Market Overview

What to do When the Bears Come Calling for Gold

Gold has been on an impressive bull run lately. It's been up consistently for two years (mirroring the recession) and is currently trading in the $1,550 range. It is up so much that, if you bought gold before the recession, you could likely sell now and retire.

Eventually, the commodity will have to come back to Earth. Experts disagree on what will kill gold, but it seems certain that there will be some pullback on the price of gold. If and when that happens, what are some places you might want to move your money to, whether you're currently invested in gold or not?

Action Items

Bullish: Traders who believe that current gold prices are merely a floor to future values may want to consider the following trades:

  • (NYSE: GLD) Gold ETFs like GLD make a lot of sense for investors who see gold continuing its trend upward.
  • (NYSE: SLV) might also make sense for gold bulls, as the two metals might trend together. This is doubly true if gold is rising because the dollar is still in trouble, or if the U.S. economy is still in decline.
  • (NYSE: UDN) is a bearish dollar ETF, giving you exposure to a declining dollar. If gold is still going up, you can expect that the dollar is likely trending down, making UDN an interesting choice.

Bearish: Traders who believe that current gold prices are insane and due for a (possibly steep) decline may consider taking positions in the following:

  • (NYSE: UUP) is always an interesting play for dollar bill bulls. You know the deal — if gold is going down, the dollar is almost always going up.
  • Alcoa (NYSE: AA) could potentially benefit from any decline in metals, as the decline would almost certainly lead to decreasing costs for aluminum and other metals.
  • (NYSE: SPY) trends with the overall market, which makes it a good play for gold bears. If gold is trending down, the U.S. economy could be in good shape again, which makes SPY a possible good investment opportunity.

Posted-In: News Commodities Currency ETFs Forex Economics Markets Trading Ideas ETFs

 

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