An exchange traded fund programmed to track the spread between gold prices and U.S. stocks vaulted higher as its strategy was perfectly in step with Tuesday’s market action.
FactorShares 2X Gold Bull/S&P 500 Bear (NYSEArca: FSG) was up nearly 10% in recent trading.
Manager FactorShares describes the fund as a leveraged spread ETF designed for investors who think gold will increase in value relative to large-cap U.S. equities in one day or less.
The fund seeks to track the spread, or the difference in daily returns, between the precious metal and U.S. equities primarily by establishing a leveraged long position in gold futures and a leveraged short position in S&P 500 futures, according to the prospectus. [ETF Lets Traders Short Stocks, Go Long on Gold]
“Like virtually all leveraged funds, this product is suitable only for sophisticated traders willing to monitor their positions and trade daily,” says Samuel Lee at Morningstar in an analyst report on the ETF. “We emphasize that these are trading vehicles. The fund is highly leveraged, so it’ll be volatile.”
The iShares S&P 500 (NYSEArca: SPY) was down 1.6% in afternoon trading Tuesday after the U.S. debt deal cleared the Senate. Markets were unnerved by lingering debt issues in the Eurozone. SPDR Gold Shares (NYSEArca: GLD) rose 1.6% as gold prices hit a new nominal high.
FactorShares 2X Gold Bull/S&P 500 Bear
Full disclosure: Tom Lydon’s clients own GLD.
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.