SPDR Gold ETF (GLD)

(A Top Pick June 1/16. Down 4.71%.) President elect Trump is behind this. Gold was having a great run. He believed it was going to try $1600 when it was trading at $1280. He likes gold in here, because he thinks the markets are going to cool off a little, and the oversold gold sector might have a nice little pull back up again.

Gold had a pullback from $1350, and there was quite a bit of frothiness in the commodity itself in terms of the open interest. It is still quite elevated, but going into this quarter and the foreseeable future, this is something he just feels he has to own. He would typically trade gold through options. Feels this has to be a core in everybody’s portfolio.

A Gold ETF, but you can’t ever get the actual gold from it (take delivery of bullion). It is a legitimate concern, but not a realistic one. He only buys Gold ETFs as a trading vehicle.

Gold? A one-year chart shows gold doing very well. Looking at Europe, Switzerland and Japan, which all have negative interest rates, large denomination banknotes are all out of circulation. Depositors are questioning why they should keep money in a bank. The alternative is to be buying gold. The 5-year chart shows a long downtrend from 2012 to the end of 2015 when it had a big break out, which is a bullish sign. He can see this going to around $145, and gold going to around $1440-$1500. To finish any big commodity cycle, you need to take out the high cost producers to shrink the supply. There are a large number of high cost producers in gold with costs around $1100. That sets the base for higher prices going forward.

This basically tracks gold. He views gold as a complement to an asset class. If a client of his is looking for some insurance, and wants to protect against extreme outlier events, then a component of gold is something he would not argue against. The statistical likelihood of an outlier event occurring would lead you to only buy a small amount.

What is really moving gold right now is whether the US Federal Reserve is going to raise rates or not. That makes this very large asset class of US treasuries more attractive as well as the US$ and its strength. Because she is not expecting an interest rate hike until September, gold is a fairly safe place for the next 2 months, but not after that. When they start talking about raising rates in September, that is the time when you should be out.

The only reason he picked an ETF rather than a gold stock is that sometimes they don’t go in tandem. He likes gold, and if he thinks it is only going to go up to $1400, this one could get back up to $125-$130 very, very quickly, while a Barrick (ABX-T) or a Goldcorp (G-T) might not do very much.

Not good in the short run. A lot of money has rushed in and he thinks the risk is back to $1200 before we go higher. Sell into strength.

He has a 25% position in gold in his trading portfolio. He uses an ETF that is currency edged. There is potential for a bounce here. He does not think China will bring down the gold market. Gold stocks will bounce more than bullion when it recovers.

Stock vs. Stock. MNT-T vs. GLD-N. He is not sure if MNT is hedged in Canadian dollars. Either one is fine. MNT run by the Royal Canadian mint and GLD is backed by real gold.

He is not a gold fan. Why would you be a gold fan when the US$ and the US markets are strong?

(Top Pick Jul 11/14, Down 4.34%) Keep holding it. Yesterday we saw the gold trusts break support and now they are underperforming the market. Seasonality suggests you want to keep holding it. You want to look for it to keep continuing to bottom by the end of September. Watch for the US$ to move lower.

Typically the gold sector moves higher from July 12 right through until October 9.

(A Top Pick June 6/13. Down 8.8%.) This was a seasonal trade in gold. This is been a very volatile space in the last year. For risk/reward, a 2^nd seasonality is coming up in July and looks rather interesting. Chart is showing higher lows.

Do you recommend using Puts and Calls to invest in gold? If you are a bull or a bear on gold, option premiums are not expensive. They are going through the same low volatility that the stock market is, so options on gold would be the easiest way to play this. Not a big fan of gold so he doesn’t think it is going too far one way or the other. He doesn’t think that doing anything more than covered writing on gold itself makes any great sense and there is not a lot of premium in doing that right now. If he were going to play it at all, he would probably use Calls and Puts because they are cheap.