Gold price continued its climb higher for a second day after Federal Reserve announcement of third round of quantitative easing which weakens the U.S. dollar and in turn strengthen gold’s price as traders look for safety.  The FMOC’s announcement of QE3 was more aggressive than most analysts were anticipating with a plan to purchase 40 billion USD in mortgage backed securities on a ongoing unlimited fashion until the U.S. economy show satiable improvementThe FMOC also noted that it will continue “Operation Twist” in which the Fed sells short term Treasuries and buy longer term Treasuries in order to keep interest rates low with a new extended commitment to key interest rates low until the middle of 2015.

The combine program buying will provide 85 billion USD of liquidity flowing into the U.S. economy which should provide a very nice catalyst for gold into year end.

Readers looking to put a some of glittering gold metal onto their portfolio can look consider looking at one of the two following ETFs that track the price gold very well.

SPDR Gold Shares Trust (GLD, quote) ETF that seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets.

Or readers can consider the iShares Gold Trust (IAU, quote) ETF that seeks to replicate, net of expenses, the day-to-day movement of the price of gold bullion. The trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act. It receives gold deposited with it in exchange for the creation of baskets of iShares, sells gold as necessary to cover the trust's liabilities, and delivers gold in exchange for baskets of iShares surrendered to it for redemption.

Gold’s Bottom Line:

Those looking to add a position can consider looking to the options market to help reduce cost and define their risk.  One of the ways to do this is via a call vertical spread. I personally like the IAU Jan 13 17/19 vertical call spread for $.65 ($65.00) with a max profit of $135 (less the cost of the spread) and the max loss of $65.  I picked January to allow some time to pass for the FMOC to get the plan into action and room for gold to run.

Remember option trading comes with risk and before making any trade you should consult your broker.