Posts filed under “Gold & Precious Metals”
If you wanted to own gold in the bad old days, there were only a handful of choices: You could take physical delivery (but if you needed any size, you would incur costs for storage and security); you could buy futures contracts, but they also incur steep expenses; or you could buy the gold miners, with their “proven reserves.”a
Earlier this year, I laid out the reasons I believed the gold miners were no longer a good proxy for the metal itself. The change occurred when the SPDR Gold Shares Trust exchange-traded fund gave professional and amateur investors a fast, cheap and easy way to gain instant exposure to gold. Sure, the ETF has internal costs and an expense ratio of 40 basis points, but it is simple and clean and has far less hair on it than the miners did. Why bother investing in a company saddled with the overhead cost of running a mine and error-prone, overpaid management, when you could instantly buy a stake in gold without any of the complications?
Incidentally, in August 2011, the Gold ETF had assets of more than $77 billion, surpassing the S&P 500 ETF for about 11 seconds. GLD was, for a very short time, the world’s biggest exchange-traded fund, as the SPDR Gold Trust’s market capitalization rose to $76.7 billion and gold topped $1,880 an ounce. At the same time, SPY’s “capitalization” was a mere $74.4 billion. I wonder how many people caught the world’s biggest contrary signal (I noticed it way after the fact).
Continues here: Gold Miners Are a Trade, Not an Investment
As Theodore Sturgeon famously observed, 90 percent of science fiction is crap, but then again 90 percent of everything is crap. In the world of online investment opinions, Sturgeon was an optimist. Not all that long ago, the perspectives of individual amateur investors and professional ones, too, were for the most part unknown. Most market…Read More
Interesting few examples from the past showing Gold benefitting from rate increases, as per a report by HSBC’s FX strategist, David Bloom. A few caveats: Rate increases typically occurred during periods of elevated inflation, and during currency fluctuation, especially a weak dollar. At present, we have deflation, and the dollar is at 12 year highs. Traders…Read More
Let’s say this right up front: The SPDR Gold Shares Trust exchange-traded fund has killed the shares of the gold miners. For a few years now, I have been very skeptical about gold’s value as an investment (this may seem excessive, but see this, this, this, this,this, this, this, this, this, this and of course this). The primary reason for this is straightforward: Gold is bought…Read More
“A gold mine is a hole in the ground with a liar standing on top of it.” – unverified quote attributed to Mark Twain A few weeks ago, we discussed how gold can’t seem to catch a break. Despite a parade of potential market-roiling news, the reaction of the shiny yellow metal has been one of benign indifference. After Federal…Read More
This was the week Greece inched closest to chaos, as a bank holiday and a technical default caused markets around the world to erupt in turmoil. They recovered somewhat Tuesday, and futures looked stronger Wednesday morning, but on Monday, the NASDAQ Composite Index lost 2.4 percent, the Standard & Poor’s 500 Index lost 2.09 percent and the…Read More