GLD was briefly the world’s biggest exchange-traded fund. In August 2011, GLD had assets of more than $77 billion, surpassing SPY (SPDR S&P 500 ETF) for a short time. The SPDR Gold Trust’s market capitalization rose to $76.7 billion  — gold briefly topped $1,880/ounce. At the same time, SPY’s “capitalization” was ~$74.4 billion.

I missed this detail in real time (I caught the Bond version in 2003). With the benefit of hindsight, its easy to say this was a contrarian signal. Not that you should short GLD, although that surely was a wonderful trade. But rather, that SPY was attractive, as this was a sign of extreme dislike for equities.

Have a look at the SPY chart and GLD (and Apple as well). click charts to enlarge them

 

SPY Weekly Chart 2008-2013

 

GLD Weekly Chart 2008-2013

 

And for a little comparison, here is Apple — GLD looks somewhat similar . . .

 

AAPL Weekly Chart 2008-2013

Category: Contrary Indicators, ETFs, Gold & Precious Metals, Technical Analysis

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6 Responses to “World’s Biggest ETF/Contrarian Indicator: GLD > SPY”

  1. But the reality is it was the biggest mainly because it was the only game in town for a liquid vehicle for owning the physical metal (Although, now their are a few more physical gold ETFs). Whereas you have a million different vehicles for tracking the S&P 500, Russell 2000, MSCI EAFE……

  2. [...] Using ETFs as a contrarian indicator.  (Big Picture) [...]

  3. rd says:

    The last time gold behaved like this was just after Volker spiked interest rates and crushed inflation. the Hunt Brothers had recently been caught out trying to corner silver as well.

    Does this mean that US T-bond interest rates have just peaked and the bull market for bonds resumes?

    Are the sudden plunges also demonstrating the unsustainable amount of ZIRP and TBTF driven margin accounts in the markets?

    • Angryman1 says:

      Nope, gold’s plunge is because Chindia can’t drive those markets anymore. They overinvested to the point where the lack of demand has created to much supply.

  4. ancientone says:

    Trying to figure out what this “means” is like trying to predict the future by looking at the entrails of a goat.

  5. It’s easy to look in the rearview mirror and realize that one could have enhanced profits by turning a long-stocks trade into a long-stocks/short-gold trade.

    The real question now is, should one stay in that trade, go neutral on both, or flip it around?

    This leads one to gather a bit of data on the total return of the S&P vs. the total return of gold over various time periods…

    The S&P 500 in terms of nominal total returns is up about 10x over 25 years since 1988. Gold (neglecting holding costs) is up 3 to 3.5x over the same time period. Both have had bull runs and plateaus in that time frame so it seems reasonably fair.

    Going back a bit further, the S&P 500 in nominal total returns is up almost 400x over 60 years 1953-present. Gold is up about 40x over that time period. This period includes (roughly) two secular bulls and a secular bear for each.

    However, if one starts the timer closer to the peak of one of the earlier bull runs in stocks, and just before we left the gold standard, the picture looks a bit different. The S&P500 (nominal total returns) is up a factor of 42x over 40 years (since January 1973). Gold is up from $65 to whatever it’s worth today (say $1350) for a gain of 21x or so. This period captures two bears and one bull for stocks, and two bulls but only one bear for gold.

    Two sources I found useful:
    http://www.moneychimp.com/features/market_cagr.htm
    http://www.usagold.com/reference/prices/1973.html