Physical Gold vs. Gold Miners as a Hedge

[Zaxon]

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.

 

[qldfrog]

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

 

[kid hustlr]

Hi,

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

 

[qldfrog]

Hi,

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

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

 

[IFocus]

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.

 

[Zaxon]

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

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.

 

[qldfrog]

S

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.

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

 

[Zaxon]

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

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.

Gold is insurance for me.that is all

Yup. Gold's had quite an impressive run.

 

[qldfrog]

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

 

[brty]

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

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?

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??

 

[qldfrog]

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