Trading options, not GLD, is a great way to fight inflation.
Inflation fears continue to mount in the US The Federal Reserve has raised interest rates to combat the ever-rising CPI (Consumer Price Index) which reached a recent all-time high of over 9% last June. This pushed consumer prices to their highest levels since late 1979.
Recent weakness in food and energy prices has led to a weakening of the CPI, which stood at 8.5% in the latest report in July. Better, but still no good news about inflation.
The difference between the yield on two-year government bonds and the yield on ten-year government bonds remained the opposite. A recession could be ahead regardless of future Fed policy.
Gold Prices Find Support
The gold price (GLD) again held strong support in the $157 area.
Shares reached oversold terms on a 9-day RSI basis before strengthening. MACD also oversold and then moved higher. Bollinger Percent B briefly turned negative, but has since regained positive ground. GLD is trading at a large discount from the 20-day moving average.
The four previous times this has happened marked significant short-term lows in GLD, as marked in aqua on the map. A return above the 20-day moving average seems the most likely outcome.
It will be interesting to see if the recent rally in GLD has meaningful legs or if it will pull back to retest support.
Investing in gold as an inflation hedge seems like a spurious exercise at best. The fact that gold peaked in March 2022, just before the Fed began raising interest rates seriously, allays much of the inflation-fighting concerns over gold ownership.
Instead of gold, consider using the power of POWR options to increase your overall returns.
What to do?
If you are looking for the best options trading for the current market, check out our latest presentation Trading options with the POWR Ratings. Here we show you how to consistently find the best option trades while minimizing risk.
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All the best!
GLD shares closed at $159.82 on Friday, up $0.84 (+0.53%). Year-to-date, the GLD is down -6.52%, compared to a -13.76% gain for the benchmark S&P 500 index over the same period.
About the author: Tim Biggam
Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, 4 years as Lead Options Strategist at ThinkorSwim and 3 years as Market Maker for First Options in Chicago. He appears regularly on Bloomberg TV and is a weekly contributor to the TD Ameritrade Network “Morning Trade Live”. His overriding passion is to make the complex world of options more understandable and therefore more useful to the everyday trader. Tim is the editor of the POWR options newsletter. Read more about Tim’s background, along with links to his most recent articles.
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