Gold stocks may hold a valuable place in an investor's portfolio, especially in times of high inflation and economic uncertainty. Gold prices hit a new high Friday, as investors flocked to the yellow metal. The SPDR Gold Shares exchange traded fund reached a new high Tuesday and topped a buy zone.
Stocks have had to maneuver evolving tariff news. Last week President Donald Trump announced tariffs on Mexico, Canada and China that were set to begin last week. But Mexico and Canada tariffs have been delayed and Trump signed an executive order for what he is calling "reciprocal" tariffs. Canada and Mexico provide gold and other metals to the U.S.
Gold provides a natural hedge against inflation and is seen as a safe-haven investment during downturns in the economy. Many investors believe gold still has a place in long-term portfolios, although the metal has gone through long slumps.
SPDR Gold reached a 257.71 buy point out of a flat base late January. The stock is getting extended from the buy zone, which runs up to 270.60. The gold stock climbed to a record high Tuesday in average volume and is on pace for its eighth straight week of gains.
Gold prices went on a run starting in March, then peaked in October before consolidating. Prices reached a new high on Friday with gold futures topping $2,960 an ounce.
Gold futures have gained around 82% since their Oct. 6, 2023, low.
Why Gold Prices Are Rising
Gold prices are nearing $3,000 per ounce.
Gains in gold prices followed tariff worries but other factors also affect gold prices.
Further interest-rate cuts from the Federal Reserve would help lift gold prices, but rates held steady at the last Federal Open Market Committee meeting and few if any rate cuts are expected this year.
Gold can also be a buffer against a bear market or in the case of an international crisis. The Russia-Ukraine and Israel-Hamas wars are examples.
Gold Stocks: A Way To Gain Exposure
The SPDR Gold 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 quoted in London.
But an ETF like the SPDR fund is only one way to gain exposure to gold. Many gold and gold mining stocks are climbing and are in or extended from buy zones.
In early February, Alamos Gold broke out of a base resembling a double-bottom with a 21.45 buy point. The IBD 50 stock is extended from a buy zone reaching to 22.52. Alamos is expected to report fourth-quarter results Wednesday after the market close.
AngloGold Ashanti has pulled back into a buy zone that stretches up to 33.03 from a 31.46 entry out of a double-bottom base. Shares had reached a record high last week before retreating and have climbed around 38% so far this year. AngloGold is set to report its 2024 results Wednesday.
Wheaton Precious Metals is above the buy zone with a 64.30 entry out of a double-bottom pattern after hitting a record high Friday.
Gold Prices Moves These Names
IBD Leaderboard and IBD 50 name Agnico-Eagle Mines is also extended from a similar looking pattern with a 89 entry point. The company reported mixed fourth-quarter earnings results Thursday.
Harmony Gold Mining broke out of a cup base with a 12.29 cup entry point last week, but the breakout quickly faded. Shares sank to the 7% loss zone from the buy point Tuesday morning.
Franco-Nevada is extended from the buy zone of a cup base with a 137.60 buy point. Shares reached a new high last week before sinking nearly 4% Friday.
Lastly, Barrick Gold is climbing from December lows and forming a handle with a 18.53 entry. The stock is on pace for its seventh week of gains out of the last eight.
Other ETFs that invest in gold bullion include the iShares Gold Trust ETF, SPDR Gold MiniShares Trust and Aberdeen Standard Physical Gold Shares. Their charts look nearly identical to SPDR Gold and they are trading just above the tops of buy zones out of flat bases.
Other Gold ETF Options
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 and Aberdeen Precious Metals Basket.
Investors can also hold a gold ETF that invests in gold mining stocks, such as iShares MSCI Global Gold Miners or the leveraged Direxion Gold Miners Bull 2X, which leverages a gold mining index.
When 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 in what other products the mining company invests.
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 iShares Gold Trust, with around $37 billion, comes even remotely close to the $81 billion in market capitalization that SPDR Gold has.
Volume has been mostly lower-than-average recently, with Direxion Gold Miners trading an average daily volume of more than 1.6 million shares, while Aberdeen Standard trades nearly 4.5 million and SPDR Gold MiniShares sees around 2.5 million shares per day.
If your goal is to invest in gold as a hedge against the rest of your portfolio, or as a tactical investment, then SPDR Gold may be a wise choice.
If, however, your interest is to follow the technical signals of SPDR Gold's chart, there are indeed good times to buy or avoid the ETF.
Chart Analysis Of Gold Prices
Gold prices have been climbing since January, causing gold stocks and ETFs to rise as well. And the SPDR Gold EFT hit a new high Tuesday.
The ETF's shares are topping a buy zone from a flat base, and above the 50-day moving average.
The SPDR Gold Shares ETF holds a Relative Strength Rating at 84 out of a best-possible 99. As a commodity ETF, it has no earnings and doesn't pay dividends.
SPDR Gold has an IBD Accumulation/Distribution Rating of B+, indicating fairly heavy institutional demand over the last 13 weeks. In addition, its 2.0 up/down volume ratio shows positive demand for the stock over the last 50 days.
SPDR 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 because it doesn't have a dividend payment. But using SPDR Gold options can enable investors to generate income.
Are Gold Stocks A Buy Or A Sell?
With many leading stocks feeling tariff pressures, the gold sector is one to watch.
And many of these gold exchange traded funds are all at the top or just above buy zones, so they are getting extended right now. The IBD recommended buy zone stretches to 5% above the entry.
Further, many of gold stocks are trading at or above the buy zone. It may be best to wait for the stock to pull back to get a lower entry point. It is a time to buy gold ETFs and some gold stocks if they are in proper buy zones.
And for other 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 market news on X, the platform formerly known as Twitter, @IBD_KKoenig.
