Gold stocks were looking like anything but a sanctuary Tuesday. But digging into the price charts within the broader group, we may find asylum for investors– and maybe some is even stored in your portfolio. Let me explain.
If we learned anything about markets and investing in yesterday’s session, it’s that safe havens, at any given time, are a figment of Wall Street’s collective imagination. In equities, fast declines of 2% to about 3% reintroduced the concept of risk assets to investors seeking unrealistic refuge in leading trillion-dollar-plus tech giants Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) for the past few months.
Oddly enough and amid the sell-off, it was gold stocks and other hard assets historically known for their safe haven qualities which failed the low correlation and diversification litmus test Tuesday. Gold sank like the proverbial rock.
In fact, it was the precious metal’s worst decline in more than seven years.
For its part, the popular and very liquid SPDR Gold Trust ETF (NYSEARCA:GLD) crumbled by 5.37%. A volatile and ugly stepsister silver contract fared even worse. The listed proxy iShares Silver Trust (NYSEARCA:SLV) cratered 13.57%. And for some of those investors, salt was spread over the wound as vague “profit-taking” was widely offered as the driver, and a suspect Russian Covid-19 vaccine and “U.S. dollar strength” were accomplices along for the ride.
While not all of these are predominantly known as gold stocks, they’re all in the sector in part and are affected by the drop.
The benefit of yesterday’s shaky profit-taking proposition is using the unsettling price action to one’s advantage. The fact is gold has pulled back within its uptrend and investors are being offered the chance to buy when others are fearful. As well, there are various buying opportunities for all types of investors as the following three price charts reveal.
Gold Stocks to Buy: Rio Tinto Group (RIO)
Source: Charts by TradingView
The first of our gold stocks is Rio Tinto. The diversified large-capitalization, Anglo-Australian mining outfit isn’t offering today’s buyers the opportunity to buy cheaply on the price chart. Shares largely bucked gold’s sell-off with a nearly untouchable loss of just 0.42% Tuesday. And today RIO is up over 2%.
But don’t be fooled. There’s still value in this miner.
The technical-based value proposal in Rio Tinto is price momentum and a pending base breakout.
On the monthly time frame, shares are nearing a devilish all-time high. If RIO clears $66.66 investors can participate in a nice-looking, massive base breakout. And with Rio Tinto’s stochastics trending nicely higher inside neutral territory and shares breaking above a bullish-oriented Bollinger Band, there are plenty of reasons to see this as a gold stock to buy.
Freeport McMoRan (FCX)
Source: Charts by TradingView
The next of the stocks to talk about are shares of Freeport McMoRan. The miner is mostly known for its copper production, but its operations include silver, gold and molybdenum. Painfully, some mistimed diversification into oil and gas have proven to be more of an Achilles Heel for FCX investors over the past several years.
But Freeport is on the mend in more than one way. July’s earnings release offered investors profits of 3 cents which took analysts forecasting a loss of 3 cents by surprise. The result follows the prior quarter’s lighter-than-expected loss and continues to improve an earnings trend which has now beaten estimates in three of the last four reporting periods.
Technically, shares of this gold stock to buy are also on the radar for a breakout. But this is a different type of value proposal. As the monthly chart reflects, a move through $15-$15.50 sets the stage for a massive breakout of Freeport’s longstanding downtrend of nearly 10 years and possibly some very well-deserved catching up.
Pan American Silver (PAAS)
Source: Charts by TradingView
Finally, we come to shares of Pan American Silver. The miner is mostly known for its silver production, but the British Columbia-based outfit also is a producer of gold, zinc, lead and copper as well. PAAS is also busy producing a ton of technical fear at present.
Whereas silver and gold had some of their technical shine removed Tuesday, the 11.61% price drop in Pan American proved more nail bitingly rare. Unlike the underlying metals, shares of PAAS also gapped through an uptrend tied to March’s fairly universal bottom. That can only mean one thing for the recent market leader, right? A new bear market! Maybe not.
When it comes to investing, price charts and stocks in general, there are always two, if not more, sides to every story. Right now, while PAAS stock looks outright terrifying by some accounts. By other standards it’s more appealing. For investors who appreciate even the best stocks can and will correct with little or no notice, this gold stock to buy could be much closer to holding a store of real value rather than a fearful-looking weight on investors’ portfolios.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. Investment accounts under management do not own any securities mentioned in this article. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
