One of the Best Ways to Play Gold Over the Next Few Months

All but one company in the HUI Gold Bugs Index is trading below its 10-day, 50-day, and 200-day moving averages.

As of Wednesday, only 3 stocks (BVN, GG, NGD) were above their 10-day, none above the 50-day and only 1 (AUY) above the 200-day.

(chart courtesy of sentimentrader.com)

The fact that almost every underlying stock in the HUI Gold Bugs Index is below its short, intermediate and long-term averages is indeed a rare occurrence.

Almost every other time this type of situation occurred, gold pulled back for a few more weeks, but bounced back over the longer-term to see at least a 9% gain every time.

Over the past week, gold has responded much like it did back in April of 2004 and August of 2008 when the commodity hit an oversold state only to bounce back immediately, but with a fairly weak attempt.

Again, with the assumption that gold will pull back a bit further over the next few weeks I have come up with an appropriate strategy to take advantage of a potential bounce off an anticipated pullback.

Check out how I prefer to trade gold at the moment and more importantly, how I typically trade in the Options Advantage service and more specifically, in the Options Advantage portfolio.