How to Profit from Gold ETF Trading

Generally speaking, gold may not move in the same direction with the general market. Many factors would impact on the movement and prices of gold. Investors need some extended knowledge on and special attention to the specific sector ETFs, such as gold ETFs.  Investors need to comprehend the correlation between gold and bond markets, functions in the gold standard, safe havens when war or disaster occurs, its usage in industry, gold price correlated with QE, etc.  

For example, on 8/27/2013, the stock market slumped on the news that the West might strike Syria. However, gold futures gained 1.6% and continued to work as safe havens during world chaos or traumatic current events.  This geopolitical uncertainty pushed gold to a 15-week high. On the other hand, on 9/10/2013, Syria might hand over the chemical weapons, the fear and worries of war diminished, gold price dropped significantly.

Often time, gold price does not move in the same direction with the general market. ETF GLD mirrors the price of gold bullion.  GLD dropped from a high in October 2012. However, the general market got big boosts since then.  There was more than a 40% spread between GLD and the S&P during October 2012 and June 2013.  The gold price recovered a little bit after the Fed affirmed that there was no pre-set date to taper bond purchasing. This example shows the gold price highly correlates with the economic stimulus program (liquidity supply). Instead, the economic condition, especially unemployment rate, will be closely watched and an intelligent decision will be made based on it.

          If investors would like to trade some ETFs in certain sectors or categories, but the expertise which is needed is beyond their reach, ETFs that track or mirror the general stock market might be better choice. If you really need to trade on gold, you might want to follow the advice from the Smart Money.

For example, on 12/5/2012, Goldman Sachs said that gold had reached its peak and the real rate would rise. 

The ETF GLD, made record highs in October 2012. On 12/5/2012, Goldman Sachs declared that gold had seen its highest level.  ETF GLD was closed at 163 that day. It went up a little bit before it drifted all the way down until 6/27/2013. The closing price was 115 and the bleeding finally stopped.  This was equivalent to a 29% drop.

            Thanks for your visiting and reading.