SPDR Gold ETF (GLD)

Between July - October, gold strengthens. But he's not a gold bug at all. It's dead money, and a tax issue in the States. If there's a strong USD, then why buy gold? Maybe, just maybe, play gold as a very short-term play, but no more than that.

What influence does the US$ have on gold, and are the producers moving? There is a pretty strong correlation with the US $. When gold was strong, the dollar tends to be weak, and vice versa. At some point, all correlations kind of break. He expects to see some sort of bottom in bullion in December. The chart has been very choppy and has really been going nowhere, but some of the producers have been moving much higher. (See Top Picks.)

It is in a longer term upward trend. Seasonal strength is from July to Mid-October. This year we have seen a nice little pickup. Technically it looks good as well. There is a good chance that we will see it break the $300 level by Mid-October.

Gold through an ETF? The most popular way of doing this is through GLD-N, the big gold bullion ETF. If you are looking at buying underlying commodities, and you have a reason why you want to speculate on the commodity itself, don’t use an ETF structure. It is easier to use the futures market.

(A Top Pick Oct 3/16. Down 3%.) You have to own gold all the time. It’s a form of currency and a proxy to the US$, which he thinks is bottoming out. Has reduced his gold exposure materially, but always has some on.

(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.