Mining for Money: A Yen for Gold

Gold is on the move again, testing its big downtrend. It looks poised to break out to the upside — though it may have to pull back before making its final hammer blow. The good news is there’s more than one way to play this move.

One I really like is the Japanese yen.

Recently, the Japanese yen is closely correlated to gold. Sure, this relationship can change over time. Just like the U.S. dollar.

As I’ve told you, the dollar usually sits on the opposite end of the “See-Saw of Pain” with gold. When one goes up, the other goes down. As for the yen — it sure looks like the yen is holding hands with gold recently. Look at this chart.

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You can see that the yen bottomed on December 12. Since then, it’s up about 8.9%. Gold bottomed a bit later in December, but it has still managed to rally 10.5%.

And that’s the profit potential I am talking about. With the yen shadowing the dollar so closely, one way you could play this move is by going long the yen.

Both gold and the yen tend to move opposite the U.S. dollar. And as I told you on April 3, the U.S. dollar is trending lower. That downtrend remains in place for the greenback. And that’s mainly because President Trump’s economic, healthcare and tax initiatives are getting bogged down in Washington’s swamp.

And it doesn’t help that the Empire State Manufacturing Index totally whiffed when it reported its April number. It tumbled to 5.2, when the street was expecting a reading over 15. Ouch!

That kind of stinky egg probably takes a May rate hike off the table. And a June hike looks less likely, too. That news sends the dollar reeling lower. On the other end of the seesaw, gold and the yen go higher.

But the dollar’s seesaw with gold isn’t the only driver. Another force is that gold and the yen are “safe havens.” When people are worried, they put money in safety.

Why are people worried? Because they consider President Trump unpredictable, especially when it comes to foreign policy. If you think North Korea’s failed launch of a ballistic missile this weekend was the end of that crisis, think again.

Washington insiders say Trump is willing to consider “kinetic” military action on North Korea. That includes a sudden military strike. On a country with nuclear weapons.

So are investors worried? Darned tootin’ they are.

We can all hope this game of brinksmanship ends on a positive note. But until it does, expect an underlying bid for both gold and the yen.

Could this be enough to push gold up through that big downtrend I told you about last week in “This Gold Party Ain’t Started Yet“?

Let’s just say the odds are better than average.

I’ve told you plenty of ways to play gold. How about the yen?

Well, you can always use the CurrencyShares Japanese Yen ETF (NYSE: FXY). It has plenty of liquidity and lets you play the yen rally cheaply.

Or, for more oomph, you can check out JR Crooks’ Currency Options Alert. Learn more about that publication HERE.

JR recently guided his subscribers to a 54% gain on Treasuries. On Treasuries? Dang! He grabbed that kind of gain on something so dull it can make drying paint look interesting? I wonder what that guy can do with a currency like the yen.

I guess I’ll find out. And maybe you will, too.

Bottom line: Gold is going higher. There are many ways to play this move. Whatever you do, prepare yourself for when this profit party train rolls out of the station. You don’t want to be left on the platform, holding the bag on a bunch of “coulda, woulda, shoulda’s.”

Best wishes,
Sean

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Sean travels far and wide to seek out small-cap values in the natural resource sector. His journey started in New England. As a youth he worked on Mt. Washington, on the cog railroad that runs to the summit. Working on…