Gold 1 OZ (XAU=X) as an Asset Class

Gold 1 OZ (XAU=X) as an Asset Class

Gold 1 OZ (XAU=X) as an Asset Class

All asset classes have their advantages and disadvantages. So far in 2020, gold is proving to be one of the best investment instruments. But gold prices can be volatile, so I wouldn’t necessarily load up the truck. Indeed many analysts recommend a 5% to 10% allocation of a personal investment portfolio to gold as an insurance policy. There are different ways to participate in the volatility or increase in the price of gold. One way is to invest in gold mining companies like Kinross Gold. Let’s take a closer look.

Gold as an Asset Class

Gold has fascinated humans since the dawn of time. Today, most gold produced is used for jewelry or investing purposes.

There are different reasons behind this year’s rally in gold, including the worries about the recent coronavirus outbreak, choppiness in the oil market, talk of a global recession, and rather volatile global equities.

This shiny metal’s price tends to shoot up in turbulent times as investors turn to traditional safe havens like gold. Between 2007 and 2011, mainly during the global financial crisis, the price of gold went from $700 per ounce to an all-time record of $1,900 in September 2011.

The current rally in the price started in June 2019 when gold traded around $1,300 per ounce. It looks like the move up is finding support due to the current volatile backdrop. Could gold once again hit $1,900 in 2020?

You may be familiar with arguments about gold being a hedge against inflation and a store of wealth. In general, gold has also had a negative correlation to stocks.

Analysts are also discussing the near-term possibility that U.S. dollar interest rates may go to zero and that pressure may be put on the Fed to introduce negative rates. If U.S. dollar deposits see negative rates, smart money is likely to move not into other currencies, but possibly into commodities, including precious metals such as gold.

Investor Takeaway

We cannot know the future with certainty. However, for a good number of people gold is an important asset for defensive diversification. If you also think that the recent strength is the start of a new rally in the precious metal, then gold mining companies like Kinross Gold will likely continue to have a bright 2020.

If you are an investor who also follows short-term technical charts, you may be interested to know that prices of both spot gold as well as KGS stock are at overbought levels. On Feb. 24, Kinross Gold shares reached a 52-week high of $6.27. They are currently hovering around $5.70. Although the rally could still continue in March, a pullback is looking more likely in the coming days.

However such a drop in price may provide a better entry point for long-term investors who would like to buy into KGC shares. Yet passive income investors should note that most gold miners either do not pay any dividends or are low-dividend payers. KGC stock does not pay a dividend.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 1,570.26.

The projected upper bound is: 1,724.05.

The projected lower bound is: 1,630.19.

The projected closing price is: 1,677.12.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 33 white candles and 17 black candles for a net of 16 white candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 85.2781. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 8 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 66.27. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 8 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 123.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 7 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 1 period(s) ago.

Rex Takasugi – TD Profile

PREC.M.XAU= closed up 3.541 at 1,673.850. Volume was -0% below average (neutral) and Bollinger Bands were 102% wider than normal.

Open     High      Low     Close     Volume___
1,670.2771,691.7201,647.6001,673.850 0
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1,637.13 1,580.22 1,491.78
Volatility: 33 19 16
Volume: 0 0 0

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

PREC.M.XAU= is currently 12.2% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 12 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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