For Greater Profits; Go Against the ‘Crowd’!

‘THE THRONG IS MOSTLY WRONG‘ . . .

The New York Stock Exchange, May 1884

Stock Market Panic May, 1884

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%.

golddecline

Chart courtesy of StockCharts.com

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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A reminder: These posts are purely for educational purposes only concerning my own private methods of analysis and are not recommendations or advice to buy or sell or to really do anything except to observe, along with me the rhythm of market price movements and try to align ourselves with them.