Have Gold Prices Officially Topped?
After a 4-week rally, gold stocks and prices pulled back on Monday. News that a potential coronavirus vaccine from Moderna. The company said initial tests showed signs of immune response in the body. As we saw on Monday, this news helped boost sentiment in the market. U.S. stocks rallied higher in one of their best sessions in over a month. This followed a much different sentiment at the close of the week last week.
Federal Reserve Chairman Jerome Powell commented on a dim outlook for the economy in the short-term. Over the weekend, he also suggested that the economic recovery in the U.S. could extend in the end of 2021. However, with some flight from safe-havens in light of these events, it may just be an expectation. Certainly a vaccine would ease concern over the country’s future dealing with coronavirus. However, it doesn’t negate the fact that extreme government stimulus has been a “hidden factor” that continues to grow.
Also consider that there is still no resolution to tensions between the U.S. and China right now. Furthermore, there are murmurs of potential for negative interest rates being thrown around. Yet JPMorgan Asset Management is one of those that expect negative rates to be much further out than the current 2020-2021 timeframe.
Are Gold Stocks Overbought?
There’s an undeniable bullishness to gold stocks this month. After several hit new 52-week highs on Monday, the dip in gold saw even the strongest trends subside a bit. So this begs the question, Are gold stocks overbought right now? If you consider record highs from back in 2011 and 2012, one may suggest otherwise. However, a look at most gold stock charts from mid-march and the breakout has been evident. Some gold stocks are even up closer to 100% during that short time period.
Also, consider the fact that a number of gold mining ETFs are at or near 52-week highs. Prudent gold investors may be already prepared for some profit taking. But will gold completely fall apart? Barring the economy from going completely back to “pre-covid” trends, it might not be likely. Nevertheless, Vaneck Gold Miners ETF(GDX ETF Report) and Junior Miners ETF (GDXJ ETF Report) both hit new highs for the last 52-week period on Monday. Even the SPDR Gold Trust ETF (GLD ETF Report) marked a fresh high during premarket trading. Despite giving back all of that gain by the close, ETF prices evened out by mid-day. For the remainder of the afternoon, most gold stocks and ETFs ended up trading sideways.
Barrick Gold stock (GOLD Stock Report) was one of the names investors have watched throughout the latest gold stock bull market. Deutsche Bank upped its target for Barrick to $34 from $25. The Bank also maintains a Buy rating. While 2020 outlook will remain uncertain for global economies, I don’t think a flight to safe-havens is over quite yet.
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