GLD: Don't Mind The Gold Sell-Off, The Buying Opportunity Approaches by Victor Dergunov
Summary
- GLD/Gold has corrected by roughly 7.5% after a monster 23.5% rally from late May to early September.
- Unfortunately, for gold enthusiasts, a number of fundamental short-term factors have turned against GLD, gold, and gold/silver/miners GSMs in general.
- The Fed's "pause" in its easing cycle, and its unintended short-term consequences are the main reason why the GLD/gold correction may continue.
- However, intermediate to long term, I see nothing to worry about, as GLD/gold is likely to go significantly higher for various reasons.
- Please read on to find out why.
- This idea was discussed in more depth with members of my private investing community, Albright Investment Group . Get started today »
Source: FXStreet.com
GLD: The Golden Buying Opportunity Approaches SPDR Gold Shares (GLD)/gold has had an interesting several months. GLD/gold had an incredible run-up in about a 3-month period, from late May to the start of September. In fact, the yellow metal appreciated by a remarkable 23.5% in that time frame, which for gold is quite a lot to say the least.
Gold 1-Year Chart
Source: StockCharts.com
GLD 1-Year Chart
Silver, a metal that naturally follows gold had a nosebleed run-up of nearly 40% in a similar time frame, which began around the time of my “Silver: The Buying Opportunity of the Decade” article was published.
Silver 1-Year Chart
Gold mining stocks and ETFs exploded higher as well. For instance, the VanEck Gold Miners ETF (GDX) shot up by roughly 50%, surging from around $20 to nearly $31 in just about 3 months. The VanEck’s Vectors Junior Gold Miners ETF (GDXJ) skyrocketed by almost 55%, from below $28 to over $43 in the same time frame.
Gold/Silver/Miners (GSMs) were doing great. They were in the Goldilocks zone: the Fed was easing rates, there was instability surrounding the U.S./China trade deal, whispers of QE were in the air, short-sellers were getting squeezed, and several other fundamental factors were firmly on gold’s side.
GLD: Great Way to Build Exposure to Gold
GLD is the largest physically-backed (reportedly) gold exchange-traded fund in the world, with roughly $43 billion worth of net assets under management. It offers market participants an efficient way to access the gold market, as it mimics the price of gold almost identically.
In addition, the ETF is an attractive alternative to trading gold futures, as it can be traded much like a stock on the NYSE Arca exchange, instead of dealing with alternative exchanges and trading requirements pertaining to futures contracts.
Furthermore, it is an appealing alternative to trading physical gold, as investors get exposure to the same price action as the metal but can buy and sell gold with great fluidity of an ETF using GLD.
Since the ETF mimics the price of gold almost identically, I will refer to GLD and gold interchangeably throughout this article.
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