Gold Bugs Chuffed At Volatility In Financial Markets
Gold is currently trading at $1,215.26 per ounce, up 0.91% or $10.96. Over the past 30-day period, Gold has risen 6.40% or $72.40 per ounce. The precious metal flourishes during times of economic uncertainty, and the fiery rhetoric of President Donald Trump has done nothing to assuage those concerns. His inaugural address on Friday, 20 January 2017 was a scathing indictment of Washington DC and political insiders. Trump vowed radical change, starting with his promise to fulfill his election mandate.
From the outset, Trump promised to remove the US from the Trans Pacific Partnership, renegotiate NAFTA so that the US gets a much better deal (or scrap it entirely). He wishes to kickstart massive infrastructure development, rebuild the military and embark upon a policy of America First. These and other policies form the crux of Trump’s radical change agenda. Naturally, gold bullion tends to react sharply to dramatic change and geopolitical uncertainty. The precious metal was trading higher in early morning sessions across Asia, along with silver. Analysts have positioned themselves in favour of gold as the preferred safe-haven asset this week. For binary options traders, there is no doubt that gold is the go-to asset.
How Has Gold Been Performing in USD Terms in Recent Years?
Since 2002, Gold has generated an average return of 10.7%. However, the total return on the precious metal is substantial at 332.7%. The last 5 years have generated mixed results for bullion.
- In 2013, the price of gold declined by 28.3%
- In 2014 the price of gold declined by 1.5%
- In 2015 the price of gold declined by 10.4%
- In 2016, the price of gold rose by 8.5%
- In 2017 to date, the price of gold is up 4.7%
The performance of gold in USD terms is not the best performance of the precious metal in currency terms. Gold has performed remarkably well in GBP (+409.6%), and INR (+510.3%). Turning our attention to gold futures, the signs are positive. In 2017, gold is already showing signs of becoming a commodity leader. Speculators are generally bearish on gold, but given their contrarian nature this is a positive sign for the precious metal. As a binary option trader, the most important determinant of gold strength or weakness now is GLD SPDR Gold shares ETF. When cash is changing hands on Wall Street, this is where you want to look for activity. Investors and speculators looking to plow money into gold, or to divest from the precious metal typically go through this exchange traded fund. GLD is the most important barometer of gold demand. Take a look at the below chart which indicates trading activity on this exchange traded fund:
The momentum on GLD SPDR Gold shares is clearly bullish and already the 50-day moving average price of $112.68 has been overtaken by the prevailing price of $115.05 per share. The trajectory of the price movement in 2017 is sharply higher than the trajectory of the declining 200-day moving average.
The gold futures price acts as the global indicator of the quoted gold price. Thus, aggressive buying and selling rapidly changes the gold price and has a major impact on gold trading activity. Gold futures markets are also heavily leveraged, while investors typically purchase gold with a maximum of double their leverage with GLD shares. This is an important indicator of why speculators are the major drivers of gold price movements, and not investors. In fact, one could go so far as to say that speculative trading activity on gold is the dominant driver of the gold price, and it is not based on anything other than market makers’ sentiments.
As a binary options trader, you can get a feel for the direction of gold price movement by heeding the pulse of the market. Firebrand speeches by Trump promising dramatic change like trade reform, cancellation of NAFTA or tariffs will invariably boost gold. Any attempt to quell market anxiety will bring down the gold price. As for the Fed, it’s a tough call because White House policy often nullifies the impact of interest rate movements.
Disclosure: None.
"As a binary option trader, the most important determinant of gold strength or weakness now is GLD SPDR Gold shares ETF."
This is extremely misleading all around. GLD's movements are so very insignificant compared to the overall gold market. The gold exchanges absolutely dwarf GLD's movements. For quite some time, I have been hearing about how it is appropriate to follow the draw-downs and builds in the GLD ETF as a directional cue for gold price. But, the "logic" of this perspective always escaped me. Should we not expect that, if people are selling the GLD, draw-downs would be seen, and if people are buying the GLD, builds would be seen? Would that not make this "indicator" a lagging one, at best, and clearly not a leading indicator?
On top of all that, I'm finding this fund to be a bit sketchy after spending considerable time doing my due diligence into it. I'd really like to know why I'm seeing the following clause in the GLD prospectus: "In addition, the Trustee has no right to visit the premises of any subcustodian for the purposes of examining the Trust's gold or any records maintained by the subcustodian, and no subcustodian is obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such subcustodian." What is the purpose of this audit loophole? Additionally, the GLD organizations promise that this fund is 100% backed by actual physical gold but yet they absolutely refuse to give retail investors the right to any of their claimed physical gold.
CNBC's Bob Pisani also made a highly publicized visit to GLD's gold vault in a segment called Gold Rush: The Mother Lode. GLD's administration organized this visit to show that GLD's gold actually exists. However, the gold bar held up by Mr. Pisani showed a serial number of ZJ6752 which did not show up on the latest bar list during that time. It was later found that this "GLD" bar actually belonged to ETF Securities. Finally, I've checked out the following statement seen around TalkMarkets commentary to be true and welcome anyone interested to see for themselves:
"Did anyone try calling the GLD hotline at 866▪320▪4053 in search of numerical details on GLD's insurance? The prospectus vaguely states "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." When I asked about how much of the gold was insured, the representative proceeded to act as if he didn't know and said they were just the "marketing agent" for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors."
Jason, why do you keep posting this same comment about the Gold hotline on multiple articles and under multiple names? Seems like pure spam to me.