BMB has made mention of the movement in gold and precious metals a few times in recent days. There’s no better way to see what’s really happening than to take a look at the charts. We’ll look specifically at the XAU - a gold & silver stock index, but in general, all precious metals seem to move in very simliar patterns over time.
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Many had given up on gold after last year’s rally peaked in January and gold experienced a significant selloff over the next 4 months. The gold stocks have since staged a strong rally, and are now testing the February and April highs, and the 50-day MA is poised for a bullish crossover of the 200-day MA (blue arrow). |
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A look at a longer term chart (weekly, 3 years) shows that the spring pullback brought the XAU back to its long-term uptrend line. This upward move in the index actually began back in November of 2000. This demonstrates that an understanding of the longer-term trend is often necessary to put a short-term move in perspective. |
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So if precious metals are indeed in a longer-term bull market, how can the individual investor profit from the move? When it comes to precious metals, as well as many other commodities, there are fewer avenues open to the investor than there are with the average industry or sector (short of trading futures contracts or buying the metals themselves - bullion). No ETFs currently exist that track gold or precious metals. BMB has heard that gold ETFs are in the works, but that could be some time off. Check with your mutual fund company to see if they have any precious metals funds - Vanguard recently reworked and reopened its Precious Metals & Mining fund, but it does require a $10,000 minimum initial investment and charges a 1% fee on sales of shares held less than one year.
Another option is to invest in the gold/silver/metal mining stocks themselves. Here is a list of the components of the XAU. A few other stocks in the metals arena (including base metals, like copper, nickel, etc.) that you might want to take a look at are BHP, HL, N, PAAS, PCU, PD, and RTP just to name a few. I’m sure readers may have other suggestions - please feel free to add them via the comments link.
A couple of other good resources for information on metals:
- John Murphy’s Intermarket Analysis - good discussion of commodities and gold, especially the inverse correlation between the price of gold and the U.S. Dollar
- Kitco.com - web site dedicated to information on and sale of gold and other precious metals. Probably more information on gold than you ever will care to know.
Charts courtesy of StockCharts.com