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Thread: Gold

  1. #11

    Join Date
    Feb 2009
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    654

    Default Re: Gold

    Food for thought from 2/4/2009 MarketSci:

    "First, a look at the ratio of gold (represented by the ETF GLD) over the gold sector (XAU) from 2005:
    Over the last 4+ years, the two have traded in a fairly narrow range versus the other, but in mid-2008 the ratio exploded as investors embraced the “safe” (good for gold) and abandoned all things equity-related (bad for gold stocks).
    Note: I’m using the ETF GLD to represent physical gold, and the index ^XAU to represent the sector, because I think those two are the most familiar to readers, but the observations in this post have more or less held for other vehicles such as futures (gold) and the ETF GDX (gold sector).
    The Strategy
    The ratio of gold vs the gold sector has exhibited a fairly strong contrarian tendency. The following graph shows the results of two strategies, the first (green) going long gold at today’s close if GLD underperformed XAU for the day, and the second (red) going long if GLD outperformed XAU, frictionless from 2005 to present.

    [logarithmically-scaled]
    The observation hasn’t been foolproof (note late 2005, early 2006, late 2007, and early 2008), but generally speaking, gold has been consistently stronger tomorrow when yesterday it underperformed gold stocks (and vice-versa).
    For the number-lovers:
    This strategy is exploiting a very small daily advantage (similar for example to adaptive daily follow-through), and therein lays a problem.
    Most of the strategies that I talk about on this blog could be traded using leveraged mutual funds (not to be confused with leveraged ETFs). These are the only thing that I trade. Because they incur no transaction fees or slippage, most of the tests I’ve performed on this blog could have been duplicated, for all intents and purposes, as well in the real world.
    Not so here. To the best of my knowledge, there are no mutual funds suitable for active trading that track gold (the gold sector yes, but not gold itself). Trading this strategy with ETFs/futures would bring trading frictions that would close an already very fine advantage.
    I’m struggling now with a way to improve upon this advantage enough to make it tradable. I share it here in hopes that I’ll generate a spark amongst fellow quant’ish folks who frequent the MarketSci Blog. As always, more to follow.
    Happy Trading,
    ms"

    http://marketsci.wordpress.com/

    Lady

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  3. #12

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    Dec 2007
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    906

    Default Re: Gold

    -- Tom | My Trades

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  5. #13

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    Default Re: Gold

    GLD or SLV are ETFs I have been thinking about a long position in, especially if the Treasury continues to print money like it's going out of style. Any contrary thoughts?

  6.  
  7. #14

    Join Date
    Dec 2007
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    906

    Default Re: Gold

    Yes. Gold seems to be in a bull market again, but may need a breather first.
    -- Tom | My Trades

  8.  
  9. #15

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    Default Re: Gold

    Quote Originally Posted by etftalk View Post
    Yes. Gold seems to be in a bull market again, but may need a breather first.
    I'm looking 9 months to all of 2009 as a long window. I think I need to build solid a base before I try shorting the market.

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  11. #16

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    84

    Default Re: Gold

    Gold is the standard and silver is the laggard. Many believe silver never reached its full potential.

  12.  
  13. #17

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    Default Re: Gold

    Yesterday's Smart Money Tracker blog had the following to say:

    "...Once the second phase of the commodity bull starts, and I'm not convinced it has started yet, I wouldn't look for energy and base metals to be the leaders again. Remember the old leaders rarely lead the next bull market. I suspect everyone will want to jump back on the energy bull once commodities do bottom and start the second phase. Granted oil will definitely rally. It may even make new highs again. I suspect it will. But it's not going to be the leader anymore. The global economy has been far too damaged by the bursting of the credit bubble for demand in this sector to recover quickly.

    No the second phase will be lead by the commodity sectors that underperformed during the first phase. It will be lead by the commodities that will benefit not from surging economic growth but surging money supplies. That would be precious metals and to some extent agriculture because infrastructure in this area has been neglected for years.

    Liquidity will always flow into undervalued sectors.

    During the 2001 to 2008 period oil gained over 1400%. I can pretty much guarantee that before the second phase of the commodity bull is over we will see the same thing happen in gold and probably more so as it's much easier for the general public to invest in gold and silver than oil.

    You need the public to come into a asset class for a bubble to form. Yes, precious metals will undoubtedly end up in a bubble before this is over. Let's just say I won't be at all surprised to see $3000-$5000 gold before this is finished.

    That being said we are now due for a correction in the precious metals markets. Ultimately it will be a buying opportunity whether gold holds above the 1980 highs at $850 or if there is still one more leg down before we get a final low."

    http://garyscommonsense.blogspot.com/


    I currently have an allocation in SLV and it may have a short term dip coming, but statements like the ones above are why I'm going to hold it for at least the intermediate term. And I'm going to add a gold position as soon as this pullback starts back up.

    For what its worth,
    Lady
    If you think education is expensive, try ignorance. - Derek Bok

  14.  
  15. #18

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    Default Re: Gold

    Quote Originally Posted by XL-entLady View Post
    Yesterday's Smart Money Tracker blog had the following to say:

    "...Once the second phase of the commodity bull starts, and I'm not convinced it has started yet, I wouldn't look for energy and base metals to be the leaders again. Remember the old leaders rarely lead the next bull market. I suspect everyone will want to jump back on the energy bull once commodities do bottom and start the second phase. Granted oil will definitely rally. It may even make new highs again. I suspect it will. But it's not going to be the leader anymore. The global economy has been far too damaged by the bursting of the credit bubble for demand in this sector to recover quickly.

    No the second phase will be lead by the commodity sectors that underperformed during the first phase. It will be lead by the commodities that will benefit not from surging economic growth but surging money supplies. That would be precious metals and to some extent agriculture because infrastructure in this area has been neglected for years.

    Liquidity will always flow into undervalued sectors.

    During the 2001 to 2008 period oil gained over 1400%. I can pretty much guarantee that before the second phase of the commodity bull is over we will see the same thing happen in gold and probably more so as it's much easier for the general public to invest in gold and silver than oil.

    You need the public to come into a asset class for a bubble to form. Yes, precious metals will undoubtedly end up in a bubble before this is over. Let's just say I won't be at all surprised to see $3000-$5000 gold before this is finished.

    That being said we are now due for a correction in the precious metals markets. Ultimately it will be a buying opportunity whether gold holds above the 1980 highs at $850 or if there is still one more leg down before we get a final low."

    http://garyscommonsense.blogspot.com/


    I currently have an allocation in SLV and it may have a short term dip coming, but statements like the ones above are why I'm going to hold it for at least the intermediate term. And I'm going to add a gold position as soon as this pullback starts back up.

    For what its worth,
    Lady
    Thanks Lady, I did make my first buy request this evening for SLV @ 13.05. I was a limit trade (thank you for that) so we will see if it fills tomorrow. This was the first time I've made a purchase outside of TSP.


  16.  
  17. #19

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    Dec 2007
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    906

    Default Re: Gold

    Quote Originally Posted by justbizness45 View Post
    Thanks Lady, I did make my first buy request this evening for SLV @ 13.05. I was a limit trade (thank you for that) so we will see if it fills tomorrow. This was the first time I've made a purchase outside of TSP.
    Congrats! I hope you get filled.
    -- Tom | My Trades

  18.  
  19. #20

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    Default Re: Gold

    Quote Originally Posted by etftalk View Post
    Congrats! I hope you get filled.
    Nope , I'll try again tomorrow.

  20.  

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