Is GLD Stock A Buy Right Now? Here’s What Charts Show

Gold holds a valuable place in asset allocation for investors, especially in times of high inflation and economic uncertainty. Investing in gold can be tricky, but one of the best investments to gain exposure to gold is through the S&P Gold Shares ETF (GLD).

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And right now could be an opportune time to buy GLD as it rises from the bottom of a flat base. On June 10, it surged more than 1% in heavy volume. GLD is trading above its 200-day moving average and its 21-day exponential moving average, and is approaching its 50-day line.

Gold is rising on fears that we may be entering a global recession and an extended period of high inflation. The S&P plunged nearly 3% on June 10 after the CPI inflation rate soared 1% in May to 8.6% from a year ago. It was the highest inflation rate since December 1981.

“Inflation keeps climbing and it’s becoming more entrenched. Today’s consumer price index (CPI) numbers were even worse than expected,” said Chris Zaccarelli, Chief Investment Officer, Independent Advisor Alliance, in a note to investors on June 10.

“The bottom line is that we’re still expecting gold to move higher throughout 2022,” said John LaForge, head of Real Asset Strategy at Wells Fargo Investment Institute, in an April 25 report. “We believe fundamentals and technicals are looking better than they looked in 2021. Plus, it appears that investors may be warming up to the idea that long-term inflation expectations could be shifting structurally higher.”

GLD stock aims to match the performance of the price of gold bullion, as quoted in London.

Gold provides a natural hedge against inflation and is regarded as a safe-haven investment during downturns in the economy. The price of gold tends to rise during times of inflation due to its dollar denomination, which offsets the decline in value of the dollar caused by inflation. It can also be a buffer against a bear market, or in the case of an international crisis. The Russia-Ukraine war is one example.

GLD Stock Is Great Way To Gain Gold Exposure

A gold ETF like GLD is only one way to gain exposure to gold. Among the other methods are buying gold itself, through bullion, coin or jewelry, or by buying it as a commodity that can be traded on commodity exchanges. Another way is by investing in mining stocks like Barrick Gold (GOLD), Franco-Nevada (FNV), Freeport-McMoRan (FCX) or Rio Tinto (RIO).

Another alternative is to invest in other ETFs that invest in gold bullion. The iShares Gold Trust (IAU), the $3.9 billion-in-assets SPDR Gold MiniShares Trust (GLDM) or the Aberdeen Standard Physical Gold Shares (SGOL) are good examples.

It’s also possible to invest in any of the other ETFs that hold gold as one of many precious metals. Examples include U.S. Global Gold & Precious Metals (GOAU) and Aberdeen Precious Metals Basket (GLTR). Or an ETF that invests in gold mining stocks, such as the iShares MSCI Global Gold Miners (RING).

But some of these gold alternatives have problems from an investor standpoint. For one, by holding gold bullion, coins or jewelry, investors have to worry about a place to store it, insuring it and the chance of it being robbed.

With trading gold as a commodity, there are several costs involved through the exchanges themselves or through brokers. By investing in mining stocks, investors have to keep in mind that you’re investing in a corporation, which requires paying attention to fundamentals and technical analysis and knowing what other products the mining stock is invested in.

Other Gold ETFs Can Help

In terms of investing in other ETFs that invest in gold bullion, investors have to take liquidity into account. With thinly traded funds, it can be difficult to perform chart analysis. Only IAU, with $27 billion, comes even remotely close to the $56 billion in market capitalization that GLD stock has.

If your goal is to invest in gold as a hedge against the rest of your portfolio, or as a tactical investment, then GLD is a wise choice.

GLD was the fifth-largest ETF overall in terms of net flows year to date, raking in over $7 billion through March 31.

“In the long term, gold serves as a strong strategic component in many portfolios, not only for its diversification benefits but also for its returns,” the World Gold Council wrote in a February report about the use of gold as a strategic inflation hedge. “Gold’s ability to protect against more than increases in the general price level suggests that its long-term real returns should be positive — something current long-term portfolios may struggle to achieve.”

If, however, your interest is to follow the technical signals of GLD’s chart, there are indeed good times to buy and sell the S&P Gold Shares ETF.

GLD Stock Technical Analysis: Approaching A Buy Point

From a MarketSmith chart analysis standpoint, GLD is currently in a flat base that began on March 8 and has a buy point of 193.40. The stock fell below 170, but is working its way back toward its buy point. It also has rising average volume of more than 13,500,000 shares, which is a positive signal.

GLD stock had already been rising and on Feb. 14 completed an earlier flat base with a buy point of 174.77. It ramped up to 193.30 during the Russian attack on Ukraine as investors sought havens.

“Gold is effective as an inflation hedge and to preserve wealth,” Kurt Nelson of SummerHaven Index Management said in an April 11 podcast. “But if we are in a rising rate environment, there is an opportunity cost to holding gold. Gold does well in a risk-off environment, more so than as a tactical allocation tool.”

Is GLD Stock Volatile?

The ETF is volatile, but it has a strong Relative Strength Rating of 83. As a commodity ETF, it has no earnings and also doesn’t pay dividends.

GLD stock also has an IBD Accumulation/Distribution Rating of B, which measures the relative degree of institutional buying and selling the stock has experienced over the last 13 weeks. Because GLD is an ETF, it tends not to attract a huge institutional investing audience. GLD shares are 2% owned by large investment funds, and 1% owned by banks, according to MarketSmith. MainStay Funds, a division of New York Life, is the largest fund owner.

S&P Gold Shares ETF can also be used to buy call and put options, and to generate income. That can be achieved with covered call options or a synthetic long trade. Gold can be unattractive for income investors without a dividend payment. But using GLD options can enable investors to generate income.

And for the best stocks to buy or watch, check out IBD Stock Lists and other IBD content, such as how to find the best ETFs.

Follow Michael Molinski on Twitter @IMmolinski

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