It almost seems like gold’s rise to a six-year high in 2019 was essentially a summer fling as prices have faded amid renewed confidence in U.S. equities and the economy, but markets experts advise investors not to sleep on the precious metal.
“The noise around gold during its big run in the summer has certainly quieted down as the metal has been consolidating for over three months. ETF inflows for gold have finally moderated from extreme levels as investor exuberance fades,” said Jeff deGraaf, chairman of Renaissance Macro Research
“We don’t want you to fall asleep on gold, the charts are too good,” deGraaf added. “A drop in extreme sentiment during a period of consolidation as the overbought condition works off after breaking out of a large basing pattern is exactly the type of action you want to see.”
What happens with the U.S.-China trade deal will remain a major market mover as both sides struggle to complete a “phase one” stage agreed to in October. Either way, market expert are seeing more upside for gold when 2020 arrives.
“Trade negotiations, rather than the U.K. elections or the December FOMC (Federal Open Market Committee meeting), continue to set the tone of trading for the gold market,” said Standard Chartered. “Concerns over a ‘phase one’ (U.S.-China trade) agreement have buoyed gold prices, but physical demand, although softer y/y, has proven to be price elastic. Provisional estimates indicate India’s gold imports rose to a five-month high in November and the local market swung to a premium. For now, the physical market is providing a sufficient cushion against the downside, and we believe the macro environment presents upside risk to prices in 2020.”
Traders looking to buy the dip can play gold miners and look at the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), which makes a play on gold miners. NUGT seeks daily investment results, before fees and expenses, of either 300%, or 300% of the inverse (or opposite), of the performance of the NYSE Arca Gold Miners Index.
The index is a modified market capitalization-weighted index comprised of publicly traded companies that operate globally in both developed and emerging markets, and are involved primarily in mining for gold and, to a lesser extent, in mining for silver. The Index will limit the weight of companies whose revenues are more significantly exposed to silver mining to less than 20% of the Index at each rebalance date.
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