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PreMarket Prep Stock Of The Day: SPDR Gold Trust

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PreMarket Prep Stock Of The Day: SPDR Gold Trust

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

Not only have stocks been volatile as of late, but so have the futures markets. One of the most popular futures markets is gold. For those not wanting to venture into the futures markets, a similar ETF that mimics the moves in gold is the SPDR Gold Trust (ARCX: GLD).

A Gold ETF 

As described by ETF.com, the GLD is the largest ETF to invest directly in physical gold. Its structure as a grantor trust protects investors: trustees cannot lend the gold bars. Yet taxes on long-term gains can be steep, as GLD is deemed a collectible by the IRS.

It is extremely liquid, trading at miniscule spreads.

Different Trading Hours Than Futures

One disadvantage to trading the ETF instead of the futures market: limited trading hours. While the futures market trades nearly on a 24-hour basis, GLD does not. After-hours trading takes place from 4-8 p.m. EST and premarket trading is from 4-9:30 a.m. EST.

Movement in the spot gold and futures market will not be reflected in the share price during those time periods. During those times, there are often huge price fluctuations that can work for or against your position.

Gold, Gold Stocks Not Always A Safe Haven

The primary reason investors put some of their portfolio in gold is that it is perceived as a safe haven or a hedge against declines in the stock market.

On many occasions, this turns out to be true. In the recent market downturn, almost everything was crushed — including the metals markets.

The reason is that the meltdown in the global equities markets triggered forced liquidation in all markets, including the commodities and a surge in the U.S. dollar.

Technical Take On The Gold Futures

At the onset of the massive decline in the equites, gold futures acted a safe haven, As the market began to crater in later February, the April gold futures made a seven-year high on March 9 ($1,704.30) and ended that session at $1,675.70 before the bottom fell out.

Over the next five days, it made a new low for the year by $75, falling to $1,450.90 on March 17 and rebounding to the end the session at $1,486.50.

As quickly as it fell, gold bounced back over the next six sessions, peaking on Wednesday at $1,699.30 before backing off to end the day at $1,633.50.

At this time, you have to respect the major resistance at the psychological $1,700 area.

For those investors looking for another leg higher, that is the major hurdle gold has to clear. If not, a breach the matching lows from Wednesday ($1,615.20) and as of Noon EST Thursday ($1,611) could indicate a another retreat.

Gold was trading at $1,637 per ounce at the time of publication Thursday, according to goldprice.org. The SPDR Gold Trust was 1.84% higher at $154.08. 

 

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