Buy Signal – Gold ( GLD )

July 2, 2014

Today is day one for a GLD buy trade.  GLD ended June 30 above its 200 day moving average.  But, I only have a 2.5% portfolio exposure at  $128.01 instead of 5%..

The back testing results for a GLD trade ( month end price above 200 day moving average  ) are not as compelling as the results for SPY and VTI.  The last five trades closed  March 31, 2014 ( loss 3.14%  ), January 31, 2013 ( loss 1.84% ) , March 31, 2012 ( loss 4.25% )….But, before that December 31, 2011 ( plus 37.4% ) and August 31, 2008 ( plus 75.67% ).

In my opinion, at present, there are too many political, monetary, cultural and speculative forces at work to say why a GLD  position will prove profitable  But, I do  like the idea of having some exposure to GLD and I do  prefer to  rely on mechanics to  control my impulses.

As for VTI and SPY….They sailed through June 30 safely in buy territory.  So, as mentioned in my last post I bought more SPY and will continue to accumulate at each month end.  It is outperforming VTI .  My present position is more than 1,000 shares of SPY at a cost basis of $ 190.89.

What is giving me courage  to invest  more money into the market monthly is my expectation that USA bond interest yields, although low, will continue to attract more money from the rest of the world where interest rates are even lower.  And, USA bond yields  offer less than formidable competition to USA  equity yields ( earnings divided by a stock’s price ).   I’ll do this ( average into the stock market via SPY ) despite lower than average  market  volume….I’d probably go all in now  if equity market  volume ( conviction ) picked up significantly. That is the wind I’d like to feel in my sails !  Well at least we are moving in the right direction.  Although strong economic numbers could raise inflationary fears, I believe low interest rates will count as the  stronger driver in the market

And, as long as our low interest rates remain relatively high versus Europe….the dollar should strengthen ( yep, versus gold too) , and that’s another reason for my skinny GLD position.

And, while you are at it, keep an your eye on our ( USA ) 10 year Treasury yield versus the S&P 500 twelve month projected earnings yield.

Nice little jig saw puzzle.

I hope I have all the pieces !!

Richard Maurice Gore

 

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