Gold continues to soar!

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
anoop
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Re: Gold continues to soar!

Post by anoop »

000 wrote: Mon May 17, 2021 2:06 pm
anoop wrote: Mon May 17, 2021 2:06 pm My brokerage now has added a new extra warning when trading gold ETFs. Wonder what changed.
What's the warning?
"This security is subject to the Designated Investments Agreement, which you have previously signed for this account.
Alternative or "alt" exchange traded funds are publicly offered, SEC-registered funds that use investment strategies that differ from the buy-and-hold strategy typical in the ETF industry. Compared to a traditional ETFs, alt funds typically hold more non-traditional investments and employ more complex trading strategies which may carry greater risks. Investors considering alternative ETFs should be aware of their unique characteristics and risks.
"
Goldwater85
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Re: Gold continues to soar!

Post by Goldwater85 »

anoop wrote: Mon May 17, 2021 2:08 pm
000 wrote: Mon May 17, 2021 2:06 pm
anoop wrote: Mon May 17, 2021 2:06 pm My brokerage now has added a new extra warning when trading gold ETFs. Wonder what changed.
What's the warning?
"This security is subject to the Designated Investments Agreement, which you have previously signed for this account.
Alternative or "alt" exchange traded funds are publicly offered, SEC-registered funds that use investment strategies that differ from the buy-and-hold strategy typical in the ETF industry. Compared to a traditional ETFs, alt funds typically hold more non-traditional investments and employ more complex trading strategies which may carry greater risks. Investors considering alternative ETFs should be aware of their unique characteristics and risks.
"
This sounds like a tag that your broker's lawyers have advised them to place on all ETFs with holdings that aren't equities or bonds. If you are trading gold trusts like GLD or IAU, which just stockpile bullion, I wouldn't worry about it. Gold may do well or poorly, but bullion ETFs should track the underlier well. ETFs that hold commodity futures (e.g., USO, DBC), are another a matter--their construction can produce surprising results at times.
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watchnerd
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Re: Gold continues to soar!

Post by watchnerd »

anoop wrote: Mon May 17, 2021 2:08 pm
000 wrote: Mon May 17, 2021 2:06 pm
anoop wrote: Mon May 17, 2021 2:06 pm My brokerage now has added a new extra warning when trading gold ETFs. Wonder what changed.
What's the warning?
"This security is subject to the Designated Investments Agreement, which you have previously signed for this account.
Alternative or "alt" exchange traded funds are publicly offered, SEC-registered funds that use investment strategies that differ from the buy-and-hold strategy typical in the ETF industry. Compared to a traditional ETFs, alt funds typically hold more non-traditional investments and employ more complex trading strategies which may carry greater risks. Investors considering alternative ETFs should be aware of their unique characteristics and risks.
"
Interesting!

Which brokerage and which gold ETF?
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% crypto & securitized gold || LMP TIPS/STRIPS || RSU + ESPP
anoop
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Re: Gold continues to soar!

Post by anoop »

watchnerd wrote: Mon May 17, 2021 2:26 pm Which brokerage and which gold ETF?
Fido/SGOL
Robot Monster
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Re: Gold continues to soar!

Post by Robot Monster »

Last month the headline was, "Gold Hits Three-Month High as Speculators Increase Bullish Bets" link

This month the headline is, "Gold Heads for Its Biggest Weekly Loss in More Than a Year" link

Last month, gold prices "rebounded from lows set in March as the dollar retreated and the Federal Reserve signaled it will keep interest rates low..."

This month gold is "weighed down by concerns over tighter monetary policy" as the "dollar surges to two-month high on Fed rate-hike projection". link
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
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market timer
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Re: Gold continues to soar!

Post by market timer »

With 30-year real rates at -0.21% and gold at $1764/oz, I consider gold relatively cheap and have just allocated 10% away from long term bonds to gold. My valuation model suggests gold should trade above $1900 based on current rates.
Lock
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Re: Gold continues to soar!

Post by Lock »

Market timer - I’ve been playing with your formula also and so far it seems to be tracking incredibly well (like within a few dollars). The gap between predicted and spot are considerably higher than normal right now. I too picked up a few micro gold contracts.

