SPDR Gold Shares (GLD) Present an Extraordinary Opportunity

Chart at Yahoo Finance

By The Greek:

The SPDR Gold Shares (NYSE: GLD) dropped precipitously recently. Early word on the Street was that the move may have been exacerbated by a confluence of trading algorithms pushing institutional capital out of the security en masse, or that an important owner had been selling (Cyprus was suggested). Also, a sort of death spiral may have developed, propelled by selling in the ETF, which then in turn is forced to sell the commodity; this could have accelerated the decline. However, unlike those who are now boisterously opposed to gold, I’m suggesting such a trading anomaly seems to have created a special arbitrage opportunity for a commodity that has serious safe haven characteristics working in its favor this year and next. This belief is behind my view that the SPDR Gold Shares (GLD) should be bought now, because a better opportunity may not avail to leverage what should drive gold higher, and the GLD is an easy way to leverage it.

The SPDR Gold Shares (GLD) started decidedly lower at the turn of the year, as enthusiasm for stocks intensified. I’ve often talked about the importance of Washington D.C. getting out of the way of stocks, and the passing of the fiscal cliff and debt ceiling issues marked important all-clear signals for equities. Unfortunately, the government’s allowance of the expiration of payroll tax breaks is having important economic repercussions today that will cost investors before long, in my estimation. Still, up until now, capital has been flowing heavily into equity funds and out of money market funds and safe haven securities like the SPDR Gold Shares Trust and the iShares Silver Trust (NYSE: SLV).

The problem is that recently, economic warning signals have become too hard to ignore. Still, stocks have ignored them, though if one inspects which stocks have been rising it has been defensive names for the most part, especially dividend payers in the utility, consumer staple and healthcare arenas. I believe this is because portfolio managers have issue with putting money behind aggressive names given the real economic situation that exists today.

But capital flow fervor will not continue forever if the economic softness gets worse. I believe there’s a good probability of that happening, especially given the real impact of the Sequester spending cuts and the payroll tax break expiration, which the Fed estimates should have a 1.5 percentage point impact on economic growth this year. However, even the Fed left that adjustment out of its own forecast, increasing the possibility of a surprising GDP report or two this year. All these things support the safe haven, gold and the SPDR Gold Shares (GLD).

The events in Boston illustrated that gold is still a safe haven, because gold rallied Tuesday just like it did after September 11th, when equities collapsed. In the first two days of trading after 9/11, Goldcorp (NYSE: GG) (there was no GLD yet) rallied 7.1% while the SPDR S&P 500 (NYSE: SPY) fell 5.4%. The day after the Boston Marathon bombings, precious metals also rallied for the most part.

Security	April 16 Change
SPDR Gold Shares (NYSE: GLD)	+1.1%
Market Vectors Gold Miners (NYSE: GDX)	-0.7%
iShares Gold Trust (NYSE: IAU)	+1.2%
iShares Silver Trust (NYSE: SLV)	+2.6%
ProShares Ultra Silver (NYSE: AGQ)	+4.2%

Given that North Korea, in my estimation, will very shortly run several missile tests and possibly test a nuclear device, gold’s safe haven appeal should be reinforced that much more. Furthermore, given that the United States and Israel believe Iran could have a nuclear weapon capability sometime around a year from now, give or take a few months; and given the world’s preference of military confrontation over a nuclear Iran, gold should find further support. Finally, given that the central banks of the world have been aggressively increasing money supply, and that their credibility could come under serious question, there is all the more reason for precious metals to regain their ancient currency appeal. Thus, I believe gold has very solid support long-term, and the SPDR Gold Shares (GLD) seems to present a special opportunity today to leverage gold on the security’s recent extraordinary collapse.

The SPDR Gold Shares (GLD) fell 13% in two days on either the selling of a major owner or the confluence of algorithms pushing capital out of gold en masse, in my estimation. Given my expectations that gold will be reinforced as an important safe haven now, after Boston, and with a near-term nuclear or missile event possible in North Korea, and with the eventual confrontation of Iran; and while global central banks are placing their nations’ currencies in vulnerable position, I believe an extraordinary opportunity exists today in the SPDR Gold Shares (NYSE: GLD).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Remember Gold the Safe Haven?

After selling off the shiny metal and its once sexy ETF peripherals, gold is getting a bid today on the regrettable reminder that it is the safe haven standard for mankind. Before Boston, investors could not get out of their own way fast enough to dump gold, silver and everything shiny. Today, with the New York City police street presence upped by 1,000 officers, Wall Street is getting its reminder first hand and spot gold is higher by 2.4% as of 10:55 AM ET.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Gold Safe Haven

The events that transpired in Boston disrupted the iconic event and our peace of mind. They were likewise disruptive to the suddenly popular trade to sell gold, silver and all precious metals and their ETF peripheral securities. Gold was falling off a cliff before the bombs exploded, but investors remembered why and when mankind seeks its historic trading tool in the unfortunate aftermath. It’s a tragic day, but the previous decline in gold now offers investors an opportunity to take a stake that should prove highly profitable in my opinion.

The reason why the gold short trade got hot is debatable, especially considering the nascent economic trend pointing toward global demise. The last remaining fuel for hope, China growth, was debatable, and we debunked some of it for you over recent days. The fuel was proven impotent yesterday, with weak data emerging out of China. Furthermore, I recently showed that the real unemployment rate is likely closer to 11.9% than 7.6%, and underemployment is probably 17.8%, not 13.8%, by my estimation. The economy is deteriorating, which should be supportive of gold demand.



I heard an interesting perspective this morning, in which a talking head discussed the troika’s push to Cyprus, demanding it sell its gold reserves to pay itself out of crisis. It would not have drawn enough cash to compensate Cyprus’ creditors, but it reportedly put fear in the heart of gold bugs. You can see some of that here in the performance of relative ETF securities and a couple major miners.

Security	Year-to-Date to April 15
SPDR Gold Shares (NYSE: GLD)	-19%
iShares Silver Trust (NYSE: SLV)	-25%
Market Vectors Gold Miners (NYSE: GDX)	-37%
iShares Gold Trust (NYSE: IAU)	-19%
ProShares Ultra Silver (NYSE: AGQ)	-46%
Goldcorp (NYSE: GG)	-24%
Newmont Mining (NYSE: NEM)	-26%

The latest terrorist event in Boston was unexpected, and shocked the market and the precious metals. However, other threats hover over securities and support gold and relatives here as well. Pressing the geopolitical scene today is the near daily threats of nuclear war by North Korea, and the expectation that the chaotic communist state could launch a missile and test the resolve of its neighbors or test a nuclear weapon. We have become a bit desensitized to the threats of North Korea, with an understanding established now that the nation’s threats are merely its means of demanding international aid for its starving population. However, with Chinese troops building up at the border and South Korea and Japan preparing anti-missile batteries with U.S. anti-missile destroyers lurking in the nearby sea, the threat of a miscue mounts. The Korean Peninsula is just one heating hot spot.

Iran is also warming. The President of the United States and his counterpart in Israel have publicly stated that the long dreaded Iranian nuclear weapon capability deadline is probably about one year away now. Leaders have also continuously noted that engagement of Iran is a better bad option than a nuclear Iran. So then how long will it be before chaos reigns and the sound of war drums is replaced by the whistles of war missiles? Obviously, it will not be much longer. When that day arrives, will not dollar demand be replaced by gold?

Chart at Yahoo Finance

So, there are enough reasons to seek safe haven. Boston only served as a reminder of them all. With gold having capitulated, as you can see in the late drop-off in the GLD chart here, we likely have a special opportunity to take stakes.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.