Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.
Have a stock YOU want us to review? Email my team here.
Hey Traders,
We all know inflation is high, and we know the economy is probably heading toward, at a minimum, a mild recession.
In times like these, there’s often a flight to quality.
With rates where they are, investors and traders are buying into money market funds and CD’s at rates they have not since the 70s.
But the king of all anti-inflation products is the SPDR Gold Trust (Ticker GLD).
There is a swath of investors that swear by it – they think it’s eventually going to the moon.
Will it? And if it does, when could that happen?
Let’s break it down.
The Good
If the question was “does gold go up when there is real inflation?” The answer is yes:
GLD is trading just off a 1 year high and has had a massive rally this year.
GLD is reacting to inflation …
But does that mean GLD is heading for new highs?
Remember where is went about a decade ago:
GLD is ABOVE those levels. Traders think it could run higher, but will it?
The Bad
Gold is just that – gold. It doesn’t really do anything.
It serves few purposes other than a store of wealth and some jewelry that looks great on Lauren.
If the world is truly going to fall apart, GLD is not the thing to own.
In addition, GLD doesn’t always own the physical. This means the ETF doesn’t just buy gold and store it. It’ll engage in futures trading, so there’s risk of a separation there.
Looking at GLD, it looks a touch overbought. One thing to think about is that if you’re looking for inflation protection using GLD … are you late to the party?
GLD has run hot, and it might be overheated.
The Verdict
Personally, if I thought the world was going to end, I’d buy guns and bullets, not gold.
But if we assume that the current structure will hold (which I do) … GLD works.
I think GLD is too high. I would be looking to buy for 170.
Questions about that? Leave a comment below!
Your Only Option,
Mark Sebastian