Gold stocks may hold a valuable place in an investor's portfolio, especially in times of high inflation and economic uncertainty. Gold prices are back near recent highs, as investors have flocked to the yellow metal. The SPDR Gold Shares exchange traded fund is also near its all-time high and extended from a buy zone.
Investors should be cautious of breakouts and new buys during the current market correction and should follow risk management rules, including cutting losses at 7%.
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 extended from the buy zone, which runs up to 270.60. Shares reached the 20% profit zone, signaling it was time to take some profits. The gold stock climbed to a record high April 22, in heavy volume.
Gold prices reached a new high on April 22, at $3,500 an ounce. Gold futures prices have more than doubled since their Oct. 6, 2023, low.
Why Gold Prices Are Rising
Gold prices topped then fell back below $3,400 per ounce Thursday. Gains in gold prices followed tariff worries but other factors also affect gold prices.
Economic and geopolitical uncertainty, a weakening dollar and ongoing inflation have all helped boost gold prices.
Gold can also be a buffer against a bear market or in the case of an international crisis. The recent stock market sell-off and 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 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 got extended from the 20% profit zone and climbed to a new high, before April's sell-off.
Alamos plunged after the gold explorer missed first-quarter profit and sales estimates results April 30. But shares have reclaimed their 10-week moving average.
AngloGold Ashanti bounced off its 10-week line in early April. The gold stock is climbing back near its record high set on April 16. The stock has gained around 89% so far this year. The gold miner is expected to report first-quarter results Friday.
Wheaton Precious Metals is also extended after rebounding off its 10-week line. Shares hit an all-time high April 21, before easing. Its first-quarter earnings are due Thursday.
Gold Prices Moves These Names
IBD 50 name Agnico-Eagle Mines action looks similar to Wheaton Precious Metals, with the stock extended from its 10-week line and back near highs. The gold producer topped first-quarter earnings and sales estimates April 24.
Harmony Gold Mining topped the profit zone from the 12.29 entry point of a cup base. Harmony Gold climbed to a new high April 16, before pulling back.
Franco-Nevada is extended from the profit zone of a cup-with-handle base with a 137.60 buy point. Shares reached a new high April 21. It reports its first-quarter earnings results Thursday.
Lastly, Barrick Gold is back near the 19.89 buy point of a cup-with-handle base. The gold miner reported better-than-expected first-quarter earnings and inline sales Wednesday.
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 are trading 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 $47 billion, comes even remotely close to the $102 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 1.5 million shares, while Aberdeen Standard trades roughly 5.5 million and SPDR Gold MiniShares sees around 4.7 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 started rising in January then retreated in early April, only to reach new highs within weeks, causing gold stocks and ETFs to rise as well. And the SPDR Gold EFT is climbing back near its high.
The ETF's shares topped a profit zone from a flat base, and are extended from the 10-week moving average.
The SPDR Gold Shares ETF holds a Relative Strength Rating at 94 out of a best-possible 99. As a commodity ETF, it has no earnings and doesn't pay dividends.
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 above buy zones, so they are extended right now. The IBD recommended buy zone stretches to 5% above the entry.
Further, many gold stocks are also trading well above buy zones.
It would be best to wait for the gold stocks to form new bases with proper buy points.
Therefore, it is time to trim some profits and not a time to buy gold ETFs and gold stocks.
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.