Some say there is a link between short term rates and the dxy. Do you have any other pricing formulas you use?

Cheers!
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market timer
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Re: Gold continues to soar!

Post by market timer »

Lock wrote: Sat Jun 19, 2021 6:07 am Market timer - I’ve been playing with your formula also and so far it seems to be tracking incredibly well (like within a few dollars). The gap between predicted and spot are considerably higher than normal right now. I too picked up a few micro gold contracts.

Some say there is a link between short term rates and the dxy. Do you have any other pricing formulas you use?

Cheers!
No, I don't have any other pricing formulas for gold or currencies, but would be curious to learn of others. When I worked with people in this space, they tended to focus on the impact of events (e.g., FOMC), rather than valuation models derived from first principles. The post-FOMC move is consistent with a hawkish surprise, as the dollar appreciated and interest-rate sensitive sectors like utilities and real estate sold off.

The yield curve flattened sharply post-FOMC, with 5yr yields up 11bps and 30yr yields down 15bps. It is certainly possible gold is sensitive to the shape of the yield curve, not simply long term rates; however, I'd like to have some theoretical justification for why this is the case. My model has an intuitive interpretation: Gold is like an inflation-adjusted bond with no coupon and a duration of 33 years. I'm open to revising this belief, but would like to avoid simply curve fitting without a theoretical justification, as this tends to lead to overfitting and performing poorly out-of-sample. One possible explanation for the discrepancy between bonds and gold in the past couple days is that the term premium declined, so I may need to include an estimate for the term premium in the gold valuation model.
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Forester
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Re: Gold continues to soar!

Post by Forester »

The deflationists will look pretty stupid if the 10 year goes back over 1.5% and DXY is under 91. According to them, this it, game over.
Always passive
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Re: Gold continues to soar!

Post by Always passive »

Lock wrote: Sat Jun 19, 2021 6:07 am Market timer - I’ve been playing with your formula also and so far it seems to be tracking incredibly well (like within a few dollars). The gap between predicted and spot are considerably higher than normal right now. I too picked up a few micro gold contracts.

Some say there is a link between short term rates and the dxy. Do you have any other pricing formulas you use?

Cheers!
Which formula?
seajay
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Re: Gold continues to soar!

Post by seajay »

willthrill81 wrote: Sat Mar 06, 2021 5:32 pm To be fair, many with that anti-gold sentiment don't want gold because they view the long-term real return as likely to be zero and they don't want to take on gold's volatility. While I definitely see that argument, I would have a hard time passing up gold entirely to instead take on hefty exposure to nominal bonds that are completely exposed to inflation risk.
Buying a treasury bond is lending to someone who can print more money, change interest rates, revise taxation, modify the rules.

For high net worth individuals, those that can get by on perhaps 1% SWR type withdrawals, wealth preservation might take priority over rewards. Perhaps a ancient Talmud type asset allocation, a third each land/commerce/reserves held via geopolitical diversification of a London home, US stocks, physical gold stored around the world. Apply a 3% SWR to the stock holdings to provide regular income and should that fail you have the gold to fall back upon to perhaps liquidate it and buy stocks to 'have another go'.

If you opted to live in that London home, spending in inflation adjusted Pounds, and perhaps opted to hold silver instead of gold then historically since 1900 that asset allocation supported a 1.5% PWR (worst case). In the average case a further 3.5% real gain was evident, oh and as historic rental yields averaged 4.4% then at a third of wealth in properties that was another 1.4% imputed rent benefit in effect thrown in on top.

As gold wasn't "outlawed" in the UK (as it was in the US 1930's to mid 1970's), with gold instead of silver the figures were near the same, a slightly better PWR of 1.6%, a slightly worse additional average real gain of 3.4%.

Contrasted to a all US stock alone holdings where a 1.5% PWR on averaged saw a further 5.5% additional real gain. Simple sum of those 7%, compared to 1.5% PWR, 3.5% real, 1.4% imputed rent that sums to 6.4%. Factor in taxation issues on top of that and subjectively it could swing either way, might broadly be considered as comparable, but with one having the greater geopolitical diversification and potentially the better tax risk reduction.

