EC This Week In Gold

So how do these investments compare? Well, past performance is no guarantee of future results, but it can be instructive. Take a look at the annual returns netted by the five exchange-traded products recently.

Annual Returns (July 2014 – July 2017)

Returns for 2014 are annualized based on monthly results from July through December; 2017 results are annualized from January through July monthly returns.

One thing’s clear: you get a lot more “bang!” out of gold mining shares. For better and worse.The junior miners fund, for example, lost 43 percent in 2014, taking until June 2016 to claw its way back to breakeven. As it turned out, 2016 was a banner year for mining shares. GDXJ end up 73 percent by New Year’s Eve.

Imagine investing in mid-2014. Would you have had the stamina to withstand a withering loss at the outset? Would the following year’s loss grind on you further? Would you have bailed out of your position or hung on in the hope of reaching breakeven or bagging a gain? Good questions to ponder as you consider today’s market.

If last week’s momentum persists, GDXJ has the technical potential to reach the $44 or $45 level. That’s about 23 percent higher than Friday’s close. Nobody, of course, can say with certainty what heights gold or gold miners may ultimately attain. Or, for that matter, what trials and tribulations* must be endured along the way. Knowing the past, it’s safe to say that it’ll be a heck of a trip either way.

*Keep in mind that owning GDX or GDXJ increases your portfolio’s exposure to stock market risk; the other exchange-traded products don’t convey this risk.

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Disclosure: Brad Zigler pens's Alternative Insights newsletter. Formerly, he headed up marketing and research for the Pacific Exchange's (now NYSE Arca) option ...

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Jason J. Smith 3 years ago Member's comment

"SPDR Gold Shares ETF (NYSE Arca: GLD) — The largest exchange-traded product that directly invests in bullion."

This is something I'm beginning to question as I research this fund more and more. GLD's structure is a bit strange. They so famously claim that they are 100% backed but obstinately refuse to give investors access to any of the 'claimed' gold. 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 frequently referenced GLD subcustodian audit loophole makes me question this fund even more. What guarantees do we have that they have not leased the gold from someone else? i.e. HSBC. Are they leasing it to someone else? How many claims are there on the gold aka hypothecation? GLD's structure seems to be deliberately vague and intentionally flawed. GLD's custodian, HSBC, with their long history of fraud certainly do not inspire confidence either.

Farah Kincaid 3 years ago Member's comment

Why so suspicious, Jason?

Otto Harrell 3 years ago Member's comment

"SPDR Gold Shares ETF (NYSE Arca: GLD) — The largest exchange-traded product that directly invests in bullion."

I'm not so sure about this. 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.