"GLD tracks the price of physical gold bullion. It generates no income, pays no dividends, and produces no cash flow. The fund holds gold bars in a vault and charges a 0.40% annual expense ratio. Your return depends entirely on whether gold prices rise or fall."
"President Trump's nomination of Kevin Warsh as the next Federal Reserve chair triggered the selloff on January 30. Markets interpreted Warsh as a more hawkish, independent voice unlikely to slash interest rates aggressively. That strengthened the dollar and made non-yielding gold less attractive overnight."
"But the mechanics made it worse. Speculators had piled into gold call options and leveraged futures contracts during the rally. When prices broke, forced selling accelerated the decline. The Chicago Mercantile Exchange then hiked margin requirements over the weekend, requiring traders to post more collateral and triggering another wave of liquidations. What started as a policy shift became a leverage-driven rout."
GLD is an exchange-traded fund that tracks the price of physical gold bullion and generates no income, dividends, or cash flow. The fund holds gold bars in a vault and charges a 0.40% annual expense ratio, leaving returns fully dependent on gold price movements. Gold functions as insurance against currency weakness, inflation, or financial stress, rallying when fears intensify and falling when confidence returns. A nomination perceived as more hawkish strengthened the dollar and made non-yielding gold less attractive, triggering a rapid selloff. Speculative call-option bets, leveraged futures, and weekend margin hikes amplified forced liquidations. Treasury yields near 4.24% create a stark income-versus-insurance tradeoff for retirees.
Read at 24/7 Wall St.
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