There are other quirks involved, such as pre 1932 UK and gold/money were exchangeable in banks by law at a fixed rate. So you might have opted to convert gold to money and then lend that money to the state (buy Treasury bonds) and be paid interest. Which was very much like the state offering to pay you for it to securely store your gold. Which could be considered as gold having paid a dividend.

Old Money (generational wealth) mantra advocates "a third, a third, a third", land, art, gold. A Cambridge University study of John Maynard Keynes (English economist) art collection observed that the longer term financial returns from that compared near equally to that of stock total returns. Some don't like art and might prefer to hold stocks instead, some don't like gold and might also prefer to hold stocks instead. Each to their own.
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market timer
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Re: Gold continues to soar!

Post by market timer »

Always passive wrote: Sun Jun 20, 2021 6:45 am
Lock wrote: Sat Jun 19, 2021 6:07 am Market timer - I’ve been playing with your formula also and so far it seems to be tracking incredibly well (like within a few dollars). The gap between predicted and spot are considerably higher than normal right now. I too picked up a few micro gold contracts.

Some say there is a link between short term rates and the dxy. Do you have any other pricing formulas you use?

Cheers!
Which formula?
viewtopic.php?p=5395727#p5395727
Unwinder
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Re: Gold continues to soar!

Post by Unwinder »

Fortune Seeker wrote: Wed Sep 16, 2020 5:36 am Interesting thing: if you adjust gold price by US M1 money stock it's at nearly same level last 5 years, but I'm not sure if you can use M1 numbers like that, it's not direct inflation number after all.

https://imgur.com/a/CKqQ3iW
I don't really have a good idea of what the M1 money stock actually is. I've heard it explained before, but it never makes much sense to me. And at this point I just can't believe any official inflation numbers, I can only believe what I pay at the grocery store and gas pump etc. While I am not a gold bug, I'm not a gold hater either. I think every asset has it's time. I've heard a few interviews recently with Rick Rule and what he says and what I see in the world makes sense and I think that gold could easier go on a big run the next 3-5 years. That's where I'm allocating some of my capital. I could be wrong though.
Lock
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Re: Gold continues to soar!

Post by Lock »

Anyone else rather surprised by the move in nom bonds and the fact that the real yield/gold price divergence still persists?

Market timer - I thought of you the other day because a bloomberg columnist was actually showing the correlation between gold and the 10 year real yield. The movement patterns were identical. Could this be the divergence from your formula?!
RoadagentMN
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Re: Gold continues to soar!

Post by RoadagentMN »

Gold is a dud - You could ask Howard Ruff about it.
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nisiprius
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Re: Gold continues to soar!

Post by nisiprius »

I haven't been paying a lot of attention, but we've have gotten a number of postings using the phrase "precious metals" rather than "gold." This is unusual, and made me suspect that gold has not been doing well lately, which turns out to be true.

Source

Image

Obviously, if gold is Just Another Commodity then there are always going to be lots to choose from and you're off to the races for prediction ahd market timing. But there is a storyline that gold is not just another commodity, it is special, recognized as the one true eternal measure of value by all civilizations throughout all history (not so, but never mind). And that gold has some special status as a safe, reliable holding even over shortish periods of time (say, intermediate-term).

I'm not sure how gold's recent underperformance of silver and copper fits that storyline.

I would say the big question with all "inflation hedges" is "what is a suitable holding period?" For series I savings bonds, zero after the first year. For TIPS, issue to maturity for an individual bond, or duration of the bond fund for a bond fund. For stocks, perhaps twenty years. For gold, based on past history, it looks to me to be about fifty years. Over anything much shorter, whether you make money or lose money depends exactly on where the start and endpoint fall relative to spikes falling many decades apart.
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seajay
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Re: Gold continues to soar!

