Gold stocks hold a valuable place in asset allocation for investors, especially during times of high inflation and economic uncertainty. Investing in gold can be tricky, but one of the best ways to get exposure to gold is through the S&P Gold Shares ETF (GLD).
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Gold provides a natural hedge against inflation and is considered a safe haven during economic downturns. Many investors believe that gold still has a place in long-term portfolios.
While AI Stocks Have Paused and Bitcoin Stocks Have Been Volatile, gold stocks continue to rise. Many gold stocks and ETFs began to rebound on March 1st. The GLD ETF went from shopping area and reached an all-time high on Thursday.
Gold prices have climbed about 12% this year so far and have topped $2,300 per troy ounce. This performance exceeds the S&P 500’s nearly 8% gain.
THE June Gold deliverYes contract sits near a a record, exceeding $2,300. Gold futures have gained about 27% since the October 6 low.
Why gold is climbing
The price of gold tends to rise during times of inflation due to its dollar-denominated value, which offsets the decline in the value of the dollar caused by inflation.
Stocks are under pressure as inflation persists and rate cuts appear to be postponed. This and rising Treasury yields are pushing investors toward alternatives such as gold.
There are a handful of factors driving gold prices, including expectations of lower interest rates, positive market sentiment, ongoing geopolitical uncertainty, and central bank demand.
The US dollar is weakening and strong demand for gold in China is also helping to push up prices. Gold received a boost on Wednesday after Fed Chief Jerome Powell confirmed that employment and inflation figures did not change their overall policy outlook for this year .
“Our base case scenario that the Fed begins cutting rates by mid-year means prices could rise,” wrote UBS strategists Wayne Gordon and Giovanni Staunovo. Barron reported.
Gold can also serve as a buffer against a bear market or in the event of an international crisis. The Russia-Ukraine and Israel-Hamas wars are examples.
Gold stocks: a way to make yourself known
The GLD ETF 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 listed in London.
GLD has outperformed the S&P 500 this year, gaining about 10% compared to 8% for the S&P 500 through Thursday.
A gold ETF like GLD is just one way to gain exposure to gold. Other methods include purchasing the gold itself – in the form of bars, coins or jewelry – or purchasing it as a commodity that can be traded on commodity exchanges.
Another way is to invest in mining stocks like Barrick Gold (GOLD), Franco-Nevada (FNV), Freeport-McMoRan (FCX) Or Rio Tinto (RIO).
Barrick Gold is rallying from its 52-week low reached on February 14, the day the gold miner released a report on its mixed fourth-quarter results. The shares rebounded the next day and are up about 26% from the low as they form a long position. double bottom base with a buy point of 18.55.
Other ETFs that invest in gold bullion include the iShares Gold Trust ETF (AIU), the SPDR Gold MiniShares Trust (GLDM) and Aberdeen Standard Physical Gold Shares (SCHOOL). Their stock charts are almost identical to those of GLD and they are above buy double bottom base areas.
Other Gold ETFs Can Help
It is also possible to invest in any other ETF that holds gold as one of several precious metals. Examples include gold and precious metals in the United States (GOÛA) and the Aberdeen basket of precious metals (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 (NUT), which operates a gold mining index. Gold ETF results have varied during the gold rally, ranging from a gain of over 9% to a gain of 40%.
| ETFs exposed to gold | ||
|---|---|---|
| Fund name | Teleprinter | 01/03/24 — 04/04/2024 |
| S&P Gold Stock | GLD | 9.66% |
| GraniteShares Gold Trust | BAR | 9.66% |
| iShares Gold Trust | AIU | 9.70% |
| S&P Gold MiniShares Trust | GLDM | 9.71% |
| Aberdeen Standard Physical Gold Shares | SCHOOL | 9.74% |
| Aberdeen Precious Metals Basket | GLTR | 10.76% |
| Gold and precious metals in the United States | GOÛA | 21.57% |
| iShares MSCI Global Gold Miners | RING | 21.63% |
| VanEck’s gold miners | GDX | 19.98% |
| Direxion Gold Miners (Taurus 2X) | NUT | 40.82% |
But some of these gold alternatives pose problems from an investor perspective. On the one hand, when holding gold bars, coins or jewelry, investors must worry about where to store them, whether to insure them and the risk of them being stolen.
Trading gold as a commodity involves several costs through the exchanges themselves or through brokers. When investing in mining stocks, investors should keep in mind that they are investing in a company, which requires paying attention to fundamentals and technical analysis and knowing what other products the mining company is investing in.
A hedge against the rest of your portfolio?
When investing in other ETFs that invest in gold bullion, investors should consider liquidity. With thinly traded funds, it can be difficult to perform graphical analysis. Only IAU, with $28 billion, even comes remotely close to GLD’s $60 billion market capitalization.
NUGT trades an average daily volume of nearly 2.9 million shares and SGOL trades approximately 3 million shares. GLDM trades 3.1 million shares.
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.
However, if your interest is in following the technical signals on the GLD chart, there are indeed good times to buy or avoid the S&P Gold Shares ETF.
GLD technical analysis: above the buy zone
GLD EFT came out of a double bottom base with a buy point of 191.36 on March 1 in heavy volume, according to MarketSurge Pattern Recognition. Shares have been trading recently around 216, well above the 5% buy zone.
The S&P Gold Shares ETF is volatile. He is 74 Relative Strength Rating improved from 62 four weeks ago. As a commodity ETF, it does not generate any profits nor does it pay dividends.
GLD stock also has a IBD Accumulation/distribution rate of A, which measures the relative degree of institutional buying and selling of the stock over the past 13 weeks.
S&P Gold shares can also be used to buy or sell options to generate income. This can be achieved with covered calls, for example. Gold can be unattractive to income investors because it does not pay dividends. But using GLD options can allow investors to generate income.
Are Gold Stocks and ETFs a Buy?
With many leading stocks expanding, the gold sector offers new opportunities. IBD’s current outlook is that the market is in a confirmed uptrend.
The GLD, GLDM, BAR, IAU and SGOL exchange traded funds are all extended from double bottom base purchase zones and are therefore non-actionable.
So watch for appropriate setups such as pullbacks at a key level, tight three-week patterns, or new bases to train.
And for the best stocks to buy or watch, check out IBD Stock Lists and other IBD content, like how to find the best ETFs.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
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