Gold’s Safe Haven Status Under Question: 3-Year Data Breakdown + Trade Ideas
Gold’s Safe Haven Status Under Question: 3-Year Data Breakdown + Trade Ideas
Is Gold the Safe-Haven Asset? Not so much...
The story goes that when equities fall, investors tend to flock to gold, driving prices up while stocks fall. Over the past three years, the data shows the opposite.
See below:
Over the past three years, gold hasn’t consistently provided the hedge that many investors expect. In fact, many of the biggest down days for equities, gold also weakened.
We ran the numbers and show the results below:
The takeaway? As the S&P 500 declines deepen, gold is less likely to rise. In other words, gold’s “safe haven” hasn’t played out over the past few years.
So why has this been true? No one has a definitive answer, but we throw a few reasons below:
- Higher interest rates - with cash and bonds offering yields, the opportunity cost of holding gold has gone up
- Shifts in popularity - Crypto, treasuries, Pokémon cards (?), have drawn some of the “safe haven” flows away from gold
Or simply…uncertainty - Heck, we just aren’t really sure. No one really knows. Gold’s hedge may simply not be as automatic as many assume.
5 ways to go short - tastylive Methodology
Strategy Comparison & Risk Management| STRATEGY | HOW TO PROFIT | TASTYLIVE TRADE MANAGEMENT |
|---|---|---|
| 1. SHORT STOCK | Stock declines Max profit if stock → $0 |
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| 2. SYNTHETIC SHORT | Dollar-for-dollar as stock declines below strike |
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| 3. SKEWED IRON CONDOR | Stock stays below short call or moves lower in range |
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| 4. SHORT CALL SPREAD | Stock stays below short strike at expiration |
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| 5. LONG PUT SPREAD | Stock moves below long strike toward short strike |
|
Two Trade Ideas
IWM ($232.74) Call Broken Wing Butterfly (OCT) $1.42 Debit
Small caps have shown strength with IWM trading at $232.74 and implied volatility at 21%. With no downside risk and a max profit of $342 possible if IWM pins at $240 at October expiration, this broken wing butterfly offers an asymmetric risk/reward. The trade structure - buying 1 IWM 238 Call, selling 2 IWM 240 Calls, and buying 1 IWM 248 Call (all Oct-17 45 DTE) - creates a neutral to bearish position that profits in the $240 zone while limiting risk to just the $1.42 debit paid.
SLV ($37.04) Jade Lizard (OCT) $1.70 CreditWith SLV trading at $37.04 and implied volatility at 29.2%, this jade lizard collects $1.70 in premium by selling the Oct-17 37 Put for $1.33, selling the Oct-17 37.5 Call for $1.23, and buying the Oct-17 38.5 Call for $0.90. This bullish to neutral position has a 68% probability of profit with max profit of $170 if SLV stays between the short strikes at expiration. The trade has no upside risk above $38.50 due to the long call protection, while the max loss of $3,530 would occur on a significant downside move. With theta of 1.557 and 45 days to expiration, time decay works strongly in your favor.
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