TBAR Offers Alternative Gold Exposure

August 13, 2013

Short- and midterm gold investors, there’s an ETN that could be perfect for you.

Gold is a peculiar asset: Despite its volatility, it’s commonly perceived as a “safe haven”—the two don’t usually go together. Investors with a short- or medium-term horizon are in a pickle regarding whether to own gold.

On one hand, gold has a strong track record of retaining value over long periods. On the other, it’s a volatile asset whose value retention over short horizons is shaky at best.

Most literature on the topic tends to be at one extreme or the other: Critics argue gold has no intrinsic value whatsoever, while gold bugs point to gold as the only “real” money. The literature tends to neglect the middle ground—where most investors fall.

Most people recognize they can’t actually do anything with their gold—they can’t eat it, farm it or build much of anything from it—but they also recognize its effectiveness as a store of value in crisis periods (banking panics, currency crises).

I’m not writing to debate the merits of gold but to summarize the discourse and suggest a product that might help investors get the best of both worlds.

Trade-off No Longer

The RBS Gold Trendpilot ETN (NYSEArca: TBAR) could help investors have their cake and eat it too. Depending on gold’s current price relative to a rolling moving average, TBAR is either fully exposed to gold or fully exposed to three-month Treasury bills (cash-equivalent).

The fine print: When the price of gold is above its 200-day moving average, the note tracks the returns of gold and only switches to cash exposure two days after the price of gold has been below its 200-day moving average for five consecutive days.

For example, TBAR most recently swapped gold exposure for T-bills in February and hasn’t gone back to gold yet. Since then, gold is down roughly 15 percent, while TBAR is relatively flat.






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