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Physical Gold vs. Gold Miners as a Hedge

Discussion in 'Stock Market Nuts and Bolts' started by Zaxon, Jul 31, 2019.

  1. Zaxon

    Zaxon The voice of reason

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    I did the math to compare physical gold (ETF) vs gold miners (ETF), to see how they've performed during the GFC and over the long term.

    Over the long term, from the 29-May-2006 to 22-Jul-2019:
    • IAU (physical gold) returned 110%
    • GDX (gold miners) returned -27.90%
    • S&P 500 returned 135%
    During the GFC, from 15-Oct-2007 to 02-Mar-2009:
    • Physical gold returned 20%
    • Gold miners returned -29%
    • S&P 500 returned -49%
    So if you're using gold as a hedge against a market downturn, physical gold (or ETF equivalent) is the way to go. If you're investing for the long term, then a share market index fund beats gold.
     
    StockyGuy and qldfrog like this.
  2. qldfrog

    qldfrog

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    Interesting, would explain my disappointment with gdx performance.will switch to pmgold
    I use both as edge indeed
     
  3. kid hustlr

    kid hustlr

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    Hi,

    I believe the aud usd relationship is s big factor in respective performances also
     
  4. qldfrog

    qldfrog

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    But gdx is supposed to be hedge vs usd from memory so i would have expected similar curves
    Anyway sell is on for me today
     
  5. IFocus

    IFocus You are arguing with a Galah

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    I wouldn't use gold as a hedge against a market down turn maybe physical gold in say a war or threat.

    Still US treasury's likely better for safe haven.

    I think using a market instrument or shorting is a better method or at least a more certain correlation IMHO.
     
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  6. Zaxon

    Zaxon The voice of reason

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    Long dated treasuries are typically a safe haven in bad markets. I think treasuries and gold are great for people who are predicting the market will fall soon. But once it actually falls, I agree that shorting the market is the surest way.
     
  7. qldfrog

    qldfrog

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    S
    Shorting the market implies someone is solvent enough to pay your wins.i doubt it will happen when the mother of all crash happen, or your wins will be frozen
    My opinion only
    Gold is insurance for me.that is all
     
  8. Zaxon

    Zaxon The voice of reason

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    Depends on what I meant by shorting :). In this case, any useable method that inversely tracks the market. So shorting futures could be one example.
    Yup. Gold's had quite an impressive run.
     
  9. qldfrog

    qldfrog

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    What i mean @Saxon:
    So you short CBA, CBA collapses and the gov refuses to bail it out: who is going to pay you the million you made by being right: IG?
    Same for my bboz...i agree
    If it gets that bad you end up with a quasi collapse of the financial system, and the least of the worries of any government will be to make sure the fews who made the right calls are paid...
    Transfer will be throttled etc
    So pmgold as we are supposed to have a 1 to 1 to physical gold,
    Physical gold and a gun,
    NOT Gold etf as not enough physical backing
    Hope never to have used this
     
  10. brty

    brty

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    Do you understand how shorting works??
    You borrow stock.
    You sell the stock.
    The money gets put I to your account minus margin.
    The stock drops a lot.
    The govt bans sorting in your scenario.
    You buy the stock back and return the stock to whoever lent it to you.
    How do you not get paid??
     
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  11. qldfrog

    qldfrog

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    Ok
    My mistake, when i " short" stock, i use options so my..who will honour the contract
    If you short by borrowing,yes, i presume you are safe in a cataclysm
     
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