Market Overview

Safe Haven No More: ETFs For Gold's Decline


Paradise has been lost. At least for the gold bugs. We're not saying the decade-long bull run in gold is over, but there are ominous signs to that affect. Take the case of the SPDR Gold Shares (NYSE: GLD) for example.

The world's second-largest ETF by assets is below its 200-day moving average on its weekly chart for the first time since early 2009. The point and figure chart for the ETF indicates a decline to $136 is possible and, not surprisingly, the outlook is no better for GLD rivals such as the iShares Comex Gold Trust (NYSE: IAU).

Maybe the yellow metal is taking a rest. Maybe it's about to reverse trend and enter a legitimate bear market. Time will tell and we'll tell you about some of the ETFs you need to know about for an extended gold slide.

Potential Winners

Direxion Daily Gold Miners 3X Bear Shares (NYSE: DUST): Apparently, we were ahead of the game by touting this ETF back in September. Back then, DUST was double leveraged, but it recently added some juice and moved to the triple leveraged neighborhood. Put it this way, if gold mining stocks and ETFs struggled to rise with gold going higher, they're not going to go up with gold going down. DUST has a lot of upside in it, perhaps even 10% over the next few days.

PowerShares Dollar Bullish (NYSE: UUP): We're having a hard time believing it, too. Two endorsements for UUP in the same day. Well, if gold isn't a safe have right now, then what is? Obviously the U.S. dollar.

ProShares UltraShort Silver (NYSE: ZSL): The experts say gold drags silver higher. Logically, that means it would drag the white metal lower. The bad news is the iShares Silver Trust (NYSE: SLV) and the ETFS Physical Silver Shares (NYSE: SIVR) need no downside assistance as both are down more than 23% in the past three months. That means it's time to dial up ZSL, which can ring up gains of 5% or more in a single day.

WisdomTree Managed Futures ETF (NYSE: WDTI): As we've been telling you lately, the WisdomTree Managed Futures ETF has short positions in gold and silver futures. Obviously, that makes this unheralded ETF worth a look here.

Potential Losers

Market Vectors Junior Gold Miners ETF (NYSE: GDXJ): Reference the part on DUST for information, but consider this as well: If GDXJ violates support at $24, its probably going to $20 for the first time since early 2010. By the way, this probably isn't the environment for small-caps of any stripe.

CurrencyShares Australian Dollar Trust (NYSE: FXA): The Aussie dollar is a commodity currency and the commodity it has shown a historical correlation with is gold. Typically, gold moves first and the Aussie dollar responds. That could mean more declines for FXA are on the way, especially if support at $98 is violted.

iShares MSCI South Africa Index Fund (NYSE: EZA): EZA did not make our list of emerging markets ETFs to watch next year. Now we might have a really good reason for that. South Africa is a major gold miner and EZA has been acting like a mining ETF, slumping as gold has gone up. In fact, EZA is down almost 21% year-to-date even as the SPDR Gold Shares is up more than 15%. That's not a good sign.

Action Items: Traders that believe gold is going to continue falling should consider the following trades: Long DUST, long the PowerShares DB Gold Double Short ETN (NYSE: DZZ), long UUP.

Traders that are willing to bet on a rebound for gold should consider the following trades: Long IAU, Short ZSL, long the ETFS Physical PM Basket Shares (NYSE: GLTR).

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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