Buy Gold Futures or Pick a Gold Mining Stock

The COMEX gold futures contract has been trading around its "reversion to the mean" since the week of June 17, 2016, and this 200-week simple moving average is now $1,235.1 per troy ounce. Barrick Gold Corporation (ABX), Yamana Gold Inc. (AUY), Goldcorp Inc. (GG) and Newmont Mining Corporation (NEM) have been lagging gold futures, so investing in these stocks makes sense as an alternative asset allocation given the high probability that the stock market is forming a global bear market.

Here's a scorecard for gold and four gold mining stocks:

Scorecard for gold and four gold mining stocks

Gold futures and Barrick Gold are in

correction

territory, while the other gold mining stocks Yamana Gold, Goldcorp and Newmont Mining are in

bear market

 territory.

COMEX Gold Futures

Technical chart showing the performance of COMEX gold futures
Courtesy of MetaStock Xenith

The weekly chart for the gold futures contract is negative, with the precious metal contract below its five-week modified moving average of $1,216.0 and below its 200-week simple moving average of $1,235.1, which is also the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week slipping to 63.44, down from 69.48 on Nov. 9.    

Given this chart, my trading strategy is to buy gold on weakness to my monthly, quarterly and semiannual value levels of $1,186.8, $1,169.9 and $1,103.6, respectively, and to reduce holdings on strength to my annual risky level at $1,539.8. With year end upon us, this type of strength is unlikely until 2019.

Barrick Gold

Technical chart showing the performance of Barrick Gold Corporation (ABX) stock
Courtesy of MetaStock Xenith

The weekly chart for Barrick Gold is positive, with the stock above its five-week modified moving average of $12.35 and below its 200-week simple moving average of $13.92, which is also the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week rising to 72.16, up from 71.53 on Nov. 9. The stock has been tracking its "reversion to the mean" since the week of April 29, 2016.

Given this chart, my trading strategy is to buy Barrick Gold shares on weakness to my quarterly, semiannual and annual value levels of $10.99, $8.98 and $8.20, respectively. My monthly pivot and 200-week simple moving average are magnets at $12.93 and $13.92, respectively.

Yamana Gold

Technical chart showing the performance of Yamana Gold Inc. (AUY) stock
Courtesy of MetaStock Xenith

The weekly chart for Yamana Gold is negative but oversold, with the stock below its five-week modified moving average of $2.39 and below its 200-week simple moving average of $3.09, which is also the "reversion to the mean." The stock is trading between $1 and $3 per share, which is the range I consider as an "option on survival." Investors are putting their money into this stock knowing the risk that this holding could become worthless. The 12 x 3 x 3 weekly slow stochastic reading is projected to slip to 14.67 this week, down from 16.59 on Nov. 9. This stock's "reversion to the mean" was nearly tested during the week of Aug. 3, when the average was $3.23.

Given this chart, my trading strategy is to buy Yamana Gold shares on weakness to the Jan. 22, 2016, low of $1.38 and reduce holdings on strength to the 200-week simple moving average of $3.09. My monthly and annual pivots are $2.52 and $2.79, respectively.

Goldcorp

Technical chart showing the performance of Goldcorp Inc. (GG) stock
Courtesy of MetaStock Xenith

The weekly chart for Goldcorp is neutral, with the stock below its five-week modified moving average of $9.84 and well below its 200-week simple moving average of $14.68, which is also the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 23.82 this week, up from 22.84 on Nov. 9. The stock is trying to stabilize around my quarterly and annual pivots at $8.98 and $9.06, respectively.

Given this chart, my trading strategy is to buy Goldcorp shares on weakness to my annual and quarterly value levels of $9.06 and $8.98, respectively, and to reduce holdings on strength to my monthly risky level of $11.21.      

Newmont Mining

Technical chart showing the performance of Newmont Mining Corporation (NEM) stock
Courtesy of MetaStock Xenith

The weekly chart for Newmont Mining will be positive if the stock ends this week above its five-week modified moving average of $31.73 and above its 200-week simple moving average of $31.51, which is also the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to rise this week to 41.42, up from 32.12 on Nov. 9. The stock is on the cusp of its monthly pivot of $31.74.

Given this chart, my trading strategy is to buy Newmont Mining shares on weakness to my quarterly and annual value levels at $29.96 and $27.56, respectively, and to reduce holdings on strength to my semiannual risky level of $36.51.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

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