The $1,800 ceiling for gold prices appears to be firmly in place as the precious metal has yet to break through and rally, but a fall sell-off in equities might be in store for gold.

“Gold has once again failed to break above the $1,800 an ounce level, but one looming driver can take the precious metal out of its trading range, according to analysts,” a Kitco News article said. “Many experts in the space are warning investors of a possible sell-off in U.S. equities, and it just might be what gold needs this fall.”

Global investment firms like Goldman Sachs and Morgan Stanley are looking at the stock market through a dubious lens. Valuations might appear beyond the norm, which could trigger a sell-off and push investors towards safe havens such as gold.

“A constricting gold-price cage and gravity pull around $1,800 an ounce is akin to patterns that previously emerged just prior to returning to a more enduring upward trajectory. Newcomer digital reserve asset Bitcoin may be hindering the old analog, but we see both ripe to resume advancing. Some wobble in equities may act as a catalyst,” said Bloomberg Intelligence senior commodity strategist Mike McGlone.

“Just some reversion in the steepest gold discount to the S&P 500 since 2005 may indicate a spark to break the metal out of its bull-market cage. The gold-to-S&P 500 ratio has dipped below the extreme from about three years ago that broke gold away from the gravity pull around $1,270 an ounce toward its record high of about $2,075 in 2020. About $1,800 is the lock-in price since July 2020,” McGlone said. “When equities eventually revert a bit, gold stands to be a primary beneficiary, as we see it.”

One Way to Play Gold Prices

One way for investors to play gold prices is with the Sprott Gold Miners ETF (SGDM). It provides an avenue for would-be gold investors to get exposure to the precious metal as opposed to playing gold prices directly.

sgdm ytd

Per SGDM’s fund description, the ETF seeks investment results that correspond generally to the performance of its underlying index, the Solactive Gold Miners Custom Factors Index. The Index aims to track the performance of larger-sized gold companies whose stocks are listed on Canadian and major U.S. exchanges.

The Index uses a transparent, rules-based methodology that is designed to emphasize larger-sized gold companies with the highest revenue growth, free cash flow yield, and the lowest long-term debt to equity. The Index is reconstituted on a quarterly basis to reflect the companies with the highest factor scores.

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