Gold Emerges As A Hedge Against Falling Stock Prices
Gold's recent gains are linked to weaker dollar as well as nervousness over a potential presidential election win for Donald Trump and a subsequent Brexit-like shock to the stock market. Nervous traders have dropped the S&P 500 for eight straight days which hasn’t happened since October 2008.
As indicated in the chart below, gold has emerged as a hedge against falling equity prices. The SPDR Gold Shares (GLD) ETF gained for six consecutive days amid growing uncertainty about the outcome of the election. The Gold ETF retook the downward-sloping 50-day moving average for the first time in more than a month. Gold acts as haven for investors in times of uncertainty and the 50-day line serves as an indicator of short-term strength. Also benefitting gold is the Fed holding off on a November rate hike. Higher rates increase the opportunity cost of holding gold while boosting the dollar in which the metal is globally priced.
Betting on the Gold should be short-term insurance in case stocks follow through on the current bearish signals. If the FOMC raises rates at their December meeting as most fed watchers expect, this will probably depress precious metal prices.
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"The SPDR Gold Shares (GLD) ETF gained for six consecutive days amid growing uncertainty about the outcome of the election."
I've been trying to do my due diligence into the SPDR Gold Trust (GLD). Anyone know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? Why would the organizations behind GLD forfeit this right and create such a glaring audit loophole? I have not heard a single good reason for the existence of this loophole thus far. It also doesn't help that GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion. There are a number of other red flags as well from what I'm reading:
"Did anyone try calling the GLD hotline at 866▪320▪4053 in search of numerical details on GLD's insurance? The prospectus vaguely states "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." When I asked about how much of the gold was insured, the representative proceeded to act as if he didn't know and said they were just the "marketing agent" for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors."
"I remember there was a well documented visit by CNBC's Bob Pisani to GLD's gold vault. This visit was organized by GLD's management to prove the existence of GLD's gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this "GLD" bar was actually owned by ETF Securities."