If you are new to investing
in gold market and do not know where to start, the opportunity might be just on the corner. Based on both fundamental and technical analysis, gold is predicted
to hit $1,500 an ounce by the end of the year.
On its way to hit new records, however, there will be price corrections and pullbacks. These will be the times to hop into the profit train with less risk. In this article we examine a strategy to enter into a long position of some gold mining stocks.
The buy price targets are based on strong support levels and trades have a lot of upside potential with minimum risk. In this gold bull market these targets may not be triggered, but a strategy based on patience can be quite rewarding.
1. Agnico-Eagle Mines (AEM)
Agnico Eagle has a market cap of $11.4B. The company is a gold producer with operations in northwestern Quebec, northern Mexico, northern Finland and Nunavut and exploration activities in Canada, Europe, Latin America and the United States.
Stock had a steady rise with the recent gold rally which started on July 28. It has a good momentum and upside potential and can hit $80 once crossing over the 52 week high of 74.4. Buy Agnico at $67 with a stop loss below $65. These are two strong support levels. Your trade has a potential gain of 19.5% and a loss of 3%.
2. Gold Fields (GFI)
Gold Fields has a market cap of $11.1B. The mining company is a producer of gold and holder of gold reserves in South Africa, Ghana, Australia and Peru.
Like Agnico Eagle, the stock has a good momentum and is testing the $16 resistance level. Once crossed that, it can easily reach $17 with a rally in gold prices. A pull back to $14.25 is ideal to enter a long position with a stop loss below $13.5. The trade has a 19% potential gain and a %5 loss.
3. Eldorado Gold (EGO)
Eldorado Gold is also a large cap gold mining company. The company has a market cap of $10.2B and is engaged in gold exploration, development, extraction, processing and reclamation in Turkey, China and Greece.
Stock had a high volume breakout above $16.5 in May. This price level has worked as a strong support or resistance level so far. If prices pull back to this level, they have room to grow back to $20 for 18% gain. A stop loss below $16 minimizes the risk of this trade to 3%.