There are two ways to insulate yourself if gold turns sour: ETFs that short gold and a solid trend following plan.
Shorting. You can use short ETFs in a couple of ways: either as a hedge to a current long position on gold or as a straight short play, if you believe gold’s rally is done. Shorting is not for everyone, though. Read our special report on the subject and make sure it’s right for you before you buy.
ETFs that short gold include:
- ProShares Ultra Short Basic Materials (SMN)
- ProShares Ultra Short Gold ETF (NYSEArca: GLL)
- PowerShares DB Gold Double Short ETN (NYSEArca: DZZ)
- PowerShares DB Gold Short ETN (NYSE Arca: DGZ)
Trend Following. When investors don’t have a plan for getting in and out of the market, the tendency is to defer to their emotions and “gut feelings.” If you’ve been burned by your emotions in the past, you know this. This is why we recommend a simple strategy for buying and selling. The one we use is trend following, which relies on the 200-day moving average as a signal. Using such strategies helps you be in position to participate in potential long-term uptrends while having you out before you’ve ridden a position to the bottom. [A Trend Following Plan for All Seasons.]
Tisha Guerrero contributed to this article.