Is GOLD a good HEDGE for STOCKS?

Hi, welcome to this short video. Today I don't want to discuss much about the situation of the stock market because if you watch my previous videos, you know, already we have discussed and you should not be surprised to see this big drop. The only interesting thing I want to mention is that yes, here it seems the price is bouncing on this level. So we have to see if this bounce is a true bounce and the price will keep going up or if the downtrend continues. But today I want to discuss with you a point that I realized I forgot to mention last time. And what's that? Remember when I was discussing the drop in the stock market, I said that if you have already positions in an investor portfolio, you may want to hedge. So basically buy something that is moving opposite to the stock. Meaning to say I can buy an inverse etf, or I can do short selling, or I can use options if I know how to do that. But then I realized that many people could have had this idea of okay, since stocks are going down, it means that gold is going up, right? Because there is this narrative that stocks and gold moves, they move in the opposite direction. And this is true most of the times, but not always. If you see this kind of draw, you would expect the gold price to go up parabolically. But let's see what actually happened. So if we go here to the GLD ETF that is tracking gold, you will realize that actually the gold price went down as well. Maybe went down less than the stocks, less than the S and P, but it still went down. So this idea of okay, stocks goes up, gold goes down is not actually always true. It may be true sometimes, but not always. And this is a perfect example of that. So if you buy gold hoping to hedge, actually you lose money on your stocks and you lose money on the gold as well. Speaking of gold, I think now we are for this ETF very close to a nice support level. We have horizontal line 50 moving average. So this could be a possible level to watch if you want to enter. But that's another story. What I wanted to discuss with you is really this idea of buying uncorrelated assets to edge is a good idea. Just remember that those correlations change over time. In some periods, gold and stocks can move opposite direction, but in other periods they can move the same direction. So you may not actually hedge. Of course, if you start to buy other asset classes that are also usually uncorrelated, you have higher chance to hedge. For example, let's say that in together with gold, you also buy bonds like the TLT ETF tracking the 20 years bonds and then yes, in this case the price have been going up. So this would have been a better way to hedge. But it doesn't mean that is always the case. You may have situation where stocks are going up and bonds are going up but gold is going down. You may have situation like here where stocks and gold are going the same direction and bond is the opposite. So that's why if you create a portfolio and you want portfolio that is well diversified with asset class that hedge each other, you should have a few, not just two and hoping that because most of the time they move in the opposite directions, this means that all the time it will be like that. So that's all for this video. I just wanted to mention this because it's a possible strategy that you may use for hedging and so now you know the risk and how it works and for the stock market I think next week we will see if this support level holds and then we see a bounce or this downtrend will continue to a new bear market with that. Thank you for watching. Subscribe to this channel if you are not a subscriber, hit the like button if you like the video and as usual if you have any comment just write and I will reply and with that see you next time.