Gold Continues To Shine
RGLD $50.70 +3.29 -- Royal Gold Inc.
Why We Like It:
Unless you've been living under a rock the last few weeks then you probably already know that gold futures have risen to new all-time highs. On Friday gold hit $1,100 an ounce. Technicals are suggesting gold will rally toward $1,300 an ounce and some are predicting a rise to $1,500. Helping gold reach these lofty levels is the downward trajectory in the dollar. Short-term the dollar will remain volatile but longer-term the dollar will most likely keep sliding lower as U.S. debt and deficits grow. That's a bullish scenario for gold.
So why buy RGLD when you can buy gold (or maybe the GLD gold ETF)? I like RGLD because the stock has spent about ten months building a base under resistance at $50.00. The company reported earnings on Thursday morning and shares didn't do much with the good news. Yet when gold hit new highs on Friday shares of RGLD surged past the $50.00 level and closed at new all-time highs. Normally I prefer buy the dip entry points over breakout entry points for a long-term position. However, I'm suggesting we go ahead and buy LEAPS on this breakout in RGLD. Start with small position sizes. I consider this an aggressive, slightly higher-risk entry point. Gold is arguably short-term overbought and due for some profit taking. If gold does correct it could produce a sharp pull back in RGLD.
We'll use a stop loss at $41.95, which is under the 200-dma. The Point & Figure chart has a new buy signal with a $72 target. Our target to exit is $64.50.
Royal Gold is a precious metals royalty company engaged in the acquisition and management of precious metal royalty interests. The Company owns royalties on 118 properties on six continents, including royalties on 21 producing mines and 12 development stage projects. Royal Gold is publicly traded on the NASDAQ Global Select Market under the symbol "RGLD," and on the Toronto Stock Exchange under the symbol "RGL."
(source: company press release or website)
Use the 2011 January calls (Entry point - now, at current levels)
BUY CALL 2011 JAN $60.00 strike (ZMO-AL) current ask $7.50
Chart of RGLD