Fed Comments Boost Gold

08/29/2018 5:00 am EST

Focus: COMMODITIES

Omar Ayales

Editor, Gold Charts R Us

Fed chair Powell recently made remarks from Jackson Hole, Wyoming that gave gold an upward boost and further exposed dollar resistance, notes Omar Ayales, commodity expert and editor of Gold Charts R Us.

The dollar is now breaking back below its 5-week moving average. Volatility at the lows in gold and at the highs in the dollar are yet another indication that the contratrend of recent months is coming to an end.

I remain a bit skeptical and watchful until the dollar breaks clearly below $94 and gold above $1220, initially. The $1220 level for gold is its 5-week moving average. Consider the last time gold was above its 5-week moving average was in April, just before trade war jitters fueled speculation that deflationary forces would take over the markets.

The past couple of days have allowed us to pick up some positions at low levels. If you were looking for more exposure to Kirkland Lake Gold (KL), you can buy in the lower $19s. I also picked up some Agnico Eagle (AEM) at $35 and $34.70 and Franco Nevada (FNV) at $66. I'm tempted to buy Wheaton Precious Metals (WPM) below $18. I'll wait a bit more before buying.

I also came across a new ETF from U.S. Global called Go Gold and Precious Metals Miners (GOAU) which picks up many of my favorite gold shares and has consistently outperformed the GDX and GDXJ during the past year. I recommend picking up some at market, and more below $10.50.

Remember to buy gold shares selectively at current levels. Buy on weakness. The current levels will prove to be great buying opportunities down the road. Although it's tempting to load up, take your time. Wait for short-term resistance levels to be surpassed to confirm the recent strength.

Energy continues to be a top performer and our energy shares are rallying. Denbury Resources (DNR) is the strongest and Diamond Offshore (DO) is just behind. In the resource sector, I also picked up some Freeport McMoRan (FCX) at $14. The lower $14s is a great buy, too.

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