Tag Archives: GLD

Whither gold?

14 Dec

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The chart above contains the nub of my observations about gold.  I tend to invest in gold through iShares’ ETF, IAU, rather than the ubiquitous GLD, which is why you see that chart above.  This commentary contains both general observations about gold, but also my personal goals for it, because our personal goals color how we view the market.

I am a long term (> 10years) bull on gold and plan to have ~10% in gold and other precious metals in each of my two long-term portfolios, one of which is tax deferred, the other being taxable.  I was not fully invested in either portfolio and was about even in my gold holdings, having taken most gold profits in August (see earlier posts).  It will give you some idea how quickly this market has changed in that yesterday and today leave me with very different price tartgets.

Yesterday, I had hedged out 50% of the position in my taxable account with a 25% portfolio value position in GLL. (ProShares ultrashort gold).  I was seriously mooting buying $16 puts (for profit and portfolio protection) and selling $15 puts both to reduce the cost of the $16 puts and because I would be quite happy to purchase IAU at $15/share.  My thinking has been that I have been prepared to see IAU sell off to ~$15.20 and still remain in the bullish channel it has inhabited since late 2008.  Although I still expect long-term gold to continue in that channel, short-term, I think we may certainly go to ~$14.60 a share for IAU.

I do not usually place order to execute at the open but today I did and it was a good call.  I fully hedged my IAU position in the tax-deferred account with GLL, sold half my long position in the taxable account and matched the remaining long position share for share with GLL.  So I am positioned short, effectively.  As it turns out, good call.  The 200-day SMA provided no support to IAU at all.

One reason I placed orders at the open was because looking back to the gold sell-offs in August and September, the sell-offs were precipitous.  Matching the price drops in those two sell-offs in the current market takes us right to the base of the current Fibonacci retracement.  While we may yet see a move sideways at around $15.20, I think there is a good chance IAU goes to ~$14.60.  I have marked those price ranges on the TC2000 chart above and marked them with the curved arrows.

So, what to day about the put spread?  I am still toying with the strikes on that one.  It’s almost buy at $15 and sell at $14 tonight, same reasoning as outlined above.  I will probably execute those option trades in GLD options though as there are more strike and expiration options in GLD.  Putting those prices into perspective, if the support at $14.60 didn’t hold, next support is in the mid $13s.

Summary opinion if you are long gold for the long term: Still bullish, actually over the next twelve months.  Worthwhile hedging or protecting positions though, and picking some gold up at cheaper prices in the coming week or so.  If you have missed the boat so far to the downside you must make your own call on whether to step in now, but my humble opinion is that some hedging — either with inverse ETFs or put options — will not cause you too much buyer’s remorse.

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Gold is OK

23 Sep

I seem to have a knack for being right about metals.  Hit it on getting out or stopping silver hard earlier this year, and I honestly think our posts on moves in the gold price have been correct since August 8th.  Yesterday we posted suggesting that gold’s reversion to its 50-day SMA was entirely normal and expected.  In fact, we also said that it would be a reasonable expectation for gold to hit the trend line we had drawn through the tops of its recent ascent.  It did that today, and a tad more to the accompaniment of a great wailing and a gnashing of teeth from the financial pundits, particularly on CNBC.

I have written that sometimes longer period charts, for example weekly or monthly tell a clearer picture than the dailies.  This is certainly true of gold, represented here by the physical ETF, IAU:

Had I purchased gold at the August peak, I too might be indulging in a bit of the old sackcloth and ashes right about now, but I didn’t.  As we can see from these two monthly charts, gold has reverted to the top part of its bullish channel.  It could actually fall quite a bit further and still be in the bullish channel that dates back to 2008.  Still a gold bull here, particularly now the prices have normalized.

I just wish people would shut up already about the “collapse” of gold.

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Quick comments on gold: This was expected.

22 Sep

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I don’t pick on the good folks at CNBC as often as some others do but they did ruffle my feathers a bit today.  Early in the day one of the talking heads opined that he was shocked at the fall off in gold prices.  Later in the day, after the close we had to endure a comment about the “collapse” of gold.   Excuse me?  Sometimes I wonder if these folk really do engage brain before opening mouth.

On August 10th, we asked if gold was turning into silver, that is, was it setting up for rather preciptitous fall?  Using exactly the chart set up with the same indicators, this is how gold (here in the form of the physical ETF IAU) looked tonight:

As gold has pretty much tracked its 50-day SMA until it started to run away in July, I would say that today gold is EXACTLY where it needs to be.  Right around its 50-day SMA.  Full disclosure, I went long today with one-third of my desired gold position, to replace my holding that stopped out in early August.  That’s not a recommendation, just disclosure.  I frankly will not be surprised to see gold drop further.  If it goes to the trendline I drew in August, which traces the highest prior highs we will be at $16.34.  It could go lower than that.

