Is It time for This Inflation Hedge to Shine Again?

Gold prices peaked at over $2,000 per ounce over the summer on a rapidly-inflating economy and concerns over rapid government spending. While the metal then saw a drop as the stock market roared higher, gold has quietly started moving higher in recent weeks as the overall stock market has slowed down.

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  • With the metal up 7 percent in the past month near $1,900 per ounce, technical indicators point to a potential move higher.

    With the metal finally up year-to-date, and with inflation signs soaring and other assets like Bitcoin selling off massively in recent weeks, gold may be the best way to hedge against inflation going forward.

    Investors have a variety of ways to play gold, from physical ownership to an ETF, to gold stocks or options on gold stocks. For a move higher in gold, the best returns will likely come from gold mining companies and options on those companies.

    Action to take: Barrick Gold Corporation (GOLD) is one of the biggest players in the space, and shares are trending higher. They’re still trading down more than 20 percent from their 52-week highs. Investors may like shares, as high gold prices tend to lead to higher dividends. Right now, shares yield 1.5 percent.

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  • For a rally in gold in the coming months, the January 2022 $25 calls are the at-the-money trade and look inexpensively priced at around $2.00 per contract. That’s low enough that on a move to $30, the options could deliver triple-digit gains.

     

    Disclosure: The author of this article has no position in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.