The period of seasonal strength for gold bullion is approaching. Thackray’s 2011 Investor’s Guide notes that the optimal time to invest in gold bullion is July 12th for a seasonal trade lasting until October 9th. During the past 25 periods, gold bullion has outperformed the S&P 500 Index by 4.7 percent
Canadian investors can choose between six exchange traded funds that trade in Canadian dollars on the Toronto Exchange when considering an investment in gold bullion. Selection depends upon the investor’s objectives.
The most active ETF that directly tracks gold bullion is the Claymore Gold Bullion ETF . The ETF is backed by physical gold bullion. Units are hedged against U.S. dollar risk. Management expense ratio is 0.50 per cent.
iShares Canada offers iShares COMEX Gold Trust units. The Canadian fund holds iShares Comex Gold Trust units that trade on U.S. exchanges. Units are backed by physical gold bullion. Management expense ratio is 0.40 per cent. Because units are not hedged against changes in the value of the Canadian Dollar relative to the U.S. dollar, they track the price of gold in Canadian dollar terms.
Horizons offers four U.S. dollar-hedged exchange traded funds based on gold futures contracts. The basic product is the Horizons BetaPro COMEX Gold ETF , an unleveraged unit that tracks gold futures. Management expense ratio is 0.65 per cent.
The Horizons BetaPro Gold Bullion Bull + ETF and the Horizons BetaPro Gold Bullion Bear + ETF are leveraged products that track COMEX bullion futures contracts. The bull ETF is designed to generate twice the daily upside performance of the futures contract. The bear ETF is designed to generate twice the daily downside performance of the futures contract. Management expense ratio is 1.15 per cent.
Horizons also offers the Horizons Gold Yield Fund . The fund writes covered call options against one-third of its gold bullion positions and distributes the call option premiums as income on a monthly basis. Gold bullion positions are backed by gold bullion ETFs and gold bullion futures contracts. Estimated annual yield is 6.5 per cent. In addition, the fund offers partial participation in the trend of gold bullion. Management expense ratio is 0.60 per cent. Technically, the fund currently is classified as a closed end fund, but intends to convert to an exchange traded fund by July 31st 2012.
On the charts, gold in U.S. dollars at $1,482.64 per ounce is testing the bottom of a 12-week trading range between $1,473.90 and its all-time closing high at $1,563.20 per ounce. Short-term momentum indicators are oversold, but have yet to show signs of bottoming.
Preferred strategy is to watch for an optimal technical entry point in the short term for a seasonal trade lasting until October.
Don Vialoux is the author of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. He is also a research analyst for JovInvestment Inc. Reports are available at www.timingthemarket.ca and www.equityclock.com. Follow him on Twitter @EquityClock.