Monday saw gold and gold stocks treading water. This comes after a weekend full of new coronavirus vaccine optimism was further stoked by President Trump’s comments on Sunday. He announced the emergency use authorization of convalescent plasma in the fight against COVID-19. This move marked yet another step the Administration has taken to try and mitigate the infection’s spread while a vaccine is still being worked out.
[Read More] Top Gold Stocks To Buy According To Analysts
Monday morning the S&P and Dow both reached news highs. This continued last week’s bullish trend in the stock market. Is this cause for concern among gold bugs? There’s two sides to this question. First, I’m sure there’s some concern seeing as though gold’s epic rise took a pause over the last few weeks. But is this the end of gold’s historic move? According to some analysts, that answer is a hard, no.
That’s also considering the fact that famed investor, Warren Buffett’s Berkshire Hathaway just took a position in the sector. Specifically, Berkshire purchased a stake in Barrick Gold (GOLD Stock Report) earlier this month. The firm revealed a $564 million stake in Barrick, despite the investor being one of gold’s most famous opponents.Analysts Remain Steadfast In Gold’s Directional Strength
In addition, some analysts are looking at this pullback as more of a technical move. Considering that gold prices haven’t broken down below key support levels. This I would consider somewhere around the $1,820-$1,830 range. It was this range that gold had a hard time breaking above for the majority of the second and first half of the third quarter.
“Gold is just consolidating right now with stock indexes at record highs. It really needs a bigger catalyst, it needs additional fiscal stimulus, it needs inflation to pick up, in order to get really going,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
“While COVID-19 vaccine developments and improving economic data present near-term headwinds to gold, low and negative interest rates, a weaker U.S. dollar, and expectations for further stimulus keep the balance of risks to the upside.”Standard Chartered analyst Suki CooperAre Gold Stocks Still Worth It?
If this is “just a consolidation” period as Streible put it, then one might think that its another dip opportunity in gold stocks. For the most part, if you look at gold stock charts, you’ll see a very similar trend. That trend is centered on the 50-day moving average. Aside from the big market drop in March, this technical indicator has presented itself as a support for gold. As well, countless gold stocks have experienced a similar trend.
Take, for instance, Barrick gold stock, Newmont (NEM Stock Report), and Franco-Nevada (FNV Stock Report). All three have gone on to make new 2020 highs this month. Additionally, all of these gold stocks have also seen the 50 day moving average act as support during consolidation periods.Barrick Gold Stock ChartNewmont Gold Stock ChartFranco-Nevada Gold Stock Chart
With the majority of gold stocks echoing something similar, it gives a broader view of the sector in general. By the look of the charts, it wouldn’t seem that the gold stock rally is over. But it is important that these levels be monitored closely in my opinion. Back in May and June, gold stocks stumbled briefly below the 50-day moving average but didn’t completely break down. Now, we’re seeing most gold stocks sitting at or around this major technical level once again.
“At least until the election in the U.S., this volatility will persist.”Luca Paolini, chief strategist at Pictet Asset Management
Investors are awaiting U.S. Federal Reserve Chair Jerome Powell’s address to the bank’s annual symposium in Jackson Hole, Wyoming this week. It should give more insight into how aggressively the Fed will seek to handle the long-term recovery from the pandemic.