The Benefits of a Gold Hedge in an Equity ETF Position

“So basically, you have one dollar that’s doing the work of two dollars in a portfolio, and what that does is put the disciple around the concept of ‘when do I have gold’ and sort of have a permanent position in gold, but it is done in a capital effective way where you don’t have to take down your equity exposure long-term,” King said.

When investors try to hedge gold on their own, they may have poor timing, often getting in our getting out of the position during the worst periods possible.

“We can be our worst enemy, right, in terms of buying high and selling low,” King said.

However, the gold hedged S&P 500 ETF will take a 100% position in gold futures along with 100% in equities, allowing investors to enjoy the long-term benefits of both gold and stock growth while also gaining exposure to the negative correlation between the two assets to diminish portfolio risk during short-term bouts of volatility.

“In the short-term, you have negative or sometimes a little positive correlation but pretty much zero, but in the long-term basis, you have both asset classes going up,” King said.

For more information on the gold market, visit our gold category.