Gold's New Rally Begins Now

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"It's been a crazy ride—but the breakout is finally here."

gold rally calculator

In the blink of an eye, summer just got a lot more interesting.

Try your best to ignore a sagging stock market for a minute. Today, I want to talk about the intense action we're seeing in gold and gold miner stocks—and how you can play it.

First, here's your ten-second breakdown of yesterday's action:

After dropping below $1,318 in early morning trading, gold futures caught fire. Price steadily climbed from below $1,320 to $1,340. That's when the fireworks began. Just after lunch, gold futures popped $20 on high volume, effortlessly blasting through resistance at $1,350.

This morning, you'll find gold futures near $1,362.

Earlier this week, I told you to keep a close eye on $1,350. That's because a break above $1,350 is a fairly good indication we could see higher prices soon.

It's been a crazy ride—but the breakout is finally here. I expect gold to continue its volatile rise in the near-term. No, I'm not expecting a dash toward 2011 highs anytime soon. But right now, buyers are clearly in control.

The best way to play this rally is going to be the miners.

Chart 1

Even factoring in the big move in gold futures yesterday, the miners are outperforming the metal so far this month. Precious metals miners had climbed nearly 10% since August 1 (as of yesterday afternoon). And I expect this group to continue to rise…

You probably recall just how oversold miners were heading into this rally. Miners were down more than 50% on the year as a group earlier this summer. And even at its worst, gold futures were only off about 28% year-to-date.

These extreme oversold conditions will help quickly propel miners in the coming weeks. They're ripe for a trade, so don't hesitate to buy…

Greg Geunthner
Daily Reckoning

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