Tuesday, February 20, 2018

Gold Fund or Commidity ETF? Woulda Coulda Shoulda

April 14, 2010 by  
Filed under Inflation Hedge Strategies, Move

Thinking about jumping into a gold fund or a commodity etf? That’s what you want to do if you think inflation is headed our way. However, as is always the case with business and economics, there some folks who take a contrary position.

This blog is chock-a-block with posts about whether the future is going to be inflation or deflation, or both.
If you’re thinking inflation, take a look at this article about Using ETFs to hedge inflation. It ran last year on Feb 15 (2009)

Just for fun, let’s see how some of their suggestions have worked out.

Starting with good old GLD, the largest gold ETF; if you would have jumped in on the first trading day after the article appeared, you could have gotten in at $95 a share. As the market winds down to a close today, the price of GLD is $113.04. Not bad, certainly better than cash in your mattress, or deposits in a savings and loan.

Of course, last February, if you weren’t creeped out about inflation, which wasn’t even showing signs of starting to creep, you might have bet the house on something as bland as the SPY, the S&P 500 ETF. On February 17, 2009 the price was about $80. Actually,that was a pretty volatile, nasty day for the S&P. The previous close was 80.89. It climbed to $82.96 and then got slaughtered, closing at $77.43. Had you stayed the course though, and held on to your SPY, you’d be gloating at today’s close of $121.19

Let’s take a look at some of those other Inflation fighters that MarketWatch told us about last year.
How ’bout them TIPS ? Yawn you could have bought them on 2/17/09 for 97 bucks a share. They closed today at a whopping $104.12

Now what about those currency bets they told us about? Suppose you took a plunge into PST (ProShares UltraShort 7-10 Year Treasury)? You jumped in at around $54. You lost a little, but you didn’t get killed. They closed today at $51.44. So you would have lost a few bucks on that one, but think how much better you would have slept had you bought it. You wouldn’t have had to worry like the rest of us, about the demise of the the dollar.

Marketwatch did have one suggestion that panned out very nicely. PowerShares DB Commodity Index Tracking (DBC) which gives exposure to an assortment of commodities, jumped more than 32% from $19 to $24.61. We’d be happy with that year-in year-out, wouldn’t we?

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