Gold Weakness

Investors often turn to Gold as a safe asset in tumultuous times, as the asset tends to hold its value during market downturns. For example, when the S&P 500 sold off by 34.1% during the COVID Crash, the SPDR Gold Trust (GLD) declined just 3.6%. In 2022, GLD initially acted as a strong hedge to the equity market, gaining 1.0% on a YTD basis on June 16th as SPY entered bear market territory. However, GLD topped out in early March and is now trading 14.0% off of its closing 2022 high. GLD has even underperformed SPY since March 8th, declining 14.0% versus SPY’s drop of 8.2%. 

Over the last four months, GLD has declined by 10.3%, which is elevated for a relatively stable asset during a bear market. Since its inception in 2004, GLD has declined 10% or more over a four-month period (with no occurrences in the prior three months) twelve times with each occurrence shown in the chart below.

GLD Chart

The forward performance following four-month declines of 10%+ has been mixed depending on the time frame. The next day (which would be today), GLD has booked a median loss of 10 basis points, gaining just 45.5% of the time. However, the median return and positivity rate in the next week is inline with historical averages. Over the one and three months, performance tends to pick back up, registering gains 63.6% and 72.7% of the time, respectively. Over the next three months, GLD has had a median gain of 5.0%, which is more than two and a half times the median of all periods. 

Gold Performance


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