U.S.-Iran tensions escalating after an air strike that killed an Iranian general last week are feeding into strength for gold prices. In Tuesday’s trading session, gold rallied to a 6 ½-year high and analysts are predicting more gains to come.
In particular, technical charts reveal that stock prices have been stable, but have been rising in conjunction with gold as of late. Specifically, the 40-day moving average of gold is hinting at more gains.
“I look at this chart of gold and it looks like to us we can trade as high as $1,760,” said Piper Sandler chief market technician Craig Johnson. “I don’t think this trade is over for gold, and I would have a little slice of this in everyone’s portfolio.”
Another key factor to pay attention to is what central bank actions suggest with respect to the balance sheet. Looser monetary policy is allowing rates to stay low and in turn, could translate to more strengths for gold.
“Overall, I think it’s a buy-the-dip story for the time being until the Fed starts getting tight,” he said in the same interview.
Investors looking to buy this dip, can certainly look to ETFs to take advantage. Investors can look to funds like the SPDR Gold MiniShares (NYSEArca: GLDM). Gold ETFs can be bought and sold freely via an exchange when compared to physical gold, allowing investors to utilize the hedging properties of gold without having to endure the costs of actually owning and storing the asset like they would with physical gold.
Traders looking to use leverage can look at the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), which makes an indirect play on the precious metal via 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.
Shared Sentiment
Other analysts share this bullish sentiment on gold. A renewed risk-on sentiment in stocks put gold gains on the backburner near the end of 2019, but the precious metal’s fortunes could turn in 2020, according to City Index technical analyst Fawad Razaqzada.
Razaqzada said in a Kitco News report that “he is looking for gold to hit a new all-time high in 2020, with prices pushing to $2,000 an ounce.” Furthermore, the U.S. Federal Reserve stood pat at its last interest rate policy meeting after three consecutive rate cuts, and that looser monetary policy could continue in 2020, according to Razaqzada.
Even if gold doesn’t push past the $2,000 mark, Razaqzada feels the investment landscape for gold tilts towards bullishness.
“Gold’s technical outlook remains bullish given that breakout in the summer from a 6-year-old consolidation at $1,350 and the subsequent bullish consolidation we have seen in recent months,” he said in a recent report. “So long as gold holds the breakout above $1350, the long-term technical bias would remain bullish.”
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