Gold mining stocks are soaring! Time to buy?

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While gold has been breaking to new 2019 highs, institutional investors and hedge funds have secretly been snapping up gold mining stocks. And, <a href=”https://moneyweek.com/504380/gold-mining-stocks-will-soon-shine/” target=”_blank”>according</a> to the manager of Invesco’s Global Gold Fund “economic factors underpin a rising price for gold, while mining companies are focused on improving returns” – creating a possible explosive combination for investors.
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<a href=”https://admiralmarkets.com/analytics/traders-blog/gold-mining-stocks-etf”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/5dec6c834919c91dc6d61789eca8a020.jpeg” style=”” rel=”” alt=”Trading gold mining stocks”></a>
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In this article, we explore a selection of gold mining stocks that are piquing investors interest and what could be next for gold and gold mining stocks. Let’s get started!
</p><h2>Why Are Gold Mining Stocks Rising?</h2><p>
The price of gold can often correlate with the price of certain gold miners. However, the correlation has historically been tricky as there are many influences on the price of gold such as demand for jewellery, central bank purchases and demand from the technology sector for mobile phone chips.
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Recently, gold demand has been driven by its use as a safe haven asset – as it can be melted down to create a form of money, among other reasons. The ongoing U.S-China trade tensions, the increasing war of words between the U.S and Iran, Brexit woes and a struggling U.S dollar have helped investors flock to the traditional safe haven of the gold market.
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Historically, the return from the mining sector <a href=”https://moneyweek.com/504380/gold-mining-stocks-will-soon-shine/” target=”_blank”>was</a> three times that of the gold price. But, with rising costs of exploration and cost pressures from labour and fuel gold mining stocks have struggled in the past. However, with a turn in gold prices and the gold mining sector learning from their mistakes and cost-cutting their mining processes, the combination could bode well for gold mining stocks.
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Let’s take a look at the technical picture to identify the current trend of buyers and sellers active in the market.
</p><h2>How to Trade Gold Mining Stocks</h2><p>
With Admiral Markets there are a variety of gold mining stocks and <a href=”https://admiralmarkets.com/education/articles/etfs/what-are-etfs”>ETFs</a> (Exchange Traded Funds) that are available to speculate on via <a href=”https://admiralmarkets.com/education/articles/forex-basics/what-is-cfd-trading-contracts-for-difference-explained”>CFDs</a> (Contract for Differences), enabling the trader to go long and short. Longer-term investors can also invest in shares of companies or ETFs through <a href=”https://admiralmarkets.com/start-trading/admiral-invest-stocks-and-etfs”>Admiral.Invest</a>, with investing fees starting at just $0.01 per share.
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To gain exposure to the overall gold mining sector, without searching through individual stocks, traders or investors can focus on ETFs such as the VanEck Vectors Gold Miners ETF. This particular ETF currently comprises of 46 gold mining companies such as Barrick Gold Corp, Newmont Goldcorp and so on.
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Below is the long term price chart of the VanEck Vectors Gold Miners ETF (<a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/gdx”>GDX</a>):
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<a href=”https://admiralmarkets.com/analytics/traders-blog/gold-mining-stocks-etf”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/8602bff514e8806f4fadaafac6c85394.png”></a>
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<em>Source: Admiral Markets </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”><em>MT5 Supreme Edition</em></a><em>, GDX, Monthly – Data range: from May 1, 2006, to June 17, 2019, accessed on June 17, 2019, at 11:18 am BST. – Please note: Past performance is not a reliable indicator of future results.</em>
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In the above chart, it is clear to see the struggles that have plagued gold mining companies in the past. The rising cost of exploration and financial leverage restrictions have taken their toll on the sector. However, with the management team of companies finding new and better ways to mine gold, it may just be a matter of time before a turnaround starts.
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In fact, in the above chart, the black horizontal line at $17.16 has acted a <a href=”https://admiralmarkets.com/education/articles/forex-strategy/support-and-resistance-indicators-with-a-trading-strategy”>support</a> level where some short-sellers may have exited their positions and value-driven investors may have entered long positions. Either way, if price can stay above this level then buyers will be eyeing the next major horizontal <a href=”https://admiralmarkets.com/education/articles/forex-strategy/support-and-resistance-indicators-with-a-trading-strategy”>resistance</a> line at $32.
</p><h2>How to Trade Gold Mining Stocks</h2><p>
While ETFs can help traders or investors gather general exposure to a sector, some may prefer to focus on individual companies such as the world’s largest gold mining company Barrick Gold Corp (<a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/abx”>ABX</a>).
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<a href=”https://admiralmarkets.com/analytics/traders-blog/gold-mining-stocks-etf”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/bdfb2f4086fda1329793c6322e4032f7.png”></a>
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<em>Source: Admiral Markets MT5 Supreme Edition, ABX, Monthly – Data range: from Feb 1, 1990, to June 17, 2019, accessed on June 17, 2019, at 11:28 am BST. – Please note: Past performance is not a reliable indicator of future results.</em>
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In the above long-term price chart of Barrick Gold, it seems as though the stock price is at an interesting area of support created by the black horizontal line at $13.09. Zooming into the chart to look at more recent price action also paints an interesting picture:
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<a href=”https://admiralmarkets.com/analytics/traders-blog/gold-mining-stocks-etf”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/bfce5e03ead3f155d9f464722126e840.png” style=”” rel=””></a>
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<em>Source: Admiral Markets MT5 Supreme Edition, ABX, Weekly – Data range: from Feb 24, 2013, to June 17, 2019, accessed on June 17, 2019, at 11:30 am BST. – Please note: Past performance is not a reliable indicator of future results.</em>
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In the above weekly chart of Barrick Gold Corp, buyers have been struggling to break through the $14 price level, as shown by the smaller black horizontal line. However, sellers have not managed to take control just yet as the stock is still making higher low price cycles.
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Many traders will be waiting for the stock to break through the $14 price level before adding to or initiating new long positions, targeting the next level of major resistance at $22. Fundamentally, it seems as though investors have liked Barrick Gold’s <a href=”https://www.barrick.com/news/news-details/2018/Barrick-and-Randgold-Combine-to-Create-Industry-Leading-Gold-Investment-Vehicle/default.aspx” target=”_blank”>merger</a> with South African mining company Randgold Resources in late 2018 and will be looking for the trend to continue.
</p><h2>Conclusion </h2><p>
The gold mining sector is currently undergoing a huge shift that is also being supported by higher gold prices. If these trends can continue, it could be the beginning of a remarkable turnaround. As with any form of investing there are risks involved.
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