The Price Of A Gold Shares ETF And The Price Of Gold Stocks: Trending Up

&l;p&g;&l;img class=&q;dam-image bloomberg size-large wp-image-34074989&q; src=&q;×0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Photographer: Simon Dawson/Bloomberg

Six months ago, at the beginning of October, 2018, the yield on the 10-year US Treasury bond sat at 3.2%.

The price of the &l;a href=&q;; target=&q;_blank&q;&g;SPDR gold shares ETF&l;/a&g;&a;nbsp; — a proxy for the gold price — was 112.

Today, the 10-year rate is 2.39%, quite a drop in the return of the government&s;s most watched paper.

And, right now, the price of those gold shares is 121, a nice gain for those holding the NYSE-listed precious metal ETF.

Many explanations exist for this relationship, but the most basic is that lower rates designed to pump growth also give rise to concerns about the inflation that often accompanies such growth.

So, those investors who&s;ve been around and seen a few of these economic cycles, begin to pick up gold, the old inflation hedge that never goes away.

So, if rates continue to fall…does the hedge continue to rise?

These charts are designed to show where this trend might be headed and where the support and resistance levels might exist. I&s;ll start with the precious metal itself and then take a look at a few stocks 0f&a;nbsp; companies that mine the stuff.

Here&s;s the daily price chart for gold:

&l;img class=&q;size-full wp-image-5275&q; src=&q;; alt=&q;&q; data-height=&q;928&q; data-width=&q;1240&q;&g; GLD SPDR ETF daily price chart.

The clear rise in price from August, 2018 to February, 2019 follows the drop-off in interest rates over that same period. You can see that the gold ETF has managed to stay above the up trending &l;a href=&q;; target=&q;_blank&q;&g;Ichimoku cloud&l;/a&g; since it crossed over in October.

Right now, price is testing the uptrend by consolidating with a drop that almost takes it below the cloud again: below the 121 level would begin to call into question whether the gains can be held. A move above the 127 high, on the other hand, would tend to confirm the continuation of the rally.

Here&s;s the weekly chart:

&l;img class=&q;size-full wp-image-5277&q; src=&q;; alt=&q;&q; data-height=&q;928&q; data-width=&q;1240&q;&g; GLD SPDR ETF weekly price chart.

From a pure technical analysis perspective, this is a classic triangle pattern: it&s;s winding up for a big move in one direction or the other. That&s;s the wisdom. If accurate, then resistance may be that slight downtrend line connecting the 2016 high at 131 with the early 2018 peaks at just above 129. A close above that line might be significant.

Also significant would be a close below the line connecting the late 2015 lows with the late 2018 lows. Such a pattern would negate the uptrend now in place.

Here&s;s the daily chart of a widely traded NYSE-listed gold mining stock:

&l;img class=&q;size-full wp-image-5281&q; src=&q;; alt=&q;&q; data-height=&q;744&q; data-width=&q;990&q;&g; Goldcorp daily price chart.

The upward trending movement of Goldcorp is benefiting from both the rise in the price of gold and the rise in stocks in general. It&s;s above the trend line and above the &l;a href=&q;; target=&q;_blank&q;&g;Ichimoku cloud&l;/a&g;. Note that the stock is susceptible to volatility: that October, 2018 drop — with the huge gap down — took the price rapidly from 11 to 8.5. That &q;gaps get filled&q; — a technical analysis maxim — is demonstrated within less than 3 months.

And here&s;s the daily price of a different precious metals equity:

&l;img class=&q;size-full wp-image-5282&q; src=&q;; alt=&q;&q; data-height=&q;744&q; data-width=&q;990&q;&g; Agnico Eagle Mines daily price chart.

Agnico Eagle Mines is another NYSE-traded gold miner benefiting, generally, from higher metals prices and from higher stock market action. It&s;s well above the uptrend line and above the &l;a href=&q;; target=&q;_blank&q;&g;Ichimoku cloud&l;/a&g;. Should a sell-off arise, then perhaps that gap in price 39.5 to 40 from January might be a target.

&l;em&g;I do not hold positions in these investments.&a;nbsp;No recommendations are made one way or the other.&a;nbsp;&a;nbsp;If you&s;re an investor, you&s;d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.&l;/em&g;&l;/p&g;

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