Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Michael Gayed: Will Gold Ever Rally Again?

By

Gold has been underperforming for years and investors are throwing in the towel.

PrintPRINT
Never give up, for that is just the place and time that the tide will turn.
-Harriet Beecher Stowe

Gold (GLD) is a tricky asset to deal with when creating a quantitative investment strategy. As I've traveled the country the last few months presenting on our award winning papers which focus on predicting stock market corrections and volatility, I've received many questions on the behavior of gold.

The challenge for gold as an asset class is that its movement seems to be based on changing dynamics and a non-repeatable pattern.

Sometimes gold serves as a deflation hedge, occasionally outperforming during disinflation and liquidity scares like in the month after the Summer Crash of 2011. 

And sometimes it serves as an inflation hedge when the dollar is weak and investors perceive the metal as a store of value.

More recently, gold has behaved more like a defensive trade in terms of relative performance against the S&P 500 Index (SPX). During the left side of the stock market's October V, when fear reigned, gold outperformed equities as our own alternative ATAC Inflation Rotation Fund (ATACX) positioned defensively into US Treasuries. 

Gold then gave back its outperformance on the right side of the V as stocks surged. Now, people seem to be scratching their heads over what happens next, especially in light of the end of Quantitative Easing in the US, and the clear deflation signals commodities are giving.

The issue here mainly relates to investor perception which I believe is negative for global growth and inflation expectations, as broader large-cap equities remained de-synced from that message.

I believe conditions will likely change sooner rather than later given the extreme bearishness that seems to be underway now for commodities relative to the extreme bullishness for stocks. 

Take a look below at the price ratio of the SPDR Gold Trust Shares ETF (GLD) relative to the S&P 500 SPDR ETF (SPY). 

As a reminder, a rising price ratio means the numerator/GLD is outperforming (up more/down less) the denominator/SPY. A falling ratio means underperformance. Note the severe collapse on the far right of the chart which followed the mid-October low in stocks and rip higher.


Click to enlarge

The weak trend has persisted for the better part of three years, and from an investing standpoint, many market participants seem to have thrown in the towel. 

I can't blame them -- it's hard to resist the temptation of buying high and selling higher. Having said that, the idea of buy low, sell high still has merit. While the trend remains down, and inflationary pressure still appears muted, I suspect gold may become an attractive buy sooner rather than later as mean reversion kicks in, at least relative to the S&P 500 Index.

Twitter: @pensionpartners

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The Fund's investment objectives, risks, charges, expenses and other information are described in the statutory or summary prospectus, which must be read and considered carefully before investing.  You may download the statutory or summary prospectus or obtain a hard copy by calling 855-ATACFUND or visiting www.atacfund.com.  Please read the Prospectuses carefully before you invest.
Mutual fund investing involves risk. Principal loss is possible.  Because the Funds invest primarily in ETFs, they may invest a greater percentage of its assets in the securities of a single issuer and therefore is considered non-diversified.  If a Fund invests a greater percentage of its assets in the securities of a single issuer, its value may decline to a greater degree than if the fund held were a more diversified mutual fund.  The Funds are expected to have a high portfolio turnover ratio which has the potential to result in the realization by the Fund and distribution to shareholders of a greater amount of capital gains.  This means that investors will be likely to have a higher tax liability.  Because the Funds invest in Underlying ETFs an investor will indirectly bear the principal risks of the Underlying ETFs, including but not limited to, risks associated with investments in ETFs, large and smaller companies, real estate investment trusts, foreign securities, non-diversification, high yield bonds, fixed income investments, derivatives, leverage, short sales and commodities.  The Fund will bear its share of the fees and expenses of the underlying funds.  Shareholders will pay higher expenses than would be the case if making direct investments in the underlying funds. 
All investing involves risks. 

The fund as of 11/06/2014 does not invest in any of the following investments: GLD, and SPY.  Fund holdings are subject to change and are not recommendations to buy or sell any security.  Current and future holdings are subject to risk.
The S&P 500, or the Standard & Poor's 500, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.
MA(4) = 4 week moving average

References to other securities should not to be interpreted as an offer of these securities.
ATAC Inflation Rotation Fund is distributed by Quasar Distributors, LLC.  No other products mentioned are distributed by Quasar Distributors, LLC.
< Previous
  • 1
Next >
No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE