Gold Thoughts – A Legendary Investor Who’s Made Billions Tells You When To Dump Stocks

GLD

donald trump

“’He speaks loud but his words are confusing.’”

Jim Rogers

You’re gonna need some help from gold.

At the risk of sounding political/partisan (I’m not…at least not for market analysis purposes anyway), the U.S. equity markets seem to be enjoying an extended honeymoon since the election of Donald Trump.  

That’s nice…

However, the savvy among you are preparing for what’s likely to be (at minimum) a sharp pullback after Mr. Trump offends the wrong country/region or, more likely, starts a trade war.

Legendary investor Jim Rogers suggests that the newly inaugurated president “…very much wants a trade war.  And if that happens sell everything.”

Rogers goes on, “…trade wars have always been disastrous. It leads to bankruptcies and has led to real wars. History has shown that no one has won a trade war and very few people learned the lessons of history. They ignore them because people think they are more powerful and smarter than people in the past.”  [Jim Rogers comments source: Marketwatch ]

So how can you prepare for/benefit from the coming storm?  There are many good possibilities… Here are 2:

  1. Hedge your stock positions via index etfs
  2. Build a position in gold and/or gold equivalents

The first approach is pretty obvious.  Identify an etf that most closely reflects the breadth of your portfolio, size appropriately, and short the etf via shares or options.

The second approach is a bit less obvious, but better for those who have an inherent bias against shorting. Owning gold is also better for macroeconomic risk.  Finally, there’s a chance that gold can rise alongside your equity position(s) if the reason for its rise is strong buying by a country or region for isolated reasons.

All that said, from our perspective, the shiny stuff remains in bull mode.  As the charts below show, support levels are pretty easy to identify.  

GLD Quarterly

Gold

 

$100 support and TAOST Magnet Zone continue to hold gold prices up for now.

GLD Monthly

gold

 

Perhaps this monthly view presents an even more clear picture of the possibilities for GLD. The etf’s price is squeezing to a point that will require it to explode higher or lower in fairly short order.  $132 down to $100 ($96 if your using the bottom of TAOST Magnet Zone) seems like a wide expanse to consider, but in truth, it’s a pretty small range for GLD.  Also, note that the range includes the full range of the 52 Week High and Low and the most recent close only places price at the 29% level of that 52 Week range.  

GLD Monthly

gold

 

Most recently, “‘[g]old found itself exposed to painful losses this week after the renewed investor risk appetite from the [President Donald] Trump effect and dollar’s resurgence encouraged sellers to attack the metal incessantly,’ said Lukman Otunuga, research analyst with FXTM.” [Source: Marketwatch]

Stock Symbol: GLD
Snapshot Date: 1/27/2017
Market Capitalization: $30,504,348,359.00
52 Week High: $ $131.15
52 Week Low: $ $106.26
Current Price: $113.49
Change (relative prev day close) $0.23
% Change (relative to yday close) 0.20%
Current Price % 52wk Range 29.05%
Most Recent Daily Open $112.93
Most Recent Daily High $113.54
Most Recent Daily Low $112.81
Earnings/Share (Most recent report) $12.55
PE (Price Earnings Ratio) 9.05
Beta 0.07

So what’s the upshot here?  As always, price action will tell you what to do.  Wait for it to give you a cue by breaking through 1 of the important levels identified here.  As a hint, we think price is most likely to hold at or above the support levels here and eventually push higher.  If it manages to clearly breach $100 (and $96 for sure) to the downside, we would head to the sidelines, but not short the shiny stuff.

Trade well.

KIS,

The Trader