Throughout history, few investments have rivaled investing in gold for popularity as a hedge against many economic problems, from inflation, to economic upheaval or currency fluctuations, to war.

When you think about investing in gold, don’t restrict yourself to just buying physical gold, like coins or bullion. Alternatives to invest in gold include buying shares of gold mining companies or gold Exchange Trade Funds (ETFs). You can also invest in gold by trading options and futures contracts.

Physical Gold

Investing in physical gold can be challenging for investors more accustomed to trading stocks and bonds online. When it comes to physical gold, you’ll generally be interacting with dealers outside of traditional brokerages, and you’ll likely need to pay for storage and obtain insurance for your investment. The three main options to invest in physical gold are bullion, coins and jewelry.

Buying Gold Miner Stocks

Companies that specialize in mining and refining will also profit from a rising gold price. Investing in these types of companies can be an effective way to profit from gold, and can also carry lower risk than other investment methods.

Investing in Gold ETFs

Investing in gold ETFs  can provide you with exposure to gold’s long-term stability while offering more liquidity than physical gold and more diversification than individual gold stocks. There are a range of different types of gold funds. Some are passively managed index funds that track industry trends or the price of bullion using futures or options.

An investor can also invest  in ETFs that hold a basket of gold mining stocks. An example is the VanEck God Miners ETF (GDX.NYSE) which holds many of the major gold mining producers.  For investors wanting to be more aggressive and buy ore speculative mining companies, the VanEck Junior Gold Miner ETF (GDXJ.NYSE) is available.

Market Notes

Market Notes – June 2/22

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A major reason the equity markets had such a great run over the past decade has been thanks to the loose monetary policy of the Federal Reserve. And from August 2019, the Fed has increased its balance sheet 137%, from $3.76 trillion, to $8.92 trillion. That is more than all of the prior QE periods combined.

Now the Fed is starting to shrink its balance sheet , starting a new era of Quantitative Tightening (QT). The last time we saw QT was in 2018 where the Fed shrunk its balance sheet by almost $700 billion in 15 months. The result of that QT was the equity markets declined, then the Fed quickly backed off, reversing its stance, lowering interest rates and starting a new QE program that massively added to the balance sheet.

While QE has dramatically juiced the stock markets over the past decade, QT will have the opposite effect. While many are saying that the bottom is in for the equity markets, as long as the Fed sticks to their QT plan, we suggest there is more pain to come.

The US 10-Year yield had been making lower highs for nearly a month, but recently has started moving higher again. For those who don’t watch bonds and yields closely, bonds and yields move opposite each other. We want to keep  an eye on this as if the yields start to decline again it means that bonds are rising, and bonds are typically safe-haven plays, suggesting the bond market is bearish on the equity markets.

After sinking below $1,800 in May, gold has spent the last few weeks rising to ~$1,870. And a breakout north of $1,880 would likely compound into additional gains. While we could get a nice run here, we expect the next big rally for gold will likely start in the fall.

Stay tuned!

Market Notes

Market Notes – April 25/22

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(AP News)…Elon Musk reached an agreement to buy Twitter for roughly $44 billion on Monday, promising a more lenient touch to policing content on the social media platform where he — the world’s richest person — promotes his interests, attacks critics and opines on a wide range of issues to more than 83 million followers.

The outspoken Tesla CEO has said he wanted to own and privatize Twitter because he thinks it’s not living up to its potential as a platform for free speech.

Musk said in a joint statement with Twitter that he wants to make the service “better than ever” with new features, such as getting rid of automated “spam″ accounts and making its algorithms open to the public to increase trust.

“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” the 50-year-old Musk said, adding hearts, stars and rocket emojis in a tweet that highlighted the statement.

Musk’s offer is $54.20 for each share.

Wild swings for the equity markets today, with the S&P 500 tumbling at the opening where it bottomed at 4200, and then fought its way to a high of 4299, before closing near that high at 4296. In yesterdays’ issue of the Trend Letter, we told subscribers… ‘sentiment is very bearish, which to us can be quite contrarian, suggesting a possible relief rally, short-term is likely.’ 

Watch the 4470 level for near-term resistance, and 4600 for key resistance. Understand that with the Fed tightening its balance sheet, raising rates, and  the yield curve inverting, a recession is extremely likely.  The first step is for the S&P 500 to break out of its downtrend channel.

Gold had another disappointing day, closing down 38.38 on Monday. Gold has now lost 108.00 since the intra-day high last Monday.

Based on seasonality, gold is in a strong period from late March through to early June. So far, that strong historic trend has not materialized this year.

Stay tuned!