Gold Stocks Close up 7 per cent, World Commodities Markets Rally

Gold stocks recorded their heftiest gain in months with key indices closing up 7%. The metal itself closed at $595 an ounce, up 3% for the day.

Is this the end of the recent sell-off and Gold goes up higher from here? Or is it just a head fake with prices to go lower soon again?

Nothing has changed in the fundamentals. Demand for the metal worldwide remains robust. All commodities are being eaten up by the Chinese and the Indians, and the other Emerging markets, which are also growing at a torrid pace. New mining budgets are still conservative-Executives still have the collapse of Gold in the late 90's in their heads to become overbullish. The cost to produce gold remains close to $200 per ounce for the major producers.

This is all great for the longs, the bulls, the long-term investors. The Gold rally is here to stay, and dips will be met by more buying, as was the case today.

However, since the markets have rallied almost 50% in less than a year (measured by ASA or GDX, the recently launched Gold Miners' share) it is prudent to not take very big positions-scaling into the market on weakness is the way to go. I vote strongly for selling options on one's holdings-you can collect some very nice premiums on this volatile market by selling out of money calls, if the market stays flat or consolidates for the next couple of years (the worst case for the bulls).

Sanjay John G.