Looking for a Great Track Record? Look at SPDR Gold Shares

By Wednesday, November 28, 2012

Look at SPDR Gold SharesSpot silver prices are fighting hard. The commodity started the year strong, getting close to $38.00 an ounce, only to retreat with gold prices and consolidate all summer. Now silver has crept up to the $34.00-per-ounce level, and $35.00 an ounce seems just around the corner, with gold prices now holding around $1,750.

Many gold and silver mining companies struggled on the stock market this year, due to the swing in spot prices and the rising costs of production. Very few producing miners have done well on the stock market this year, whereas most did well in 2011.

If you’re a gold (and silver) bug, there’s a lot to be said about an instrument like the SPDR Gold Shares (NYSEArca/GLD), which is a gold trust exchange-traded fund (ETF). Held in the form of 400-ounce gold bars, the gold itself is kept in vaults stored in London. It is currently worth approximately $75.0 billion in U.S. dollars, according to the trust.

SPDR Gold Shares actually has a great long-term track record on the stock market. Back in 2006, it was trading around $60.00 a share, moving to $70.00 in 2007 and $120.00 by 2010. It hit a high of over $180.00 a share when spot gold peaked in 2011. SPDR Gold Shares is currently trading around $170.00 a share. The ETF’s recent stock chart is featured below:

GLD SPDR Gold Trust Shares NYSE

Chart courtesy of www.StockCharts.com

The current consolidation in gold prices is very similar to the one experienced in 2008/2009. Gold prices have been going up consistently since 2002, with silver prices moving up since 2005.

Realistically, one of the better ways for most investors to be long on gold or silver is through an ETF. Investment risk is compounded if an investor is speculating in individual mining companies; it is also compounded if investors hold the physical commodity in their own homes.

There aren’t a lot of reasons why either gold or silver prices should go down from their current levels. Certainly, if demand for jewelry in Asian markets was to dry up, spot gold would take a hit. But that doesn’t seem likely, as more and more Asian consumers become middle-class consumers.

I don’t know when, but someday, all this monetary stimulus in the form of artificially low interest rates and huge increases to the U.S. money supply is going to impact consumers and investors in unforeseen ways. Most argue that gold will benefit with rising inflation, but a weaker U.S. dollar will also be a major catalyst.

Most investors should already have some exposure to gold and silver as part of a balanced investment portfolio. (See “The Biggest Stock Market Winner Going Forward.”) Western economies aren’t growing faster than the rate of inflation, but gold and silver prices are solidly holding up. This tells me that futures speculators are waiting to bid these commodities much higher in price. All that’s required is a catalyst, and I think we’ll get one next year.


About the Author | Browse Mitchell Clark's Articles

Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »

Sep. 2, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter) $1014.15
Trailing 12-month Price/earnings multiple (Most Recent Quarter)

17.44

Dow Jones Industrial Average Dividend Yield 2.71%
10-year U.S. Treasury Yield 2.14%

Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.

Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.

Poll

Will slowdown in China affect the U.S. economy?

View Results

Loading ... Loading ...
×
From: Michael Lombardi, MBA
Subject: The $2 Silver Stock Every Investor Should Own!

Read this message