The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and other gold exchange traded products such as Rex Gold Hedged S&P 500 ETF (GHS) and Rex Gold Hedged FTSE Emerging Mkts ETF (GHE) were supposed to be winners if Donald Trump pulled off the upset in Tuesday’s presidential election.
Trump did just that, but gold ETFs traded slightly lower and some technical analysts believe the yellow metal could face more downside as financial markets potentially realize that the specter of a Trump presidency is not as grave as previously thought.
Related: Demand Supports Gold ETFs
“Looking at a long-term chart of gold dating back almost a decade, Piper Jaffray technical analyst Craig Johnson sees a downtrend that began in 2011, when gold hit record all-time highs. Based on that downtrend, Johnson believes that gold’s rally this year is really just temporary and investors should be careful of an impending drop in gold prices — even if Donald Trump were to win Tuesday’s election,” CNBC reported in advance of Tuesday’s election results.
As ETF Trends reported earlier this week, Democratic challenger Hillary Clinton may have actually been the preferred victor for gold ETFs because historical data suggest gold performs better when Democrats are in the White House.
“While volatility and fear generally have supported gold around election uncertainty (in fact, this year through Oct. gold in the index is posting its 6th best year ever going back to 1979 (+19.3 percent) and is on pace for its best year since 2011,) gold does significantly better under the historical Democratic presidencies, adding 24.3 percent on average in Democratic terms versus Republican ones since 1978,” according to a recent note by S&P Dow Jones Indices.
Risk-tolerant traders can profit from a possible decline in gold with inverse ETFs. For example, the ProShares UltraShort Gold (NYSEArca: GLL) provides a two times inverse or -200% daily performance of gold bullion.
Alternatively, ETN options include the DB Gold Double Short ETN (NYSEArca: DZZ), which tries to generate the twice inverse or -200% return of the daily performance of gold; DB Gold Short ETN (NYSEArca: DGZ), which tries to reflect the inverse of gold price movements; and VelocityShares 3x Inverse Gold ETN (NYSEArca: DGLD), which tries to reflect the performance of three times the inverse or -300% daily performance.
For more information on the gold market, visit our gold category.
SPDR Gold Shares
Tom Lydon’s clients own shares of GLD.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.