Looking at the Bollinger bands we did push through the bottom envelope today.As I write gold is open in Hong Kong and the Globex and looks to be holding steady.  We’ll see what tomorrow brings.  Ready to accumulate profits or add to positions at the trendline.  I remain a long-term gold bull, particularly under the  market circumstances.

Will the 50-day SMA provide support? We’ll see.

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Is gold a “bubble”? Wells Fargo thinks so. Our take on it.

16 Aug

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In a story that has hit many news wires, but you can read the substance of here from Bloomberg, Wells Fargo has stated that gold is a, well, “bubble”.   I am getting tired of the over-use of the “B” word personally, but let’s see if there’s any substance to their alarm.  Here are the daily and weekly charts of my preferred physical gold ETF, IAU or the iShares Comex Gold Trust:

From the daily chart you can see the froth and volatility that led to reserve requirements being increased on gold ( see Is gold turning into silver? from 8/10).  Notably the reserve increase did not lead to that much of a dent in gold’s price, merely, say, a “hiccup”.

The real story’s in the weekly chart (as it often is).  From this we can see that over the last few years gold has enjoyed decent support from its 40-week SMA, which it periodically returns to and not always in an orderly fashion.  IAU had also set a nice resistance trendline which it breached at the start of this month. Were we to be sticking to that resistance line, IAU would be selling at $16-$16.20, however, instead, it closed today at $17.44.  Were gold, and consequently IAU, to return to its 40-week SMA, IAU would be selling at $14.40.

So there is a potential downside of between 7% and 17%.  These are hardly Earth-shattering numbers given the equity volatility we’ve seen the last few weeks. How you react to the numbers would, I suppose, largely depend on (assuming you are long gold):

  1. When you bought your current position, and, consequently
  2. How much you paid for it. And,
  3. What your investment horizon is, and
  4. Why you are long gold in the first place.

If you have held gold for a while and have a decent accumulated profit, take a longer-term view (investing not trading) and particularly if you are holding gold as a longer term hedge, I think one might reasonably take a somewhat sanguine attitude to Wells’s  headline grabber. On the other hand, had I bought in towards the peak I might be looking to my stops or puts right about now.

It is my opinion that this is a relatively short-term problem, if indeed it is a problem at all. Perhaps it will turn into a buying opportunity.  It is hard to persuade me that we will not see dollar-denominated gold at $2,000/oz and in not too long either.  As I am wont to say, whether we will get there in a straight line is another matter.

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Model portfolios updated

5 Jun

Our model portfolios are now current.  The results may be seen on their individual pages (see menu tabs)

It is interesting to note that commodities, gold, oil and of all things, Mid Cap or extended market ETFs are the leaders for the year to date.  So much for commodities being hammered.

As at May 31st, 2011:

  • Simple:  +4.86%
  • Conservative Long:  +3.95%
  • Conservative Hedged:    +1.71%

 

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Do ETF charges matter?

23 Jan

Good question, isn’t it?  I wonder how many of us even think about fees and expenses when we review ETFs to invest in.  If I’m honest, it isn’t something that’s been on my mind but I’m going to start thinking about it.

I’m on the sidelines in the gold market right now and have been since Marketclub issued a red weekly trade triangle for GLD on January 14th 2011 @$133.10.  I liquidated my GLD positions in all my portfolios. Currently,  I’m waiting for a good signal to get back in.  I’m watching the MACD line for a turn; maybe I’ll get back in before a new green weekly trade triangle, but the green weekly will be my default re-entry point.

However, I will probably not buy back into GLD.  There are three physical gold ETfs that I know of, GLD, SGOL and IAU.  If you plot them together on a chart over a year I defy you to see any difference in performance.  However, their expense charges are not the same:  GLD, 0.40%; SGOL, 0.39%; IAU, 0.25%.  OK, so the difference between GLD and IAU over the course of a year on a $100,000 investment will only be $150, however I will take that towards my investment newsletter and website fees.  So when I go back to gold, it will be with IAU, not GLD.

The difference doesn’t only show in show gold ETFs either.  Emerging Markets draw a huge chunk of change too.   EEM, from iShares has a 0.69% expense ratio.  VWO, from Vanguard has an expense ratio of 0.27%.  That’s $420 a year on a $100,000 investment.  Now that’s a good donation to my newsletter and website fees!  Put them together on a one-year chart in Google Finance and you may notice VWO is the better choice, too.

How about the broader markets like the S&P500?   The ubiquitous State Street SPY has an expense charge of 0.09%, whereas Vanguard’s VOO charges only 0.06%.  Well, it’s only $30 but I’d rather have it in my pocket.  Long story short? Why not take  a few minutes to check alternatives and fees before pushing the trade button?  I can’t say I’d liquidate an existing position based on fee differentials, but I’m certainly going to take account of it when I buy a new position.

Disclosure: Long EEM, VWO, SPY

 

 

 

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