Continue reading...When the equities market is in distress, is taking a long position in gold a profitable strategy?
The conventional thinking among pundits supports taking a long position in this precious metal as a way of mitigating strong losses in the equities market. Fortunately, many active market participants prefer to run the numbers before acting on this long held assumption about market direction. This study attempts to prove or disprove this form of hedging strategy by performing an analysis on two active funds: the spiders (SPY), which are the best representation of the equities market (averaging 205 million shares per day), and the SPDR Gold Shares fund (GLD) with 15.7 million shares a day serves as our dependent variable.
In this study, our operational definition of a setback – within the previous 300 trading days (Apr 11, 2011 to Jun 19, 2012) – is a daily loss in excess of $1.00 in the spiders.
The findings show 65 days with a $1.00-plus loss in the spiders. On these days, were...
Last edited by a moderator: