Gold Gets Supporting Bid from Surging Cases
The one thing that has held back gold from gaining any meaningful traction in recent weeks has been the utter lack of a fear catalyst. But that has now changed as gold has a new “fear factor,” as discussed in this week’s report.
It looks increasingly like the recent surge in U.S. Covid cases will be the fear catalyst that gold has been waiting for. The front-month gold futures price hit an intraday low of $1,750 an ounce on June 29. Since that time, the price has been gradually drifting higher and is now above its key 25-day moving average.
An interesting (and by no means coincidental) correlation to gold’s recent strength has been the rebound in U.S. Covid cases, which started at around this same time, as shown in The New York Times coronavirus tracker shown below.
While I’m hesitant to make too close a correlation between gold’s price and the virus case tracker, there’s no denying that as Covid cases increase it will almost certainly engender increasing fears over the possible re-introduction of virus-related restrictions in the various states. (According to CNN, cases are “surging” in 46 states, and it’s alarming news headlines like this that I expect will boost gold’s attraction as a safe haven in the coming months.)
From a technical standpoint, the latest strength in gold was preceded by relative strength in platinum and palladium—metals which often serve as leading indicators for gold. The only thing standing in the way of an outright intermediate-term reversal for gold is for the yellow metal’s strength to be confirmed by corresponding strength in its sister metal, silver.
However, now that gold is back above its key 25-day moving average, I’m going to recommend that speculative traders begin nibbling on our gold-tracking ETF, especially on pullbacks. Conservative investors may wish to wait for silver to join in and strengthen before buying gold again, but I’m adding a new gold-tracking fund to our current holdings as of today.
What to Do Now
Traders can buy a small position in the GraniteShares Gold Trust (BAR), which is a low-cost way to track price movements in the physical gold price. I’m going to suggest using a tight stop-loss at this time for BAR since gold isn’t completely in the clear yet (with regard to silver’s lack of confirmation). Accordingly, I suggest exiting long positions in BAR if the 17.66 level is decisively violated on an intraday basis.
