June Gold

As the weather heats up, so does gold. At the close of the 2nd trading day in June, gold has greeted this month (so far) with little movement. Since the beginning of May, gold has broken key levels as it climbed from $900 to $980 an ounce where it has closed at today. Anyone with half a brain should be expecting a pullback by now. Well I guess I must be just shy of half, because I can assure you no major pull back will be taking place. As the June contracts expire on the Comex, some were beginning to worry of a possible overwhelm in delivery demands, which would skyrocket prices even higher. So far, It doesn't look like that is going to happen either. As for the metal itself in the next few days, I expect a sideways movement. I'm sure there will be a decline some days and an incline others but by the close, the price difference will be negligible. The price will not fall below $931, and I'd honestly be surprised if it got that low. After a few days of sideways movement, the daily chart might form a very bullish flag or pennant that might be the "juice" we need to break $990. (But this early that would be only a very hypothetical situation) Pay attention to US dollar index as well. Any major key levels broken on the downside could be very strong for gold, I expect it to hold for a very short period of time however, at the 77.70-77.60 mark.

So this week, how should you play gold? Well unless you have a futures account, you can count the Comex out, it wouldn't be very profitable anyway. "IamGold" is mid tier gold mining company I like very much. (see box at top right of page for quote on Iamgold) They have a production of just shy of 1 million oz of gold a year, 100% unhedged (presold for last year's/cheaper gold prices) which although isnt steller, its close to some of the more "senior" miners (Yamana anyone?) They have 360 million shares outstanding which is pretty low for the industry (half that of Yamana and Goldcorp) so you own a bigger chunk of the company and it takes less shares bought/sold to affect the price. They also have 16 million oz of gold in there reserves, which is pretty hefty for an 11 dollar stock. Now, as for why I like it now: Although it is at it's 52 week high, its ultimate high of all time was 11.83 its had an issue now twice at the 11.50 mark, once on Mon. once again today. Its closing price today was at 11.20 which at that or less is a gift in my opinion.

This company is run by some brilliant people who I have had the pleasure of speaking with on many occasions. There doing everything right in every sense of the word. This is a $14 stock (if not much more) right now at today's gold prices.

The play is this: Iamgold creeps up to the 11.50 mark in the next few days and blows it away, giving it a boost to meet it's ultimate high of 11.83 If it breaks it the first time around I'd be surprised, but still very happy. If not, I would expect a pull back to the now support line of 11.50 until it creeps up back to 11.83. It will break the second time around and head to 12.

It's a beautiful play in my opinion. I wouldn't say it if I wasn't playing it myself. Just one thing to remember: DO NOT BE AFRAID TO BUY IT BECAUSE IT'S AT THE TOP! It had to get to that top by breaking the old top. It's not about how high is the top but what is it worth. Charts are great but keep in mind if a stock goes higher than its ever been before, there's no resistance above it! It's chained by no psychological barriers!

So that's my predictions for the next few days and my play to go with it.
Good Luck.

-J

Related links:
Chart of Iamgold
Iamgold's website