Amid more tightening by the Federal Reserve that’s pushing up the dollar into the stratosphere, gold prices have been languishing. However, a short-term bounce could be ahead, giving traders a potential opportunity.
Rising inflation continues to be on the mind of investors, given bullish greenback overtones resonating through the capital markets. It’s been a reversal for gold, which was strong out of the gate before losing steam by May 2022.
“Gold is overall bearish, but approaching significant possible exhaustion levels below, which could trigger a bullish correction/trend,” said Michael Moor, founder of Moor Analytics, in a Kitco News report. “We have broken below multiple bearish formations, but are likely in the last structural stretch down from the highs.”
From a technical standpoint, however, some market strategists see a potential bounce ahead.
“The recent drawdown in the gold price has mainly been driven by a rally in the U.S. dollar, which has been getting overextended technically. With the RSI for XAUUSD getting oversold, gold could be due for a short-term trading bounce,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “That being said, with so much capital moving into the U.S. looking for a defensive haven, gold could continue to struggle against the U.S. dollar.”
Play a Bounce With SGOL
Rather than make an indirect play on miners or gold futures, ETFs that focus on physical gold can give investors a more tangible feel for playing gold prices. One fund to consider for this level of exposure is the abrdn Physical Gold Shares ETF (SGOL ).
The fund seeks to reflect the performance of the price of gold bullion. Fund facts per SGOL’s fact sheet:
- Physically-backed: The trust holds allocated physical gold bullion bars stored in secure vaults.
- Transparency: The metal is held in allocated bars, and a bar list is posted daily on abrdn.com/usa/etf.
- Pricing: The metal is priced off the London Bullion Market Association’s specifications for Good Delivery, which is an internationally recognized and transparent benchmark for pricing physical gold.
- Vault location: Metal is held in Zurich, Switzerland, and London, England in a secured vault.
- Vault inspection: Inspectorate International, a leading physical commodity auditor, inspects the vault twice per year (including once at random).
For more news, information, and strategy, visit the Commodities Channel.