Post by seajay »

nisiprius wrote: Fri Jul 16, 2021 8:26 am I haven't been paying a lot of attention, but we've have gotten a number of postings using the phrase "precious metals" rather than "gold."
Many moons ago Great Uncle Sam was quite generous, he used to pay you for him to securely store your gold. Gold and money were exchangeable at a fixed rate, made more sense to hold money deposited in T-Bills earning interest, convertible at any (reasonable) time into gold.

From 1933 investment gold was outlawed. Accordingly a PM investor might have opted to hold silver instead. From the mid 1970's it was lawful to trade investment gold again so a PM investor might have rotated their silver into gold.

Based on those historical circumstances, peculiar/specif to the US, its easier to point to present day 'gold' as being 'PM'. Which is no more unreasonable than looking at the S&P500 index methodology as being a representation of historic 'average' rewards. Dow and Jones for instance devised three indexes that later transposed into one (more rewarding) choice and later still the S&P500 stepped up to take over as the 'better' choice.
gold has not been doing well lately, which turns out to be true.
If you adjust the start/end dates to being prior to the time period you selected you'll see that gold relatively outperformed silver. The broad nature of the two is similar overall rewards but where their synchronicity varies over time.

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000
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Re: Gold continues to soar!

Post by 000 »

nisiprius wrote: Fri Jul 16, 2021 8:26 am Image

Obviously, if gold is Just Another Commodity then there are always going to be lots to choose from and you're off to the races for prediction ahd market timing. But there is a storyline that gold is not just another commodity, it is special, recognized as the one true eternal measure of value by all civilizations throughout all history (not so, but never mind). And that gold has some special status as a safe, reliable holding even over shortish periods of time (say, intermediate-term).

I'm not sure how gold's recent underperformance of silver and copper fits that storyline.
The chart you posted shows gold holding, not losing, dollar value over the time period in question.

So either gold did hold value over that time period or serious inflation happened (despite all the posts here asserting not) and gold has not yet responded.

Copper is not a precious metal and I'm not aware of anyone proposing buy-and-hold investment in copper. Silver is semi-precious in that much of its demand is industrial not monetary/hoarding; likewise there are few who propose buy-and-hold investment in silver. Both copper and silver have typically been more volatile than gold.
JBTX
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Re: Gold continues to soar!

Post by JBTX »

nisiprius wrote: Fri Jul 16, 2021 8:26 am I haven't been paying a lot of attention, but we've have gotten a number of postings using the phrase "precious metals" rather than "gold." This is unusual, and made me suspect that gold has not been doing well lately, which turns out to be true.

Source

Image

Obviously, if gold is Just Another Commodity then there are always going to be lots to choose from and you're off to the races for prediction ahd market timing. But there is a storyline that gold is not just another commodity, it is special, recognized as the one true eternal measure of value by all civilizations throughout all history (not so, but never mind). And that gold has some special status as a safe, reliable holding even over shortish periods of time (say, intermediate-term).

I'm not sure how gold's recent underperformance of silver and copper fits that storyline.

I would say the big question with all "inflation hedges" is "what is a suitable holding period?" For series I savings bonds, zero after the first year. For TIPS, issue to maturity for an individual bond, or duration of the bond fund for a bond fund. For stocks, perhaps twenty years. For gold, based on past history, it looks to me to be about fifty years. Over anything much shorter, whether you make money or lose money depends exactly on where the start and endpoint fall relative to spikes falling many decades apart.
I'm not a big proponent of gold or precious metals, but your assessment is really off the mark. Gold is perceived as a diversifier and store of safe value in times of turmoil. With stocks soaring and economy growing it really isn't one of those times. I don't think anybody looks at one year of gold performance vs other raw commodities and makes an assessment of its merit,or lack of it. Gold to be effective has to be held long term...and that's the problem, sometimes longer than ones lifetime.

Gold is kind of a monetary asset, whereas Silver is a combination of monetary and economic. Copper is almost entirely world economic cycle driven. To some degree silver serves as a poor man's gold, and is more speculative, and more volatile. I have small stakes in gold and silver- 5% of portfolio in total. My timing on precious metals is terrible, especially Silver. Finally I may actually be in the black with it.
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