As a position trader, holding on to an investment for an entire year is pretty difficult. However, if a stock’s technicals and fundamentals don’t deteriorate, there’s really no reason not to stay long.
Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted.
— Alan Greenspan
Coming into 2022, I expected gold and gold miners to outperform. And for the first few months of the year, demand for shiny rocks was high. But then, beginning with Gold futures in early March and gold miners in mid-April, demand vanished, and anything related to the yellow metal went into a freefall.
Before you ask, I’m not a gold bug. I don’t own any gold bars, and until I purchased Newmont (NEM) last fall, I couldn’t remember the last time I invested in a gold miner for longer than a few hours.
My opinion on gold began to change when the SPDR Gold Trust (GLD) broke beneath long-term support at around $158 in mid-September 2022 on below-average weekly trading volume, only to trade back above that level a few weeks later on higher-than-average volume. It’s also worth noting that the break of $158 was accompanied by a bullish divergence in the 14-period Relative Strength Index (RSI).
You may have heard that Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital, told CNBC’s Street Signs Asia that Gold prices could surge to between $2,500 and $4,000 in 2023. While I’m not as bullish as Kiener, I believe the gold’s technical setup is very attractive.
With GLD trading around $170.50 (and gold futures trading near $1,844) and momentum stalling around the volume-weighted average price (VWAP) anchored to the early March 2022 swing high, I’m looking for a dip toward $163.50 to $165. Assuming buyers don’t pull the same disappearing act they orchestrated in early 2022, I expect GLD to trade toward $185.
Now, while I like the chart of GLD, I’ve chosen to participate in the metals market via my position in NEM. And while the VWAP anchored to Newmont’s mid-April swing high is capping the stock’s current advance, as long-dip buyers return in the mid- $40s, the stock can trade back toward $67 to $70 this year.
The risk to NEM is that demand evaporates in the mid-$40s, and the stock is stuck in limbo between $40 and $45. A protective stop under $45 would mitigate some of this risk.