Gold ETF: GLD in its 74th Month of Drawdown

Oct 03, 2017 in Drawdown | Gold Follow us on Follow etfreplay on Twitter

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Gold Since 1982

Dec 13, 2012 in Gold

Below is price of Gold from 1982 to 2002.   Yes, it underperformed even T-bills and it was obviously a time of great prosperity for the US economy.

 

 

Now let's look at it annually, since 1982 with the larger bold years being those that are the only years the GLD etf has been in existence:

 

 

There have been no negative calendar years yet for GLD (the ETF).    So the big question is:  do you consider Gold a core portfolio holding or a tactical holding?  

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Gold ETF Monthly Returns Look

Jan 02, 2012 in Gold | Volatility

Since the Gold ETF (GLD) began trading, there have been 85 full months.    December of 2011 represented a  -2 Standard Deviation move down as the month ranked 83rd of the 85 in percentage return.  September 2011 was the second worst (84 / 85) at -11.1%.   GLD  dropped -3.8% for the quarter (Q4) and was +9.6% for 2011, completing its 7th consecutive up year.   The chart below uses the Monthly Returns page to rank all calendar month returns from low to high:

 

For fun, here is the date CNBC ran its special Gold Vault Visit video report.

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Gold Overweight

Jun 17, 2011 in Gold

Our commentary has focused on bonds for many weeks now.   Within this defensive portfolio level view ---  being overweight Gold makes sense to us.

 

 

 

We think a gold position can enhance return here --- with the added benefit that such a position will likely continue to reduce a bond portfolios variance.

 

 

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Month of May For Gold (GLD ETF) vs Last 15 Years

May 18, 2011 in Gold

The Gold ETF (GLD) had something of a spike up into the end of April. Since that time GLD has corrected and is now -4.4% for the month of May (so far).

Since the ETF only has a price history from 2004, we wanted to show a few extra years to get a feel for GLD moves. We use the London PM Fix price prior to November 2004 and then use GLD thereafter.

 

Click on image below to enlarge

 

 

Compare this drawdown to Gold Stocks (GDX) --- which is consistently one of the most volatile ETFs among all the major ETFs.   GDX is currently -10% this month.    The GLD etf has only lost -10% in 1 month in the last ~15 years and that was October of 2008 -- which was an outlier month in many ways --- including the economy, gov't policy,  credit spreads etc....

 

 

Understanding relative drawdowns is important way to view risk.

 

 

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Index ETF Focus: Gold (GLD)

May 07, 2010 in Backtest | Gold

We highlighted potential leadership developing in gold at month-end.  Last Friday, the Gold ETF triggered a buy vs SPY in the Relative Strength application.

 

 

As of Tuesdays close,GLD had then moved to the top of our screener relative strength list.   When volatility began surging in the equity markets, it should have become clear that US equities were going to drop in the screener rankings as high volatility is penalized in the model.  The logical asset to assume new leadership was Gold (GLD) as it had already been moving up the rankings, as highlighted in our May outlook and as also being supported by the RS ‘app.’   This is a good example of reading ‘market generated information.’   

 

 

While Gold (GLD) advanced this week, of course the best relative strength-based call was staying short international equities, particularly Europe.    Europe has some serious problems to deal with  and you can see the horrid relative performance of international stocks over the past few weeks.  This is an example of an opportunity that was available to globally focused investors and invisible to those with only a domestic focus.

 

Summary:  volatility has increased sharply in the equity markets, which makes equities LESS desirable to hold vs a fixed payment security like a short-term bond.   Meanwhile, the Gold ETF (GLD) is rising in price, which makes it more attractive as its volatility is justified by its improving relative strength.   

 

In a world of talking heads, rumors of computer errors and extreme emotion, it pays over the long-run to ground yourself with some strong reading of money flows that is statistically supported by backtested models.



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