This trade has been a real disappointment. Despite seeing the greatest monetary stimulus package in history, gold is now lower than when QE3 was announced. You can do all the research in the world, but when market sentiment and election fears overwhelm you, it does no good.
Having broken the 50-day moving average, it now looks like (GLD) wants to challenge to 200- day moving average at $161.4. That is down another $40 in terms of the spot market for the yellow metal. They don’t call this the barbarous relic for nothing.
In fact, it seems like everything is taking a run at its 200-day moving averages, from gold to silver (SLV), stocks (SPX), small caps (IWM), and the yen (FXY). If the November 7 election is your inflection point, then we have another two weeks of pain to endure, more than I am willing to tolerate.
Now that my hedge for gold is gone, a short position in oil (USO) which I covered on yesterday’s spike down, I was left standing naked, and uncomfortably so in this increasingly brisk autumn. I would rather buy them back on the way up than sacrifice what is already a great year leaning into them on the way down.
Still, we have to trade the market we have, not the one we want or deserve. So I am stopping out of the SPDR Gold Trust Shares (GLD) here. I am too old to lose all my money on a bad trade and then plead for my old job back as an entry level trainee at Morgan Stanley. Besides, they probably wouldn’t have me back anyway.
I will revisit this trade in the future. QE3 is still in-force and should work. But we need to get yearend profit taking and the election out of the way. The continued slowdown in China isn’t helping. Rumors are European gold sales to collateralize sovereign bond issues are bogus, as they are limited by treaty to selling only 400 tons a year. But in these conditions traders will take flight on even chatter they know to be wrong.
Many investors probably want to see the monetary expansion in the flesh, which usually lags by a couple of months, before that increase their positions in the barbarous relic. Watch the monthly data from the Reserve Bank of St. Louis.