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SGOL Weekly: The Best Way To Play The Recessionary Environment And The Epic Policy Support In The U.S.

Orchid Research profile picture
Orchid Research


  • SGOL has consolidated slightly recently, reflecting a slowdown in investment demand caused by easing investor fears, which, in turn, has resulted in a pick-up in long-term U.S. real yields.
  • Given the negative price seasonality for gold prices in May, it wouldn't be a surprise should gold prices experience some temporary weakness.
  • This is especially true considering that long-term US real rates could move still higher on growing expectations the re-opening of the economy and the resulting rebound in economic activity.
  • Taking a step back, however, we think that the recessionary/depressionary macro environment and the epic monetary/fiscal policy support will underpin a downtrend in US real rates.
  • Against this, we maintain our long-term outlook for SGOL.

Investment thesis

Welcome to Orchid's Gold Weekly report. We discuss gold prices through the lenses of Aberdeen Standard Physical Gold Share (NYSEARCA:SGOL).

SGOL has consolidated slightly in recent days, reflecting a slowdown in investment demand caused by easing investor fears, which, in turn, has resulted in a pick-up in long-term US real yields.

Source: FRED, Orchid Research

While a further increase in long-term US real rates cannot be ruled out in the immediate term, we think that the current macro environment and the epic fiscal/monetary policy support in the US will, ultimately, result in a sustained downtrend in US real rates in the coming months. This is, ultimately, bullish for SGOL.

For May, we caution that gold's price seasonality tends to be slightly negative, inducing us to be prepared for a potential dip in the gold price.

This would be a buying opportunity, in our view, considering that our overarching view is that the COMEX gold price should hit an all-time high late in 2020/early in 2021.

In the same vein, we expect SGOL to reach an all-time high either late in 2020 or early in 2020.

Source: Trading View, Orchid Research

About SGOL

For investors seeking exposure to the fluctuations of gold prices, Aberdeen Standard Physical Gold Share is, in our view, a great long-term investment vehicle, with a small expense ratio of 0.17%.

The average spread over the past 2 months is at 0.07%, suggesting that the ETF is also well suited from investors with a short-term horizon.

Further, the legal structure of the fund prevents trustees from lending the precious metal held in the Fund.

The Fund physically holds gold bars in vaults based in London (U.K.) and Zurich (Switzerland) custodied by JPMorgan.

SGOL's assets total $1.75 billion.

Importantly, SGOL, which was launched in September 2009, tracks closely its benchmark - the

This article was written by

Orchid Research profile picture
Orchid Macro focuses essentially on commodity and macro analysis, using quantitative tools. We conduct research on supply and demand trends across commodities. We also analyze global macro dynamics and their reflexive interactions with the commodity complex. With 10+ years of experience in macro and commodity research, Orchid Research seeks not only to deliver unbiased views and accurate forecasts, but also to identify trade opportunities generating α.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Our research has not been prepared in accordance with the legal requirements designed to promote the independence of investment research. Therefore, this material cannot be considered as investment research, a research recommendation, nor a personal recommendation or advice, for regulatory purposes.

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Comments (2)

gastro4 profile picture
Have a small position. Wondering your thoughts on GLDI?
This ETN picks up an old idea: Selling call options against the gold position to generate an income. This works well in a volatile market. You should look it up on etf.com. The high expenses (0.65%) will likely take quite a bite from profits.
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