Stock Market Declines Support Gold Markets

Gold CoinsGold Coins

Gold markets continue to move higher, as investors seek safe haven assets in uncertain markets.  The S&P 500 is already up 4.2% year-to-date, and the latest rallies come after an already-impressive 2017 for equities markets.  Stocks at elevated levels are vulnerable to volatility, however, and if this is the types of scenario that unfolds for the remainder of 2018,  gold markets could be the primary beneficiary.

Recent Volatility Supports Gold Outlook

Stocks have undoubtedly been moving in the bullish direction for the past few years, but many market analysts have started to question the viability of the underlying trends.  

Can any asset move in one direction forever?   The conventional wisdom tells us that there must always be retracements in any financial markets instrument, as this buying and selling pressure is what truly allows prices to settle at an equilibrium.  This does not bode well for stocks, as they could be vulnerable to declines in the S&P 500.

Buying Opportunities

Ultimately, this means that there could be strong buying opportunities to buy gold online and gain exposure to precious metals in the months ahead.  To accomplish this, it is important to define potential support and resistance levels that could represent turning points in these assets going forward.

Gold Prices

Gold Prices

In this chart, we can already see some interesting developments occurring in the gold market.  After moving out of oversold territory in the Commodity Channel Index indicator, we have broken the latest downtrend lines on the lower time frames, and this suggests that an upside rally is imminent.  The next important level of resistance can be found at 1,340.60, which is a double top on the 2-Hour charts.

Fundamentally, there are several drivers that could lead to a quick test of these upper levels.  Specifically, increases in trade tariff talks from US President Donald Trump, or even retaliatory efforts from other countries (with their own trade tariff suggestions) could be enough to create spikes in stock market volatility.

Rising volatility in the stock market is almost always a positive factor for gold investors, and so this will continue to be an area to watch within the financial markets.

VanEck Gold Miners ETF

VanEck Gold Miners ETF

The gold miners would also likely see a rally from this type of event, as demand for their asset base rises.  The Van Eck Gold Miners ETF (NYSEARCA: GDX) is one of the best ways of gaining broad exposure to the large-cap names within the space.  

Holdings within the GDX ETF include Newmont Mining Corp. (NYSE: NEM), which makes up 9.62% of the total composite.  The GDX ETF has actually made a similar breakout of its own, invalidating its YTD bearish tendency and poised for another run higher. The next level of resistance can now be found at the 200-period exponential moving average on the 2-Hour charts.  An upside break here will target the highs from the end of January.

Ultimately, this is a confluence of events that supports the outlook for precious metals. Gold and silver purchases should always be conducted by a reputable coin dealer, as this is the best way to protect against risks and ensure that your assets are always safe in the active markets.


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