Comments on: Time For An Inverse Gold ETF?

By: howard adler

howard adler — Wed, 30 Nov -0001 00:00:00 +0000

Since gold tends to be inversely correlated with the U.S $ , a comparable trade would be to use a long dollar (U.S.) ETF to gain when Gold is declining. Power shares offers both long and short $ ETF’s. Symbol UUP Bullish $ and UDN Bearish $

By: Asif

Asif — Wed, 30 Nov -0001 00:00:00 +0000

That is an interesting thought Howard. Looking at a 6 month comparison chart of streetTracks Gold Shares ETF (GLD) and PowerShares DB Dollar Index Bullish (UUP) does show an inverse correlation but not too a great extent. I guess looking at a longer period of time would provide a better picture.

Gold has appreciated 50% over the last two years but the dollar has dropped almost 10% against the Euro in the same time period. So you are right that going long the dollar would be an alternative strategy to shorting gold.

By: Anis Haroon

Anis Haroon — Wed, 30 Nov -0001 00:00:00 +0000

The two Indian gold ETFs have not lived up to the fanfare with which they were introduced earlier this year. The charts of GOLDBEES and GOLDSHARE tell the story.

While there was some apprehension whether the ETF way of investing in Gold would work in India (which by the way is the world's largest Gold market) because of the traditional link to buying Gold as an asset (this point is well articulated here), the number of investors has increased to 25,000. I wonder if its time for an Inverse Gold ETF in India.

By: howard adler

howard adler — Wed, 30 Nov -0001 00:00:00 +0000

"Market analysts have long understood the impact of rising commodity prices and its impact on rising inflation, which in turn puts upward pressure on interest rates. Commodity prices and interest rates are influenced by the direction of a country’s currency. Because global commodities are quoted in U.S. dollars, the direction of the dollar has an influence on the direction of global commodity prices like gold. A falling currency usually gives a boost to commodity prices quoted in that currency. This is basic intermarket analysis, however the correlation relationship is not 1:1, and certainly won’t be for an isolated 6month test period. However the longer term trends do bear this relationship out. How much of the actual inverse move you capture is subject. It gives traders another choice.

By: Asif

Asif — Wed, 30 Nov -0001 00:00:00 +0000

As mentioned in a comment on ETFtrends.com in response to this post, the ProFunds Short Precious Metals (SPPIX) would be another excellent alternative to an inverse Gold ETF and would probably capture the effect much better than ProShares Ultra Short Basic Materials (SMN).

It should be noted that SPPIX is not an ETF, has an expense ratio of 1.81% and requires a minimum investment of $15,000.

By: Roger

Roger — Wed, 30 Nov -0001 00:00:00 +0000

Asif above is correct, except that if you buy it thru a discount trader such as Ameritrade there is no minimum purchase value requirement. You do pay transactions fees.

By: mumbaikar

mumbaikar — Wed, 30 Nov -0001 00:00:00 +0000

What do you think about the new ETF from WisdomTree EPI?

I would love to learn your thoughts about its almost 20% exposure to energy sector.

By: Asif

Asif — Wed, 30 Nov -0001 00:00:00 +0000

I think that the India ETF by WisdomTree (EPI) is an excellent product with greater diversification through 150 stocks when compared to the Powershares India Portfolio ETF (PIN) despite a slightly higher expense ratio of 0.88%. It gives me a chance to hedge any long positions I may have in individual stocks but with the Indian market declining more than 4,000 points since early January, I think the opportunity to short may be over in short-term. As I mentioned in the March newsletter, a potential trade I am considering is long Tata Motors (TTM) and Sterlite Industries (SLT) with a short position in either EPI or PIN.

By: wayne

wayne — Wed, 30 Nov -0001 00:00:00 +0000

I’m looking to short commodites "aig" in my ira account, but I have to use inverse etf’s. Do you know of any? I can’t find any in the us.

By: tskreddy

tskreddy — Wed, 30 Nov -0001 00:00:00 +0000

Hello Asif,

I really liked ur TWM (ultrashort rus2k) trade, nice way to hedge against recession.Is there any way to buy puts on indian index as well?
Also, I have been following your blog for over an year now and I noticed that you hit the bulls eye on all of your put options.
I think you should consider more of these ….