Gold and Miners: To Buy or to Hold?
Since lower interest rate expectations, a weakening US dollar, and geopolitical factors pushed gold above its long-term resistance of $1,350 per ounce, technical factors seem to have taken over.
Jun. 25 2019, Published 5:45 p.m. ET
Gold getting overheated?
Since lower interest rate expectations, a weakening US dollar, and geopolitical factors pushed gold above its long-term resistance of $1,350 per ounce, technical factors seem to have taken over. Gold breaking above $1,350 and then $1,400 per ounce sparked a wave of short covering accompanied by fresh buying, boosting the metal to new highs. However, investors may be wondering if this is the right time to enter gold. Let’s look at the technicals.
GLD’s and GDX’s moving averages
The SPDR Gold Shares ETF (GLD) is currently trading 10% and 7.5% above its 200-day and 50-day moving averages, and the VanEck Vectors Gold Miners ETF (GDX) is trading 21% and 16.6% above its averages, respectively. In comparison, gold miner Eldorado Gold (EGO) is trading 40% above its 200-day moving average.
Gold’s and miners’ relative strength index scores
Based on their 14-day RSI (relative strength index) scores, GLD and GDX look overbought, with values of 84.6 and 88, respectively. Miners Barrick Gold (GOLD) and Agnico Eagle Mines (AEM) have RSI scores of 96.7 and 88.7. To learn more about their performance, read Which Gold Equities Could Have Upside Potential as Gold Shines? An RSI score above 70 suggests an asset is overbought and prices could pull back slightly in the near term—some investors may want to take to opportunity to enter gold as prices are low.
The question now is not whether the Fed will ease in July, but by how much. A 50-basis-point cut could mean a new wave of buying for gold.
Paul Tudor Jones’s favorite pick in the next 12–24 months is gold. He predicted that if gold were to hit $1,400 per ounce, it would quickly move to $1,700. Citigroup analysts believe gold could reach $1,600 per ounce.
