At the FRED Report (
) we have been, and remain, concerned more with inflation than deflation. Because of this, our favorite long-term investment is the commodity markets and gold has been a top performer in this area. Gold is always a market leader in inflationary times. Recently, gold and the metals have been in the news again, as they have broken out to new highs. We have been asked by our subscribers the best ways to capitalize on this move in precious metals and we have the following suggestions.
Our main vehicle for analysis is the GLD (SPDR Gold Trust) for gold and the SLV (iShares Silver Trust) for silver, but there are other ways for the average investor to be involved in these markets. To trade gold directly, the IAU ((iShares Comex Gold Trust) may be a less expensive alternative. We show charts of the GLD and the IAU and note the patterns are very similar.
Of course, there are also stocks in the gold and silver mining industries. Our favorite index to invest in these stocks is the ^XAU (Philadelphia Gold/Silver Index). This is an index of stocks related to the metals. When looking at the component stocks of that index, we use relative price analysis to determine the best performing stocks in the index. Relative price analysis is a technique used by many portfolio managers and in its simplest form consists of dividing the price of the stock by the index (in most cases, the S&P 500). You can see an article on this on our website (
). In this case, however, we will use the ^XAU. Of the 17 stocks in the ^XAU, we have found four tickers that seem a bit more attractive than the index: NEM, FCX, KGC, and SLW. We show these charts below.
Readers can see that these stocks are outperforming the XAU on a technical basis, but we note two things. The first is that there is â¿¿company risk,â¿ i.e. these are individual companies with business risk independent of the commodity. The second is to realize we have not analyzed the companies -- these are technical recommendations only.
Fred Meissner is founder and publisher of
. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report. A detailed bio is here: