The price of spot gold recorded a marginal decrease of 1.25% on Thursday, an outcome largely attributed to the publication of preliminary estimates data by the U.S. Bureau of Economic Analysis.
The data disclosed a growth of 2.4% on an annualized basis in the U.S. economy during the second quarter of 2023.
Further, the week ending July 22nd demonstrated a drop in unemployment rates, a testament to the unwavering strength of the labor market. This outcome also suggests the Federal Reserve’s success in circumventing a potential recession, which ordinarily does not bode well for gold and its mining companies.
However, despite the decrease, spot gold managed to sustain above the 50-day simple moving average. This raises the prospect of a potential resurgence. When the sector displays bullish signs, it might be beneficial for investors to consider a stake in the Sprott Gold Miners ETF (NYSE:SGDM), allowing access to a wide range of gold mining companies.
The ETF monitors 30 large-scale gold mining corporations and mirrors the total return performance of the Solactive Gold Miners Custom Factors Index. Presently, SGDM boasts total net assets amounting to $257,956,220.39 and a total of 9,550,000 outstanding shares.
Within SGDM, the three dominant holdings are Barrick Gold Corp (NYSE:GOLD), Franco-Nevada Corp (NYSE:FNV), and Agnico Eagle Mines (NYSE:AEM), with weights of 11.04%, 10.4%, and 9.73% respectively.
Reflecting the performance of spot gold, SGDM experienced a decrease of over 3% on Thursday, yet managed to sustain support above the 200-day simple moving average (SMA). This area acted as a support between June 26 and July 10, when the ETF briefly fell below the 200-day SMA before bouncing back.
The ETF appears to be on track to display a bearish kicker candlestick on Thursday, which could forecast lower prices in the short term. If SGDM dips below the 200-day, bullish traders may seek to observe the ETF consolidate laterally under the area for a certain duration. Bearish traders, on the other hand, might be looking for SGDM to fall below the 200-day SMA on higher-than-average volume, which could speed up a downward trend. The SGDM currently has resistance at $26.51 and $27.82, and support at $25.14 and $23.65.
Despite these short-term movements, it is worth noting that the value of gold has historically shown resilience and a tendency to increase in value over the long term. The yellow metal continues to be seen as a safe haven in times of economic uncertainty, and it also provides a hedge against inflation. Thus, while short-term indicators may be bearish, the long-term outlook for gold and gold ETFs like SGDM remains positive, offering an attractive opportunity for investors looking to diversify their portfolios.
