Gold Price: Higher was better for this trade. Does gold have more scope?

A strong few years for gold prices are helping to boost other precious metals – but a key driver for the commodity could be thanks to ETFs that track gold prices.

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“Everyone always wants to talk about gold – why aren't we in gold?” John Kosar, chief market strategist at Asbury Research, said on Investor's Business Daily's “Investing with IBD” podcast. Kosar held out until August to open a position in the precious metal. “As someone who manages money, as a company that manages money, who has been in the research business for 20 years, I am continually amazed at the never-ending interest in gold.”

The comparative stability of the gold price makes the metal a relatively safe haven for investors. Uncertainty in the markets often leads to higher gold prices. A stronger dollar, on the other hand, often puts pressure on gold, as well as most other dollar-valued commodities. However, gold is an asset that is often characterized by slow growth compared to the rest of the market. Due to geopolitical risk and Fed interest rate movements, the precious metal's yields have been able to rise recently.

Audio version of the podcast

Gold prices vs. commodities

Kosar acknowledges that gold doesn't always perform well. In August, he opened a position in the SPDR Gold Trust ETF (GLD) after gold prices cleared a key resistance level. He cites the expansion of the ETF's net assets in recent months as a sign of increased conviction. In other words, investors hold gold for longer instead of viewing it as a shorter-term trade.

“In my world, if you're not outperforming the S&P 500, why should you be there, right?” He points to the resistance gold faced during the summer months. “One thing I never do is buy against the resistance level,” Kosar said. “If you want to look bad in front of your clients, be too hasty and buy a resistance level – that’s an instant loser.”

He often waits for confirmation of strength. That could mean a higher entry point, but also a greater likelihood of success.

Alternative ways to profit from the price of gold

According to Kosar, investors should also look further into the future – both up and down the production process – to understand the sentiment surrounding gold prices. After a recent breakout, he took a long position in silver miners like the iShares MSCI Global Silver Miners ETF (SLVP). “I wanted to wait until we had a good lead here until we did something else in the precious metals space,” he said.

SLVP recently saw the chart form a 35-day cup pattern that began in May, followed by a 48-day consolidation period that began in July.

ETFs can also provide some exposure to gold prices and other commodities. “You’re seeing outbreaks,” he said. “I see a lot of good technical things happening across the precious metals space, including ETFs that cover the space a little more broadly.”

Although IBD believes gold is being extended out of the traditional buying range, Kosar remains bullish on the precious metal. He says those who are currently invested can maintain their positions as long as the bullish trend in gold prices continues. “As long as it continues to outperform and those assets continue to flow into GLD, I will stick with this thing until the rapture.”

Find out here how to deal with the uncertainty ahead of the 2024 election.

Follow Mike Juang on X below @mikejuangnews and on threads at @namedvillage.

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