To very little fanfare, the price of gold has shot up over the past three months. Since bottoming out below $1,630 an ounce in October, gold traded up to $1,950 last week. That is only 6% below its all-time high price near $2,074 achieved in August 2020.

In the early days of the coronavirus pandemic, central bankers around the world flooded the global financial markets with liquidity to prevent an economic collapse. And since putting more money into the economy without a comparable increase in productivity is inflationary, the price of gold and other commodities shot up.

When it became apparent that the economy was going to hold up, the price of gold receded below $1,800. At that time, there was nothing in the monthly Consumer Price Index (CPI) numbers to suggest that inflation was about to take off.

It havered around that price until a year ago, when it briefly shot back up above $2,000 in March 2022. By then, inflation was clearly on the rise as was the price of gold. But once the Fed started raising interest rates, gold took a quick dive below $1,700.

Once again, gold appears to be headed above $2,000 (circled area in chart above). But this time, I don’t think it is going to hit a wall. Instead, I believe gold is going to establish a new all-time high price later this year. If I am right about that, then it’s not too late for you to profit from such a move.

A Better Option

Two years ago, I showed you how to participate in gold’s price movements. Since trading the actual metal is costly and inconvenient, I suggested using the SPDR Gold Shares (GLD) as a proxy for gold.

At that time, I recommended buying GLD and then selling a covered call option on those shares to generate immediate income. Had you made that trade, you would have earned a return on investment of 4.2% in less than six months. That works out to 9% on an annualized basis.

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This time, I think you could do a lot better than that. But instead of selling a call option, we are going to buy one. This is a riskier trade then the last one. If the price of gold remains flat or goes down, our call option will expire with little or no value.

But if gold rises above $2,200 then this trade could pay off handsomely. Last week while GLD was trading near $180, the call option that expires on September 15 at that strike price could be bought for $12.

For this trade to be profitable, GLD must rise above $192. That’s an increase of 6.7% within the next eight months. But if gold reaches the $2,200 mark before then and GLD appreciates by the same percentage (as it is designed to), then our call option would double in value.

In other words, a 13.7% rise in the price of gold would result in a 100%+ increase in the price of our call option! Actually, it could be a lot more than that if it reaches that level well before this option expires.

Buy the Sector

If you aren’t comfortable with the options trade explained above, there is another way to leverage the price of gold. To do that, buy shares of gold miners whose profit margins expand rapidly when the price of gold shoots up.

Since this is a sector bet on gold, I suggest using the VanEck Gold Miners ETF (GDX). Its top three holdings are Newmont (NYSE: NEM), Barrick Gold (NYSE: GOLD), and Franco-Nevada (NYSE: FNV).

When the price of gold rose 20% over the past three months, GDX gained 32%. To the extent gold continues to appreciate, almost all that gain should fall straight to the bottom line of most gold miners.

That’s because their cost of extracting gold is constant, but the price at which they call sell it is variable. And now that inherent weakness of Bitcoin and other cryptocurrencies has been exposed, gold is once again the global currency of choice.

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Jimmy Butts has pinpointed ingenious plays on gold’s likely ascent this year.

Jimmy is the chief investment strategist of our premium trading service Maximum Profit. Jimmy has a single goal with Maximum Profit and it’s one he takes very seriously…to help you become wealthy.

Jimmy isn’t satisfied delivering mediocre returns that just barely beat the market. Instead, Maximum Profit is designed to present you with opportunities to generate life-changing fortunes.

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