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Almost every trading day someone asks me if they should buy gold. Personally, I own physical gold and silver bullion since 2004, but if you are trading gold ETFs, you may want to wait before jumping on board at this time. As you all know, gold topped out in September 2011 at $1923.70 an ounce. Ironically, that same week that gold topped out it was upgraded by J.P. Morgan Chase (NYSE:JPM) to $2500.00 an ounce. Either J.P. Morgan Chase is just terrible at spotting tops or it was looking to sell to the amateurs that always buy the peak. My suspicion is the latter as most large firms have an agenda behind their upgrades and downgrades when equities are at extreme highs and lows. Just think about it, Goldman Sachs (NYSE:GS) upgraded oil to $250.00 a barrel when it was trading at $145.00 a barrel in July 2008. As you probably know, oil peaked at $147.00 a barrel a week after that upgrade. Again, the amateurs that followed that upgrade were just decimated when oil was bought at that high. Oil dropped to $30.00 over the next year. Now gold has turned into one of the most hated commodities out there by Wall Street. Currently, gold is coming under pressure due to potential tightening of the Federal Reserve’s $85 billion QE-3 program. Now let us be clear, the Federal Reserve has not begun to tapper yet, it is only floating rumors of a tapering. This can be seen by the recent rise in yields in the 10-year U.S. Treasury Note yield. So enough with that, here are three signs to look for that will tell us we should buy gold ETF’s again:

1. If the recent low in gold futures (GC) from June 28, 2013 is briefly broken to the downside and then reverses back to the upside on volume. If this occurs it will signal institutional sponsorship and it will most likely be a solid low in place. This could also lead to a W-bottom pattern on the larger time frame which often signals huge upside potential.

2. Next, watch for a major downgrade from Goldman Sachs, J.P. Morgan Chase & Co or another major firm. Remember, when these giant firms downgrade stocks at lows it is often a sign that they now want to own that equity. Just look ay their past track records of upgrading and downgrading stocks at extreme highs and lows.

3. Gold is a currency, this is why central banks around the world own it, and this includes the Federal Reserve. So when you start to notice that asset prices are falling despite the easy money policies (money printing) by the central banks around the globe it is a good time to get on board and own some gold. After all, gold cannot be printed out of thin air or by a click of a keyboard like the fiat monetary system that we have today. Why do you think Bitcoin is becoming so popular right now? Bitcoin only has a certain amount available for use unlike fiat currency which can be printed infinitely.

Disclosure: This article is written by Nicolas Santiago. Nicholas Santiago is a co-founder of In The Money Stocks. Nicholas Santiago and In The Money Stocks represent that Nicolas Santiago does own physical gold and silver at the time the article was submitted.

The post Don’t Buy Gold Until These 3 Things Happen appeared first on Wall Street Insanity.

Gold is bouncing back, but it remains to be seen how high it will go. The SPDR Gold Shares ETF (NYSE: GLD) is up 4.84 percent in the past month. Gold had dropped over 29 percent from the first of the year, reaching a 52-week low of $114.68 on June 28th. The yellow metal has rallied back over 17 percent from this low. The question is whether the rally will continue. Not surprisingly, analysts are divided on that point.

Morgan Stanley analysts believe the rally is short lived. They contend the gold market has already priced in an announcement that the Fed will reduce its monthly bond purchased at its next meeting. The FOMC is scheduled to meet on September 18th and 19th. The Morgan Stanley analysts point to a couple of fundamental factors which fueled the rebound. They site an exhaustion in ETF sell offs and stronger physical demand in China and India. They further believe the current rally will be limited by a stronger U.S. dollar and higher bond yields. Technically, the analysts stated the price would have trouble breaking through the 100 day SMA.

JP Morgan analysts are taking the opposite side of that prediction, indicating gold will continue to rise. The bank released a note a couple of weeks ago saying the market had shrugged off the news that Paulson & Co. reduced its gold exposure by half. The most recent 13F filing from John Paulson’s firm states it sold off 11 million shares of GLD, leaving a position of 10.23 million shares with a market value of $1.22 billion. JP Morgan analysts pointed to a strong positive seasonality trend in the metal which coincides with the Denver gold conference, predicting a strong run-up to the show. The Denver Gold Forum is scheduled for September 22nd to 25th. They advised that short term investors should go long gold with a 4 to 5 week time horizon. They further pointed to strong physical demand in India and China as bullish, similar to the Morgan Stanley analysts.

Paulson was not the only hedge fund manager leaving the gold party. Soros Fund Management sold off its last 530k shares in GLD according to the firm’s most recent 13F filing. A year ago, Soros had a position of 884k shares with a market value of $137 million. Soros became publicly bearish on gold after the Cyprus banking meltdown, indicating the metal was no longer a holder of value in the face of financial deterioration. Overall, the GLD has had substantial outflows of funds year to date.

The GLD chart shows the price moving in a narrow upward channel since August 6th. The price broke through the 100-day SMA on strong volume on August 23rd, invalidating at least a portion of the Morgan Stanley prediction. If the lower level of the channel is broken, the price could be headed down to at least $130. Volume has generally been moderate since the bottom at the end of June. GLD is trading with a beta of -2.16, showing a strong inverse relationship with the overall market.

The Market Vectors Gold Miners ETF (NYSE: GDX) has had a more substantial rebound, up over 10 percent in the past month. GDX has traded more volatile than GLD with a beta of -4.16, but has rallied over 36 percent since a 52-week low of $22.21 on June 28th. Similar to GLD, Soros Fund Management exited its position in GDX by selling off 2.66 million shares, as shown by its second quarter 13F filing.

