‘THE THRONG IS MOSTLY WRONG‘ . . .
Our latest and best examples for this are the precious metals markets.
GOLD and SILVER were hotly promoted and discussed endlessly on forums and financial talk shows. Ads selling gold and silver coins, even now, can be found almost everywhere on the web.
What’s wrong with this picture?
There’s way too many sellers. In short, it appears that, at these high prices, everyone’s already bought who’s going to buy so there’s no where to go but down (and way down at that!). Most recent purchasers are under water now with nowhere to go.
For quite some time, I’ve expressed that Gold and Silver are merely commodities not money as widely promoted today. As commodities, they’re subject to the cycles OF commodities and that cycle is now down and has been for some time now. The super peak for this cycle has come and gone unnoticed by the masses who now await and fully expect it to go higher.
If one wishes to hold gold or silver as a hedge and not an investment, then, price is largely irrelevant.
However, as this is an educational site for inquisitive investors and those seeking to learn where profitable opportunities may exist in today’s markets, let’s take a turn off from the main highway where the crowds are and gain some insight into where the profit could be made from Gold even during it’s slide downwards in price for these last 9 months.
Prices for cash Gold since last September-October have declined by over 30%.
That’s a negative, asset-depleting figure.
THERE’S A BETTER WAY TO TAKE ADVANTAGE OF FALLING MARKETS
In a world with so many over-bought markets, one needs a strategy to take advantage of declining markets more than ever before.
Fortunately today, there are short-ETFs (Excahnge Traded Funds) and ETNs (Exchange Traded Notes) which allow one to participate and profit from declining markets and some of these are leveraged 2 or 3-times.
Here’s a list of some example stocks for the GOLD market (there are others as well):
- Short, non-leveraged: DB Gold Short ETN symbol: DGZ
- Short 2x leveraged: ProShares Ultra Short Gold ETF symbol: GLL
- Short 3x leveraged: VelocityShares 3x Inverse Gold ETN symbol: DGLD
To view what could have been the alternative returns instead of standing back and losing 30% on Gold’s decline, take a look at the charts below for all three of these above-listed stocks . . .
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Above is our first example of what could have been done instead of sitting on a pile of gold coins in hope for the future.
DGZ is an unleveraged short-position ETN which can be easily purchased on the exchange.
Back when the first alerts were given that GOLD was weakening (September-October), DGZ could be purchased for only around $11.00 a share.
It’s rise since then has exceeded Gold’s and was around 42% as of this posting.
The next chart below is for GLL which is a double-short position against GOLD with 2x leverage.
This ETF has performed wonderfully under the circumstances and down trend of the Gold market
As of this writing, GLL has produced a gain of over 97% from a short position in Gold.
A performance that can only be described as (do I dare?) . . . Golden.
Still, there’s yet another stock type that was available for those more accustomed to risk and the rewards that can come with it. I’m speaking now of the triple-short Gold stock shown in the chart below for DGLD.
This stock was THE big winner from the decline in Gold.
DGLD returned over 165% so far from following Gold’s declining trend.
These alternatives as shown do require one to have a very good tool for determining market long-term direction.
Those of you who have the Excalibur Method already have the method of detecting major long-term trends very early.
This post is just a pointer towards the direction of which instruments can help you to take advantage of those insights. No one has to stand by and get beaten by a market. There’s always the opposite direction to trade and profit to make while the crowd is distracted by emotion. – George [/private_Free Observers Level Membership] [/private_Level 2 Elite Membership]