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Monthly Archives: April 2016

The confessions of an investing addict

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New year new start for Castle Street

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Focus on the FTSE 250 for value stocks

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The IRS Report annual stock prediction

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So many shares so little time

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Another Jacob Marley or a late Chinese Christmas gift

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Investment Update Walker Greenbank

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Investment update Amerisur

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Investment Update EnQuest

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Gold sets new records

Gold sets new records

Gold sets new records 
Whatever way you spin it, gold has been setting new records.

  • February showed the largest monthly gain in four years.
  • 2016 Q1 had the largest quarterly gain since as far back as 1986.
  • And 2016 has seen the biggest gains since the all-time highs back in late 2011.

You could have enjoyed those gains – and the comparatively settled trading away from mainstream equities – with a simple purchase of shares in GLD, the SPDR Gold Trust ETF. It has made gains of 22% since December.

But if you were anticipating what looked like a nailed-on rise in the gold price on the charts, you could have leveraged with the GDX, the Market Vectors Gold Miners Index ETF. In January 2016 the shares were $12.40 each, but they hit $21.40 in late March. That’s a gain of 72%.

If you had call options in those ETFs the gains would have been substantially more.

Numbers like these are bringing wider attention back to gold, and while oil and equities bounce around wildly, gold looks like a sheltered port in a storm.

Gold sets new records

Gold miners index rises over 70% sicne January

But where is the price going now? Is this really the start of a new bull market?

At the beginning of March I said the price rise would stall, but not fall too far as there was solid support. In fact, the price did not fall even as far as that support, bouncing instead off the rising 50-day moving average.

All things being equal, I expect the gold price to start going up again now while equities and oil both fall. And the steeper any fall in oil or shares, the steeper the rise in gold should be.

Gold sets new records

S&P 500 is overbought and due for a turn

 

The GLD chart below shows it as oversold, but not quite ready to bounce. That may change suddenly, so be prepared. I am starting to accumulate some long-dated call options in both GLD and GDX, while I buy puts in both the SPY S&P 500 ETF and DIA, the Dow Jones Industrial Average ETF. As gold sets new records I don’t want to be just watching, but in the thick of it.

Gold sets new records

Gold price bounces off the 50 day moving average

I will continue with the oil play I outlined at the beginning of March, where I buy the DWTI 3x leveraged down Oil ETF at $38, and switch to the UWTI when oil hits $26. Allowing for some increase in the base for oil, I may adjust that up to $28.

Gold sets new records

Oil is heading back down, look for a turn at about $28

In summary. Expect equity indices and oil to fall, while gold and gold infrastructure rise.

At least for the near future.

Investment Updates and other posts