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Gold Stocks Pop Ahead of Wednesday’s Fed Announcement

Gold Stocks Pop Ahead of Wednesday’s Fed Announcement

The Federal Reserve is set to release its FOMC policy statement on Wednesday. Without any stimulus package being passed by Congress, many traders may be looking for the Fed to be aggressive. So far, they have walked a fine line, but this time they may need more. This is what makes the move in gold stocks on Monday so interesting. For, example, Gold Fields Limited (NYSE: GFI) jumped 12.98% as it broke resistance yesterday.

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  • The FOMC policy statement will be released on Wednesday at 2:00pm EST and the press conference with Fed Chairman Powell occurring at 2:30pm. This is an interesting report with the backdrop of a failure to pass a stimulus bill. Powell has been able to walk the tightrope with many of his recent statements. However, the market may be expecting a bit more from him on the topic of yield curve control and negative interest rate policy.

    The likelihood of more stimulatory action from the Fed isn’t lost on the market as gold prices rose on Monday. However, it was the movement in gold stocks where it was interesting. A number of gold stocks rose sharply on Monday and Gold Fields was one of them.

    Until Monday’s move, the share price of GFI has been mirroring the movement in gold. The price had been rangebound since its July 27 high just over $14. The share price was able to find support near $12 but tested the $13.35 price level three separate times over the past month.

    That resistance level broke on Monday and the July 27 high was also cleared. The move came on substantial volume that was over double the average. The move saw its share price close at a new 52-week high and finish near the high of the session.

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  • The over $2 range of the price provides a potential near-term target of $16. Option traders may want to consider buying the 16 OCT 20 14/16 long call vertical for around $0.80 or less.