Gold stocks may hold a valuable place in an investor's portfolio, especially in times of high inflation and economic uncertainty. As gold prices hover near highs today, investors may want to wait for a pullback in the S&P Gold Shares ETF to gain exposure to gold.
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.
Gold stocks are near record highs. Many gold stocks and ETFs started to rally on March 1. On July 16, the GLD ETF topped the 225.66 buy point of a flat base. The ETF is well extended from that entry.
Gold prices have soared since March and reached a record high of $2,685.20 an ounce Thursday. Gold futures have climbed more than 29% year to date.
That performance squashes the S&P 500's 20% gain so far this year. Gold futures have gained about 47% since their Oct. 6, 2023, low.
Why Gold Prices Are Climbing
Interest-rate cuts from the Federal Reserve 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.
Another way is by investing in mining stocks like Barrick Gold or Franco-Nevada. Barrick stock pulled back after reaching a 52-week high last Thursday. Shares are above the buy zone of an 18.95 buy point of a choppy undefined base. The company issued a robust earnings report on Aug. 12.
And Franco-Nevada is in a flat base with a 131.69 buy point. Shares have been rangebound since the company missed second-quarter profit and revenue estimates on Aug. 13, and even before then.
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 GLD and they are above buy zones of four-weeks tight patterns.
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 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. Results among gold ETFs have varied during the gold rally, ranging from a more than 26% gain to an 89% gain since March 1.
| Fund Name | Ticker | 3/1/24 - 9/30/2024 |
|---|---|---|
| Direxion Gold Miners (Bull 2X) | NUGT | 89.94% |
| iShares MSCI Global Gold Miners | RING | 52.54% |
| VanEck Gold Miners | GDX | 45.70% |
| U.S. Gold & Precious Metals | GOAU | 40.75% |
| Aberdeen Precious Metals Basket | GLTR | 26.27% |
| S&P Gold MiniShares Trust | GLDM | 26.22% |
| Aberdeen Standard Physical Gold Shares | SGOL | 26.22% |
| iShares Gold Trust | IAU | 26.14% |
| GraniteShares Gold Trust | BAR | 26.13% |
| S&P Gold Shares | GLD | 26.01% |
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 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 $31 billion, comes even remotely close to the nearly $75 billion in market capitalization that GLD has.
Volume has been rising recently, with NUGT trading an average daily volume of nearly 1.9 million shares, while SGOL trades more than 3.6 million and GLDM sees more than 3.9 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 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 has been rising and taking gold stocks and ETFs with it. The GLD EFT is near its record high reached last Thursday and remains well above its 50-day line.
The S&P Gold Shares ETF holds an 85 out of a best-possible 99 Relative Strength Rating. As a commodity ETF, it has no earnings and also doesn't pay dividends. GLD 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 Or A Sell?
With many leading stocks extended, the gold sector offers fresh opportunities.
And exchange traded funds GLD, GLDM, BAR, IAU and SGOL are all above buy zones, so they are not actionable right now. It is a not time to buy gold ETFs and gold stocks. But investors with robust gains may want to take some profits.
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.
