Gold stocks hold a valuable place in an investor’s asset allocation, especially during 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 (GLD).
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Gold provides a natural hedge against inflation and is seen as a safe haven during economic downturns. Many investors believe that gold still has a place in long-term portfolios, despite the metal having experienced long periods of decline.
While artificial intelligence stocks are showing mixed results and bitcoin stocks are down, gold stocks are in buy zones from bases and hitting new highs.
Many gold stocks and ETFs began to rally on March 1st. On July 16th, the GLD ETF reached the 225.66 buy point from a flat base. Although the ETF has now extended from that entry, the shares are in a buy range of a four-week tight pattern with a 234.01 entry. That buy zone has widened to 241.03.
Gold prices have soared since March, closing near a record high of $2,580.40 an ounce on Monday. Gold futures have risen more than 25% so far this year.
That performance outpaces the S&P 500’s gain of nearly 18% so far this year. Gold futures have risen about 43% since their Oct. 6 low.
Why the Gold Price is Rising
The Federal Reserve’s impending rate cuts should boost gold prices. There are a handful of other factors that are boosting gold prices, including positive market sentiment, continued geopolitical uncertainty and central bank demand.
Gold can also be a buffer against a bear market or in the event of an international crisis. Examples are the wars between Russia and Ukraine and Israel and Hamas.
Gold Prices: A Way to Gain Exposure
The GLD ETF is not like gold mining stocks, which can be volatile. The ETF aims to match the performance of the price of gold bars, as listed in London.
A gold ETF like GLD is just one way to gain exposure to gold.
Another way is to invest in mining stocks such as Barrick Gold (GOLD) or French Nevada (FNV). Barrick shares have been extended from a buy point of 18.95 after hitting a 52-week high on Friday. The company released a robust earnings report on Aug. 12.
And Franco-Nevada is in a flat base with a buy point of 131.69. It reclaimed its 50-day moving average on Thursday. Shares have recovered from a 6.4% drop after the company missed second-quarter earnings and revenue estimates on Aug. 13.
Other ETFs that invest in gold bullion include the iShares Gold Trust ETF (IAU), SPDR Gold MiniShares Trust (GLDM), and Aberdeen Standard Physical Gold Shares (SGOL). Their charts look nearly identical to GLD’s and they are in four-week tight pattern buy zones.
Other gold ETFs can help
It is also possible to invest in one of the other ETFs that hold gold as one of the many precious metals. Examples of these are US Global Gold & Precious Metals (GOAU) and Aberdeen Precious Metals Basket (GLTR).
You could also hold a gold ETF that invests in gold mining stocks, such as iShares MSCI Global Gold Miners (RING) or the leveraged Direxion Gold Miners Bull 2X (NUGT), which leverages a gold mining index. Performance among gold ETFs has varied during the gold rally, ranging from a gain of over 23% to a gain of 89% since March 1.
| Fund | Ticker | 3/1/24 to 9/16 |
|---|---|---|
| Direxion Gold Miners (Taurus 2X) | NUGT | 89.75% |
| VanEck Gold Miners | GDX | 52.63% |
| American Gold and Precious Metals | GOAU | 45.22% |
| iShares MSCI Global Gold Miners | RING | 41.04% |
| S&P Gold MiniShares Confidence | GLDM | 24.67% |
| GraniteShares Gold Trust | BAR | 23.79% |
| iShares Gold Trust | IAU | 23.76% |
| S&P Gold Stocks | GLD | 23.70% |
| Aberdeen Precious Metals Basket | GLTR | 23.67% |
| Aberdeen Standard Physical Gold Shares | SGOL | 23.59% |
When trading gold as a commodity, there are various costs associated with the exchanges themselves or through brokers. When investing in mining stocks, investors must keep in mind that they are investing in a company, which requires them to pay attention to fundamentals and technical analysis and know what other products the mining company invests in.
A hedge against the rest of your portfolio?
When it comes to investing in other ETFs that invest in gold bars, investors should consider liquidity. With thinly traded funds, chart analysis can be difficult. Only IAU, with a market cap of around $30 billion, comes even close to GLD’s $71 billion.
Volume has been increasing lately. NUGT trades an average of almost 1.9 million shares daily, while SGOL trades over 3.6 million and GLDM sees almost 3.5 million shares per day.
If you want to invest in gold as a hedge against the rest of your portfolio, or as a tactical investment, GLD may be a smart choice.
However, if you want to follow the technical signals of the GLD chart, there are indeed good times to buy or avoid the S&P Gold Shares ETF.
Gold Price Chart Analysis
The metal has risen, taking gold stocks and ETFs with it. The GLD EFT hit a record high on Monday and is well above its 50-day line.
The S&P Gold Shares ETF is volatile. It has an 85 out of a possible 99 Relative Strength Rating. As a commodity ETF, it has no earnings and pays no dividends. GLD has a IBD accumulation/distribution classification of C+.
S&P Gold Shares can also be used to buy or sell options to generate income. This can be achieved, for example, with covered call options. Gold can be unattractive to income investors because it does not pay dividends. However, GLD options allow investors to generate income.
Are Gold Stocks a Buy or a Sell?
With many leading stocks expanding, the gold sector offers new opportunities.
And exchange traded funds GLD, GLDM, BAR, IAU and SGOL are all in buy zones, so they are doable now. It is a time to buy — not sell — gold ETFs and some gold stocks.
And for the best stocks to buy or watch, check out IBD’s stock lists and other IBD content, like how to find the best ETFs.
Follow Kimberley Koenig for more stock market news on X, the platform formerly known as Twitter, @IBD_KKoenig.
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