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Turkey, Vanguard and Gold

Lemon Slice
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Turkey, Vanguard and Gold


Postby CommissarJones » September 18th, 2018, 10:18 pm

More testing times in the gold market, with the price down about 7.5% since the end of May and dipping below $1,200 an ounce in August. However, I wonder whether it might be the case that a pair of one-off events - the Turkish currency crisis and Vanguard's reorganisation of a precious metals fund - have pulled the market down to its current oversold level.

Bloomberg ran a timely story recently about how Turkish banks cashed in gold reserves amounting to as much as $4.5 billion in three months from mid-June to stave off a liquidity crisis. Gold holdings reported by the central bank fell by about 20%. And Vanguard announced the restructuring of the $2.3 billion fund on 27 July, saying that the new strategy would take effect in late September - i.e., until then much of the current portfolio presumably is being sold off.

Looking at a couple of charts, it's interesting to see that gold futures began their latest leg down in June, after a few weeks of sideways trading in May. GDX, meanwhile, was reasonably steady in June and even touched an eight-week high in early July, before slumping over the rest of the month and then falling off a cliff in August. With Vanguard presumably not planning to reorganise any other resources funds and some welcome indications of efforts to put things right in Turkey, i.e. the central bank raising rates, I wonder if gold might finally catch a break in the fourth quarter.

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Re: Turkey, Vanguard and Gold


Postby Lootman » September 24th, 2018, 9:10 pm

I do wonder if the Vanguard capitulation is a classic signal of a bottom as well. The value looks compelling to me, but of course I've said that before and been dead wrong, and gold has been making fools of folks for centuries now. My best ideas right now:

CEF - the Canadian closed end fund that holds physically segregated gold and silver which investors can have transferred to their own depository upon request

FNV - They don't do the messy job of mining but rather buy the royalty rights to bullion still in the ground. It's like storing gold in your bunker only you get paid 1.5% a year for it instead of paying for custody and security. Wheaton has the same idea, but just for silver.

GDX and GDXJ - ETFs for miners and junior miners. Will whiplash upwards when the turn happens. Best done via options IMO.

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