Trading Gold Stocks

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Close – Trading Gold Stocks

Trading gold stocks has been a bit hectic of late as the price of gold has corrected and risen again. Investors can profit from trading gold as bullion, exchange traded gold funds, and gold mining stocks.

Our interest right now is in trading gold stocks. As an example, Coeur d’Alene Mines Corporation recently opened higher by a dollar and a half. The stock has ranged from the teens to the mid-thirties and now trades around twenty-nine dollars a share.

The price of Coeur d’Alene Mines Corporation, CDE, is obviously related to the fortunes of gold bullion but the company mines for silver as well.

When gold prices go up gold mining stocks typically rise more rapidly and when the price of gold falls gold mining stocks often correct more abruptly and dramatically. Thus, when trading gold stocks, one can often expect a bumpier ride than with trading gold bullion. On the other hand profits can be more impressive too.

Many use options in trading gold stocks. Buying a call option on a gold mining stock gives the purchaser the right but not any obligation to purchase shares of the stock on or before the expiration date of the options contract.

The contract price, also known as the strike price, will remain the same throughout the term of the contract no matter how high the stock rises or how low it falls. Obviously the buyer of a call option on a gold stock expects the price to rise.

If he is indeed correct he will be able to purchase the stock in question for less than it current market value, its spot price. If the person trading gold stocks is wrong he stands to lose the price of the options contract but no more, even if the stock falls in price.

When one buys puts in trading gold stocks the trader expects the price of the stock to fall and purchases the right to sell at the strike price even if the spot price is substantially lower. Traders sometimes buy both puts and calls on a stock in order to profit no matter which direction the stock price moves.

Options traders as well as those trading gold stocks directly use both fundamental and technical analysis in order to anticipate stock price changes.

The price of gold is a major determinant in stock prices of mining companies. However, it is not the only determinant. Companies need to have gold reserves in order to mine them. They need to constantly prospect for more of the shiny stuff. Companies need to contain costs as well.

This can be a problem when much of the known gold supplies in the world are being found deeper and deeper in the ground or in politically unstable and dangerous areas of the world. Companies like Coeur d’Alene mine on four continents and have extensive reserves yet to mine.

Startup operations, on the other hand, may have great promise but can run out of funds and be subject to takeover if they are not able comply with local rules and regulations, successfully mine in foreign countries, and bring refined gold to market. The recent fall in gold price followed by a rebound has many traders interested in trading gold stocks.

The Euro Zone debt crisis continues and the dollar promises to devalue over the years traders hope to profit from gold price fluctuations as gold steadily increases in value as measured in the US dollar, Euro, or other currencies.

For more insights and useful information regarding stock, options, commodities, and futures trading visit


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