Opportunity: Gold On The Move
Paper assets are struggling this year.
Both the S&P 500 and 10-year Treasurys are down around 3%.
Meanwhile, gold prices are on the move.
Shares of the SPDR Gold Trust (NYSE: GLD) are up nearly 4% in 2018. And I’m forecasting another 7%-plus gain over the next two months.
The once-loved precious metal was left for dead for the past several years. But a recent rally is bringing it back to life.
If you missed out on that move, here’s your second chance to make good gains in gold…
Gold rallied from $117.50 to $129.50 between mid-December and the end of January – a roughly 10% gain in just six weeks.
That “too-far-too-fast” move was naturally followed by a pullback, forming a chart pattern called a “bull flag,” highlighted by two blue lines above.
Bull-flag patterns typically resolve with a bullish breakout. And when they do, you typically see a “second-chance” rally of equal or greater magnitude as the rally that preceded them.
In this case, GLD rallied $12 before forming the bull flag (from $117.50 to $128.50).
GLD made a bullish breakout last week, when fears of Trump’s global trade war prompted it to leap higher and clear the top of the bull flag, at $126 a share.
Projecting another $12 run, from $126, gives us a near-term target for gold of $138. That’s a potential gain of 7%-plus, which could take just a month or two to capture.
If you’re finding yourself even a little worried – about stocks, inflation, or geopolitical unrest – now’s a great time to add a gold hedge to your portfolio.
You stand to gain 7% or more as we head into summer.
"If you’re finding yourself even a little worried – about stocks, inflation, or geopolitical unrest – now’s a great time to add a gold hedge to your portfolio."
I understand actual gold has traditionally served as an inflation hedge but using paper gold like GLD as an inflation hedge makes no sense to me. This is essentially hedging inflation with mass printed paper which seems very contradictory and counterintuitive. GLD in particular so famously promises to be fully backed by physical gold bullion but yet they adamantly deny retail investors the right to any of it. This alone guarantees GLD to be nothing more than paper at the end of the day. I'm also left wondering why? There are many profitable gold selling businesses in the world. GLD could even charge exorbitant fees for delivery of said 'gold' but they don't for some strange reason.
The commonly discussed GLD subcustodial audit loophole is also a point of immense interest. "the Trustee may have no right to visit the premises of any subcustodian for the purposes of examining the Trust’s gold bars or any records maintained by the subcustodian, and no subcustodian will be obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such subcustodian" Why does this audit loophole exist?
For anyone interested but have not heard, I recommend looking into CNBC's Bob Pisani making a highly publicized visit to GLD's gold vault in a segment called Gold Rush: The Mother Lode. GLD's management organized this visit to show that GLD's gold actually exists. However, the gold bar held up by Mr. Pisani showed a serial number of ZJ6752 which did not show up on the latest bar list during that time. It was later discovered that this "GLD" bar actually belonged to ETF Securities.