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Trader flags an under-the-radar way to ride gold's surge to all-time highs

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Gold hits all-time highs, but miners lag. What two traders make of the moves

Gold has outshined itself.

The precious metal notched a new all-time high on Friday, breaking above $2,000 for the first time ever as investors sought safety from the coronavirus pandemic's economic blow. Although it was down from that record high on Monday, to $1,986.90, July marked gold's fifth straight month of gains and its best month since 2016.

"Gold is now breaking out of about a nine-year base and has broken out to new highs," Craig Johnson, senior technical research analyst at Piper Sandler, said Friday on CNBC's "Trading Nation."

"I agree that gold hasn't been among the more attractive areas to have put investments over the last say 10 or 15 years," he said. "But at this point in time, ... I think you've got a play."

Turning to a chart of the VanEck Vectors Gold Miners ETF (GDX), which was outperforming gold prices year to date as of Friday, Johnson noted that its rally has slowed recently.

"We've thought about adding to more of our positions that we've already got in gold in our model portfolio that we do run for Piper Sandler, and right now, trend is still higher," he said. "It's gotten a little bit overbought. We're waiting for it to come back a little bit and then we'll probably add to some of our positions in the gold names just to create some further diversification into the portfolio."

One such name is Wheaton Precious Metals, which Johnson's firm first purchased in March 2019.

"This is a stock that still remains in a very nice uptrend off of those March lows like a lot of other stocks, doesn't necessarily look like it's about to break down, and from our perspective, the relative strength has been nicely improving," he said, citing the momentum chart.

"In fact, as I go through our entire work that we got where we basically break down the entire marketplace into relative strength rankings, the gold, mining [and] silver groups are all making 26-week relative strength new highs and absolute new highs inside of our work," he said. "I think as a technician and investors, you can't really ignore that. You've got to put at least the big toe in the water in some of these names if not a little bit more. So, we would be a buyer of WPM in here."

However, Nancy Tengler, chief investment officer at Laffer Tengler Investments, said gold may be losing its glimmer as a key hedge against inflation.

"Historically, gold has not been a great hedge against inflation compared to equities," she said in the same "Trading Nation" interview.

"This can be a trade," she said. "Wait for a pullback and then think of it as a midterm trade because longer term, equities historically outperform. If you want to play it through stocks, then you can buy the XLB and the materials sector, or you can buy a company like Freeport McMoRan that mines gold and copper."

For Tengler, copper, which climbed nearly 6% in July, "is a leading indicator on the economy and the metals."

"We don't think gold is signaling inflation," Tengler said. "We think this is a safety play, but we also think that the metals are signaling economic recovery."

"China's about 50% of copper consumption," she said. "We think this is bullish for the economy and we also think it's bullish for stocks. That said, I think we need a breather. We are still expecting to see some sort of correction and I think we'll get one as the political calendar takes over. And then I think we go higher."

Copper prices fell nearly 2% on Friday but was up nearly 1% early Monday.

Disclosure: Piper Sandler will buy and sell securities on a principal basis for Wheaton Precious Metals.

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