The analysts are in disagreement on where gold is going, pointing to differing fundamental and technical factors that will influence future price action. From the GLD chart, it looks like the recent strong rally could be broken at any time. Further, the volume on the rally has not been that high, which suggests it could turn around at the drop of a hat. Likely, larger macro-economic factors will influence where GLD heads from here.

Disclosure: The author has no position in any of the companies mentioned, and does not intend to initiate a position in the next 72 hours.

The post How High Will The Gold Recovery Go? appeared first on Wall Street Insanity.

Exchange traded funds (ETF) have become an increasingly popular way for investors to play the stock, bond and commodities markets without dealing with individuals stocks, bonds or mutual funds.

ETFs are often compared with mutual funds because they both enable investors to buy into a broad basket of stocks or other types of investments with a single purchase. However, while most stock mutual funds are actively managed by a portfolio manager, most ETFs are set up merely to track a particular index, such as the Standard & Poor’s 500, the Dow Jones Industrial Average, the Russell 2000, or a more specific international or sector index.

Until the rules were changed in 2008, ETFs were all index-type funds that were not actively managed. Since 2008 a few managed ETFs have been launched, but the majority of ETFs are still tied to an index.
Why are so many investors and money managers switching to ETFs in place of mutual funds? ETFs offer some very enticing benefits over mutual funds:

Easier To Trade

ETFs trade just like stocks on the major stock exchanges. There are no loads—either front end or back end, as you would face with many mutual. Your only transaction cost is the brokerage fee you’d pay to buy or sell your ETF—the same as it would be to buy or sell a traditional stock. And since most ETFs are not actively managed, the annual management fees you’d pay are relatively inconsequential compared with the typical management fee of a mutual fund, which tends to range from about 0.05 percent (half a percent) to 2 percent of assets under management each year. Management fees for ETFs typically range from just 0.01 percent (one-tenth of one percent) to 0.05 percent (half a percent) of assets under management.

Flexibility

When you sell a mutual fund, you have to wait until trading closes before the transaction is actually made. With an ETF, you can sell at any time during the day. If the market is up 200 points in the morning and you want to take your profit for fear it may drop back down in the afternoon, you can sell an ETF at its current trading value. With a mutual fund, you’d have to take your chances and wait until trading closes before your shares would be sold—at the value posted at the end of the day.

Limit Orders

Just as you can do with any stock, you can use a limit order when you buy your ETFs. (A limit order is an order to buy or sell a stock at a set price.) So if you want to buy an ETF at a dollar or two below its current trading price—or sell it at a set price above its current price—you can put in a limit order and the transaction will be completed when or if it hits your target price.

Taxes

ETFs tend to have certain tax benefits over mutual funds. Mutual funds pay out all capital gains at the end of each year, generating a tax liability for shareholders—even those who didn’t buy the fund until near the end of the year. ETF investors are only liable for capital gains earned while they were holding the EFT. Taxable transactions also tend to be less frequent with ETFs since most of them are not actively managed with ongoing trading by the portfolio manager.

ETFs are offered by a growing number of investment companies. Barclays Global Investor has been a pioneer in the ETF market with its wide offering of more than 100 portfolios of what it terms “iShares”. Some of the other leading ETF firms include State Street Global Advisors, Vanguard, PowerShares, and Merrill Lynch.

ETF Strategies

Investors are able to pursue a wide range of strategies with ETFs.

Day traders and active investors can move in and out of the market and out of their positions more quickly, more easily and more inexpensively than they could with mutual funds. And because they typically hold a broad range of stocks, ETF traders can work with the entire market—or sectors of the market –rather than trading individual stocks.

Long-term investors can build a diversified portfolio of ETFs by investing in broad-based index portfolios of both blue chips and smaller stocks, and add in foreign indexed ETFs or a broad international ETF, as well as ETFs from nearly any sector of the economy.

But you don’t have to stop with stocks. Some ETFs invest in corporate or government bonds—both high yield and standard. You can also use ETFs to diversify into the precious metals or commodities markets. For independent investors who want to manage their own portfolio, ETFs offer an enticing mix of convenience, diversity, and tax benefits

The post Exchange Traded Funds Offer Key Advantages Over Mutual Funds appeared first on Wall Street Insanity.

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Soros Fund Management, and George Soros, reported a new position in Apple, Inc. (AAPL).  The Soros Fund Management 13F filing shows a new position of 66,800 shares in Apple with a market value of $26.45 million. Carl Icahn also recently announced his position in Apple on Twitter. Apple appears to be a popular hedge fund play in advance of some major product releases.

However, the most interesting news from the filing may be the largest holding in the portfolio. Soros now holds a massive put on the S&P 500 ETF (NAR: SPY) of 7.8 million shares with a market value of $1.28 billion.  This position represents 13.54% of his total portfolio. It is an increase of 5.18 million shares over the previous 13F filing. The next largest equity holding is Google, Inc. (GOOG), with 396,953 shares representing 3.13% of the total portfolio.

The market should take notice when a famed investor like Soros takes such a massive bearish position. Soros is known for having made bold moves in the past, and has been accused of breaking down national currencies. He made around $1 billion on one day in 1992 when taking a bearish position against the pound sterling. There were rumors earlier this year that he made a massive profit betting against the yen.

However, it is difficult to decipher the meaning of the position. The 13F filing only discloses the position was entered into during the 2^nd quarter, but does not narrow down dates of entry.  Still, when an investor like Soros takes a huge bearish position, it behooves investors to take notice. Only time will tell if Soros gets it right.

Disclosure: The author has no position in any of the stocks mentioned, and does not intend to initiate a position in the next 72 hours.

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