Removing Volitility In A Gold Position (AU; ETF: GLD)

Includes: AU, GLD
by: Roger Nusbaum

Roger Nusbaum submits: On Friday, during the last few minutes of the trading session, I took some volatility and exposure off the table for my clients who own gold.

Some clients owned Anglogold Ashanti (NYSE:AU), some own the gold ETF (NYSEARCA:GLD). I started buying AU several years ago for gold exposure. As it moved higher, I bought it only for more aggressive clients. Over the last six months it has dramatically outperformed GLD:

It feels like gold may have topped out, for now or forever, you can take your pick. If gold falls back to $480 I am afraid that I would give back all of the advantage I picked up with AU. After the great run gold has had, I think this is a good time to remove beta and reduce exposure.

I sold AU around $58.40 and bought the exact same share amount of GLD around $54.80. The net reduction in dollars exposed was about 6%. It is a little tougher to dig up exact volatility numbers right now but the dip at the far right side of the chart shows what I mean.

Update: This question just came in:

I'd like to know your reasoning for even staying with GLD if you think gold is topping out?

I will always maintain exposure to gold because it serves as a counter strategy to stocks. Its low correlation to equities reduces overall portfolio volatility. If something truly bad happens in the world, gold will likely go up so I want some exposure. I have merely altered that exposure.

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