For my third pick for my new Perfect 5 ETF Active Passive Portfolio I looked to fill the Commodities slot in the portfolio with an ETF that would provide a hedge for the portfolio if the market tumbled but that would also produce a positive return if the market didn’t fall but other recent trends continued.
The pick that achieves those two goals is the SPDR Gold Shares ETF (GLD) and I’m adding it to the Perfect 5 ETF portfolio today.
Gold is a classic haven in market volatility. If something goes wrong that the market is now counting on going right, gold will climb on fear and volatility. And what could go wrong? North Korea could decide to test a nuclear bomb over the Pacific. The Trump/Congressional Republican tax cut plan could go down in flames (or it could pass in a form that everyone realized will add massively to the deficit.) The debt ceiling deal that President Trump struck with Democrats could unwind. An inexperienced Trump nominee to head the Federal Reserve could say something clear about policy (a definite departure from the Fed norm) and spook the market. I can go on. But the important moment to remember is the rally in gold at the last spike in U.S./North Korea tensions.
But gold doesn’t pay any interest so unless the price of the metal goes up, this position loses ground in relative terms with time. But gold should get a boost from a resumption of dollar weakness on growth in the U.S.deficit or uncertainty over the speed of interest rate increases from the Fed or an announcement from the European Central Bank at its October 26 meeting that it’s moving to further taper off its purchases of debt. Right now, as of October 3, gold is in a slump that has taken it to a seven-week low. The SPDR Gold Shares ETF has fallen from $128.13 on September 7 to $120.83 today, October 3. That decline of 5.7% provides a pretty good opportunity for establishing this position.
The GLD ETF has $34 billion in assets and charges an expense ratio of 0.40%.
The SPDR Gold Shares ETF is a member of both my Jubak Picks and Volatility portfolios.
Please note that as I wrote yesterday in announcing this new ETF portfolio, today’s two ETF picks are the last that I’ll be posting on my free Jubak Picks site. If you want to get the last two picks and/of to follow the subsequent picks and updates on this portfolio, you have three options.
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