Gold stocks and exchange traded funds continued to weaken Wednesday as the precious metal loses its haven appeal. And now, multiple mining stocks are flashing sell signals.
Gold prices' slide grew worse after the U.S. and China last weekend agreed to temporarily slash tariffs while working on a long-term trade deal. The news removed one of the main drivers of gold, which serves as a defensive play and is often viewed as a hedge against inflation.
The U.S. dollar's rebound also seems to be hurting gold prices. Meanwhile, other haven assets such as U.S. Treasuries also have ended rallies, while stocks have surged this week.
Gold futures are down nearly 7% off the record closing high of $3,411.40 an ounce made on May 6. Wednesday, gold for May delivery fell 1.8% to $3,181.40 an ounce, according to Dow Jones Market Data. For the year, gold is still among the best-performing assets, up 21%.
While strategists believe U.S. trade talks with China, the U.K. and other nations are calming nerves, some are not giving up on gold. Economist Ed Yardeni, for example, this week said that demand from central banks is likely to remain a driver. Other strategists caution that many trade deals remain unfinished, leaving risk for investors.
Gold Stocks Break Important Levels
SPDR Gold Shares, an ETF that tracks gold prices, is down more than 4% so far this week. It is testing an important support level at the 10-week moving average. The ETF fell 2.2% Wednesday afternoon to 292.75, off 7.8% from its April 21 peak.
Many gold mining stocks are faring worse.
Agnico-Eagle Mines, DRDGold, Alamos Gold and Gold Fields are trading below their 10-week moving averages, their IBD MarketSurge charts show.
Those moves should be considered sell signals, especially since those stocks previously found support at that line.
Gold Stocks Pare Gains
Moreover, the gold miners are eroding once-astounding gains. Agnico had rallied 42% from a Jan. 22 breakout at 89. DRDGold raced 53% from a Feb. 20 handle buy point at 11.49. Gold Fields rose 34.5% from an 18.96 buy point to its peak. Alamos made it as high as 44.5% from a 21.45 entry.
IBD trading rules encourage investors to take at least some profits at 20%-25%.
Newmont, the largest gold producer in the world, gapped moderately below its 50-day line Wednesday. It also fell back to a previous resistance level around 49. Newmont shares are still up 31% year-to-date but had climbed as much as 53.6%.
Wheaton Precious Metals, Eldorado Gold and Royal Gold also fell below their 10-week lines Wednesday. But so far they are less than 2% below them.
Canada-based Kinross Gold is one of the few gold stocks still above the 10-week price average. Shares broke out past a 10.82 buy point on Jan. 29 and climbed as much as 47.5%.
Barrick Mining, which had been called Barrick Gold until a name change on May 6, is now 7% below its 50-day average and has fallen 11% below a handle buy point at 19.89. That's another sell signal for gold stocks.
