[ad_1]
Gold stocks hold a valuable place in asset allocation for investors, especially in times of high inflation and economic uncertainty. Investing in gold can be tricky, but one of the best ways to gain exposure to gold is through the S&P Gold Shares ETF (GLD).
X
In March, gold bullion and coins, gold stocks and gold ETFs found new strength amid the banking crisis that was unfolding.
Gold futures hit a low on Nov. 3, then started a reversal after the Federal Reserve raised the fed funds rate by 75 basis points.
The GLD ETF followed a similar pattern, hitting a 52-week low on Nov. 3 and a 52-week high on May 4. The ETF broke out past the 181.73 buy point on March 17, and remains in the 5% buy zone reaching to 190.82, according to MarketSmith pattern recognition.
Pimco’s Portfolio manager of Commodities and Real Assets, Greg Sharenow, says that despite the recent drop in price, gold is still expensive and might show further losses, but has long-term appeal.
Dan Wantrobski, technical strategist and associate director of research at Janney Montgomery Scott, sees more upside for gold.
“With recent dollar weakness and crisis in the U.S., gold prices have been shooting higher,” he said. “And we believe there may be more to go for the precious metal. We are watching for potential resistance targets toward $1,950-$2,000 on gold prices in the weeks/months ahead.”
Gold prices have rallied since March lows, trading around $1,980 per ounce. Factors such as a weak dollar, recession fears, sticky inflation and a potential interest rate-hike pause have lifted prices of the yellow metal.
Gold futures are up about 22% since the Nov. 3 lows.
Will A Slowing Of Rate Hikes Lift GLD?
Gold provides a natural hedge against inflation and is regarded as a safe-haven investment during downturns in the economy.
The price of gold tends to rise during times of inflation due to its dollar denomination, which offsets the decline in value of the dollar caused by inflation.
It can also be a buffer against a bear market, or in the case of an international crisis. The Russia-Ukraine war is one example.
If the Fed slows or reverses its tightening policy, it could become a bullish catalyst for precious-metals stocks.
GLD reversed course in mid-May and has underperformed the S&P 500 this year, gaining 7.5% vs. 11.6% for the S&P through Tuesday. Many investors believe gold still has a place in long-term portfolios.
Gold Stocks: A Way To Gain Exposure
GLD is not the same as gold mining stocks, which can be volatile. The ETF aims to match the performance of the price of gold bullion, as quoted in London.
A gold ETF like GLD is only one way to gain exposure to gold. Among the other methods are buying gold itself — through bullion, coins or jewelry — or by buying it as a commodity that can be traded on commodity exchanges.
Another way is by investing in mining stocks like Barrick Gold (GOLD), Franco-Nevada (FNV), Freeport-McMoRan (FCX) or Rio Tinto (RIO).
Barrick Gold (GOLD) pulled back after tapping the 20.19 buy point of a cup base on April 13. Shares undercut the 50-day then the 200-day moving average before finding support around the 200-day average at the start of June.
Another alternative is to invest in other ETFs that invest in gold bullion. The iShares Gold Trust ETF (IAU), the SPDR Gold MiniShares Trust (GLDM) or Aberdeen Standard Physical Gold Shares (SGOL) are good examples.
Other Gold ETFs Can Help
It’s also possible to invest in any of the other ETFs that hold gold as one of many precious metals. Examples include U.S. Global Gold & Precious Metals (GOAU) and Aberdeen Precious Metals Basket (GLTR).
You can also hold an ETF that invests in gold mining stocks, such as iShares MSCI Global Gold Miners (RING) or the leveraged Direxion Gold Miners Bull 2X (NUGT).
| ETFs With Exposure To Gold | ||
|---|---|---|
| Fund name | Ticker | YTD through 6/6/23 |
| U.S. Gold & Precious Metals | GOAU | 17.40% |
| Direxion Gold Miners (Bull 2X) | NUGT | 13.26% |
| VanEck Gold Miners | GDX | 10.36% |
| iShares MSCI Global Gold Miners | RING | 9.36% |
| GraniteShares Gold Trust | BAR | 7.59% |
| S&P Gold MiniShares Trust | GLDM | 7.65% |
| iShares Gold Trust | IAU | 7.55% |
| Aberdeen Standard Physical Gold Shares | SGOL | 7.50% |
| S&P Gold Shares | GLD | 7.49% |
| Aberdeen Precious Metals Basket | GLTR | 1.17% |
But some of these gold alternatives have problems from an investor standpoint. For one, by holding gold bullion, coins or jewelry, investors have to worry about a place to store it, insuring it and the chance of it being robbed.
With trading gold as a commodity, there are several costs involved through the exchanges themselves or through brokers. By investing in mining stocks, investors have to keep in mind that they’re investing in a corporation, which requires paying attention to fundamentals and technical analysis and knowing what other products the mining company is invested in.
A Hedge Against The Rest Of Your Portfolio?
In terms of investing in other ETFs that invest in gold bullion, investors have to take liquidity into account. With thinly traded funds, it can be difficult to perform chart analysis. Only IAU, with $29 billion, comes even remotely close to the $60 billion in market capitalization that GLD has.
NUGT trades an average daily volume of 2.2 million shares and SGOL trades 2.9 million shares. GLDM trades 1.4 million shares, also showing liquidity.
If your goal is to invest in gold as a hedge against the rest of your portfolio, or as a tactical investment, then GLD may be a wise choice.
If, however, your interest is to follow the technical signals of GLD’s chart, there are indeed good times to buy or avoid the S&P Gold Shares ETF.
GLD Technical Analysis: Below The 50-Day Line
The GLD chart deteriorated from its 52-week high just one month ago. The stock fell below the key 50-day line on May 17, a red flag. The relative strength line followed in a steep dive.
The S&P Gold Shares ETF is volatile. Its 82 Relative Strength Rating is down from 87 four weeks ago. As a commodity ETF, it has no earnings and also doesn’t pay dividends.
GLD stock also has an above-average IBD Accumulation/Distribution Rating of B-, which measures the relative degree of institutional buying and selling the stock has experienced over the last 13 weeks.
Just 2% of shares are owned by large investment funds, and 2% by banks, according to MarketSmith. Centerstone International (CINTX), WesMark Tactical Opportunity Fund (WMKTX) and Midas Fund (MIDSX) are the largest fund owners.
S&P Gold Shares can also be used to buy or sell options to generate income. That can be achieved with covered call options, for example. Gold can be unattractive for income investors without a dividend payment. But using GLD options can enable investors to generate income.
Are Gold Stocks And ETFs A Buy?
Although some leading stocks show buy signals, investors should gradually add exposure. IBD’s current outlook is that the market is in a confirmed uptrend.
Exchange traded funds GLD, GLDM, BAR, IAU, and SGOL have all fallen below their 50-day moving averages and therefore are not actionable.
Other gold and gold-related ETFs are showing improving charts, so watch for proper bases to start forming.
And for the best stocks to buy or watch, check out IBD Stock Lists and other IBD content, such as how to find the best ETFs.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
YOU MAY ALSO LIKE:
Get Free IBD Newsletters: Market Prep | Tech Report | How To Invest
What Is CAN SLIM? If You Want To Find Winning Stocks, Better Know It
IBD Live: Learn And Analyze Growth Stocks With The Pros
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Want More IBD Insights? Subscribe To Our Investing Podcast
[ad_2]
Source link
