Gold’s weakness could reverse

As we’ve discussed previously in this series, the SPDR Gold Trust ETF (GLD) has fallen ~8.0% year-to-date and ~11.0% from its April peak. The sentiment for gold is quite bearish right now. This is a seasonally weaker period for the precious metal, which could give investors an opportunity to buy gold at low levels and hold it as a hedge against economic uncertainty.

Why an Autumn Rally in Gold Could Be around the Corner

A seasonally strong period ahead

Historically, gold prices have declined in the summer months, only to climb in August onward due to the seasonal pattern of demand for gold. Physical gold demand from Asian countries such as India supports its price after that.

Year-to-date, gold prices (IAU) haven’t seen any significant gains from volatility caused by President Trump’s uncertain and sometimes mercurial policy changes. Gold prices haven’t gained despite increasing trade concerns. Because gold is considered a safe-haven investment, gold prices typically rise when geopolitical concerns increase. Gold’s rally has been stalled by the US dollar’s rally and the Fed’s tighter policy stance.

Factors that could reverse gold’s slide

While the US dollar (USDU) has been gaining as a safe-haven asset as trade concerns heighten, a further increase could leave the dollar vulnerable. Markets seem to have priced in the policy divergence theme and the rate hike (TLT) trajectory by the Fed. This could mean a limited upside for the dollar (UUP) and even weakness going forward, which could benefit gold.

The current technical indicators point to an extremely oversold position for gold. As we saw in the latest COT (Commitment of Traders) report, money managers’ net long positions are the lowest since 2015, a trend that usually precedes a rally.

Latest articles

Apple (AAPL) investors have had a roller coaster week. Apple stock has lost just under 2% in a week, ending on August 23, 2019.

Competition taking a toll on Netflix as its share of US subscription video streaming market keep falling as rivals gain ground.

Crude oil production continues to rise, and oil prices remain at $50. Despite that, US energy stocks aren’t getting investors’ interest.

Apple stock fell 4.6% as the US-China trade war intensified today. China warned of tariffs on more US goods, followed by Trump's tweeted response.

In response to new tariffs from China and President Trump's tweets, the market tanked to session lows on Friday. The DJIA nosedived more than 600 points.

Coverage on Cresco Labs has increased from seven analysts in July to nine in August. Six analysts favor a “strong buy,” and three recommend a “buy.”