Gold stocks hold a valuable place in asset allocation for investors, especially in times of high inflation and economic uncertainty. Investing in gold has its challenges, but one of the best ways to gain exposure to gold is through the S&P Gold Shares ETF.
Gold provides a natural hedge against inflation and is regarded 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.
While artificial intelligence stocks have varying results and bitcoin stocks have been volatile, gold stocks are breaking out of bases and reaching new highs.
Many gold stocks and ETFs started to rally March 1. The GLD ETF is in a buy zone to 236.94 after breaking out of a flat base with a 225.66 buy point Tuesday.
Gold prices have soared around 19% so far this year and reached a record high of $2,466 per troy ounce on Tuesday. That performance equals the S&P 500's gain. The August gold delivery contract reached a record high, topping $2,472 per ounce. Gold futures have gained about 35% since their Oct. 6 low.
Some feel there is still room for gold to climb even higher.
Why Gold Prices Are Climbing
The increased likelihood of interest-rate cuts from the Federal Reserve this year should lift gold prices.
There are a handful of other factors boosting gold prices, including positive market sentiment, continued geopolitical uncertainty and demand from central banks.
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 Prices: A Way To Gain Exposure
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 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 or Franco-Nevada, both of which broke out of bases Tuesday.
Barrick Gold broke out of an irregular base with an 18.95 buy point on Tuesday in above average volume. The new base also could be interpreted as a double bottom with an 18.10 buy point. The gold mining stock jumped around 4.8% on Tuesday in sympathy with the pop in gold prices.
Other ETFs that invest in gold bullion include the iShares Gold Trust ETF, the SPDR Gold MiniShares Trust and Aberdeen Standard Physical Gold Shares. Their stock charts look nearly identical to GLD and they are above buy zones of double-bottom bases.
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 and Aberdeen Precious Metals Basket.
You can also hold an 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. Results among gold ETFs have varied during the gold rally, ranging from a more-than 18% gain to a 91% gain since March 1.
| ETFs With Exposure To Gold | ||
|---|---|---|
| Fund Name | Ticker | 3/1/24 — 7/16/2024 |
| Direxion Gold Miners (Bull 2X) | NUGT | 91.32% |
| iShares MSCI Global Gold Miners | RING | 47.37% |
| VanEck Gold Miners | GDX | 43.72% |
| U.S. Gold & Precious Metals | GOAU | 42.04% |
| Aberdeen Precious Metals Basket | GLTR | 21.47% |
| S&P Gold MiniShares Trust | GLDM | 18.50% |
| Aberdeen Standard Physical Gold Shares | SGOL | 18.48% |
| iShares Gold Trust | IAU | 18.43% |
| GraniteShares Gold Trust | BAR | 18.41% |
| S&P Gold Shares | GLD | 18.35% |
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 around $29 billion, comes even remotely close to the $63 billion in market capitalization that GLD has.
Volume has been dropping recently, with NUGT trading an average daily volume of nearly 1.8 million shares, while SGOL and GLDM each trade around 3.1 million shares a day.
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.
Chart Analysis Of Gold Prices
The metal gained nearly 2% on Tuesday, taking gold stocks and ETFs with it. The GLD EFT is well above its 50-day moving average.
The S&P Gold Shares ETF is volatile. Its holds a 72 out of 99 possible Relative Strength Rating. As a commodity ETF, it has no earnings and also doesn't pay dividends. GLD stock also has an IBD Accumulation/Distribution Rating of B-.
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 because it doesn't have a dividend payment. But using GLD options can enable investors to generate income.
Are Gold Stocks A Buy?
With many leading stocks extended, the gold sector offers fresh opportunities.
And exchange traded funds GLD, GLDM, BAR, IAU, and SGOL all broke out of bases Tuesday, so they are actionable right now.
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 market news on X, the platform formerly known as Twitter, @IBD_KKoenig.
