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The Top Stock for Direct Access to the Ultimate Defensive Asset

This week,we are presenting an exchange-traded fund (ETF) that is all about getting direct access to the ultimate asset during times of duress or uncertainty. 

Last Friday, with the holiday-abbreviated trading day with all of the senior fund managers and traders on holiday, the third-string folks sent general stocks plunging over concerns that one of the 30 published mutations of a known coronavirus variant might end global growth or worse.

Outside of US Treasury bonds, gold was one of the few assets that not only held its value but actually gained in price in limited futures trading in the US and beyond.

And the ETF that we’re setting you up to trade this week provides great access to the leaders in the gold market. 

Gold has been gaining again and has been at elevated prices over the trailing three years. This means that the companies digging it up and selling it into the market are genuine alchemists for their shareholders with rising revenues and underlying asset values.

At Josh’s Top 5, we have been following this ETF as well as the ongoing market performance for gold. And this is the top ETF stock in the US market to be buying at the right level this week.

Indeed, this ETF is set for a further quick gain this week for our Top 5. And we project a nice potential return in this gold mining tracking ETF as gold prices are supporting rising revenues and gains for the underlying stocks represented inside the ETF.

This continues our successes in our stock trades inside Top 5 with the average return on our hit stock trades at 7.49% for a total gain for hit trades running at 576.86%. 

And for the stock option alternatives presented for many of the stocks, the average gain for hit trades is running at 41.99%.

So, for weekly hit stock trades and stock option alternatives, these returns add up and can compound to amount to four-figure returns over the year. 

The Golden Gains Trade for this Week

Gold has been gaining overall over the past trailing three years. In fact, in the continuing contract for the Nymex futures price, gold is up by 45.87%.

Gold Continuous Contract (Nymex) — Source: Dow Jones

Gold has been gaining for some specific reasons. To start, the US dollar has generally been under control in its market value against the leading financial and commercial currencies of the globe. As gold is priced in US dollars for the US market, a stable to lower dollar equates to better gold prices.

Then, there’s the US interest rate environment. Gold in and of itself does not pay any yield. This means that there is an opportunity cost to buy and hold it. Higher interest rates make that opportunity cost rise, and lower rates reduce that cost. 

And as you know, US interest rates have been driven to near zero over the past year in response to the economic impacts of the virus mess. So, gold is a clear beneficiary of low to lower interest rates.

In addition, institutional transactions for gold are based on interest rates. Mining companies hedging their production sell forward their mined gold that is priced out based on the underlying interest rate to carry that hedge. 

And financial firms trading and entering other gold-related transactions also calculate prices for future settlements based on the implied underlying interest rates for these transactions. With lower US interest rates, all of these transactions are made cheaper and in turn benefit the price of gold.

Now, it’s not all perfect for the gold market, as there is also the factor of competition from other assets. Gold is just one asset against other opportunities such as in the stock and bond markets. And of course, BTC and other coins also compete against gold. But overall, the demand for gold remains pretty well supported, and the price action reflects this for the metal.

VanEck Gold Miners ETF

The VanEck Gold Miners ETF (GDX) is a leading ETF that tracks the American Stock Exchange (AMEX) Gold Miners Index. 

Gold mining companies continue to benefit from the ongoing higher prices for gold and related ancillary minerals for higher revenues and more trading interest in their stocks. 

VanEck Gold Miners ETF Price — Source: Dow Jones

With our ongoing bullish view on spot gold prices, mining companies should be continued beneficiaries. And in turn, this mining company-tracking ETF is set for more gains in the works.

Here is our latest analysis for the stock trades and how it sets up for this week.

company
VanEck Gold Miners ETF Price & Technical Analysis — Source: Traders Agency & Trading View

The trade to make for VanEck Gold Miners ETF is to buy the shares under $33.00 and hold them for our target price level of $38.39.

From the current price of around $32.10, it represents a potential cash gain on the shares of 19.60% to the target price for a short-term trade. 

But we are looking for the counter trend line to break bullish for a better entry price that would provide more certainty in the short-term direction in the ETF. 

That entry point would be best at any price above $33.60, which would equate to a gain to the target price of 14.26%.

And note that we see a potential resistance level of $36.15 that may need to set up an early exit before the target price for a quicker gain.

Keep on trading,

Josh Martinez

Editor, Top 5

P.S. This is a great pick, but it’s still only one out of my Top 5. To find out about the rest of the trades I’m recommending, complete with specific entry and exit points, you need to click here and join me on the Top 5 journey…

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