Gold ETF | A Short Gold ETF For the Bears

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A Short Gold ETF For the Bears

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For some gold bugs it’s hard to imagine buying a short gold ETF, especially with such a strong gold market these past few years.  Though it’s difficult right now to see a need for an inverse gold ETF, remember not that long ago gold was not a strong performer to say the least.

Now I’m not saying that gold is about to take a nose dive into bear market territory but it has been on a tear lately and could be due for a correction of some kind.  You know the saying, “what goes up must come down”.  Well that’s not always true in the investing world but like all common sayings there is “some” truth to it.  No investment goes up all the time and though it seems the gold price is trending up long term, it still can come down a number of times as it corrects in price from over exuberance in the gold market.  It is at these times where short gold ETF funds can be become a profitable tool so long as they’re utilized correctly, which comes with experience and technical analysis skills.

Gold is money and because the fiat currencies are being devalued, in particular the USD, gold continues to gain value as a hedge against the risk of government mismanagement and over spending.  Gold has and always will have value and during times of uncertainty, investors and people in general, snatch up what they consider to have value, especially gold.  This is one of the reasons why gold has been doing so well lately.  All the turmoil, uncertainty and fear throughout the global markets has served as the primary catalyst for gold’s rapid rise in value.

Having said all this, eventually after all this turmoil is behind us, gold will begin to level off over the long term and may even decline just as rapidly as it had gained.  Gold will always hold value but it’s a commodity like anything else and at the end of the day its value is determined by supply and demand.  So if gold starts its decline, you’ll want to take advantage of this, just as you hopefully did on its way up.  The best way to profit from a decline in gold is to buy an inverse gold ETF or ETN.  Since they are exchange traded funds they can easily be bought and sold freely on the stock market making them ideal for short term trades.

The following is a list of the most commonly traded short gold ETFs on the major stock markets:

Short Gold ETF (GB: SBUL) – Traded on the (LSE) London Stock Exchange the SBUL short gold ETF trades inversely to the current gold price.

DB Gold Short ETN (DGZ) – The DGZ is an ETN traded on the NYSE that is also priced inversely to the gold price so if gold goes down 1%, DGZ will go up 1%.

DB Gold Double Short ETN (DZZ) – Similar to the DGZ, except that it is leveraged 100%, and thus trades at double the inverse of gold.  This gold short ETN can be thus be very profitable if you’re on the right side of the trade.

ProShares UltraShort Gold ETF (GLL) –  This double short gold ETF also trades at twice the inverse of current gold prices, only it is an ETF (vs. ETN).

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