How To Hedge The Gold and Silver You Own Via ETFs
Larry Edelson: Larry here with a quick but very important update on the precious metals. As you may well know from my previous columns, I have been calling for a further decline in the precious metals. Yesterday, gold added to its losses since its high in August of 2011 … and fell to close below a very important sell signal I have at $1,582.80.
Silver has also penetrated an important support area and a sell signal at $27.58.
Bottom line: Both gold and silver should now head still lower. The next key support levels, which I expect will fully be tested in the coming weeks and months, are the $1,380 level in gold, and $20.47 in silver.
Why are the metals falling when there’s so much central bank money printing going on, and so many hot spots around the world? The euro crisis, Cyprus, Iran, North Korea, and more?
The answer is simple and two-fold …
First, as I informed my readers many times over the last 18 months, from a purely technical point of view, gold and silver need to temporarily pull back in order to “refresh” their long-term bull markets.
They climbed almost non-stop for 11 years, and I have never seen a bull market climb for 11 straight years without taking at least a two-year breather before heading higher again.
Second, the crises that I refer to above, the ones that are on everyone’s minds, are NOT bullish for the metals. In the short-term, they are setting off a flight to cash, and a flight of capital to cash, by default, no matter where you are in the world, leads to a rally in the dollar, which is also putting downside pressure on the metals.
Fortunately, if you’ve been following my forecasts, you’re OK. You refrained from purchasing more precious metals, and you also side-stepped the pullback in mining shares, which has been staggering, with the average mining share losing over 40% of its value since the highs were recorded in the sector in September 2011.
What to do now?
First, do not be surprised if you see a short-term bounce in the precious metals. They’ve been hit hard recently. Any bounce that might occur, however, should be weak and brief.
Second, if you are not in gold and silver, or in mining shares, simply sit back and enjoy the further decline that will come. An incredible buying opportunity will arrive in the not-too-distant future. One which will set you up for staggering profit opportunities when gold and silver do bottom.
If you are loaded up with precious metals or mining shares, I would consider hedging. One good way to hedge the gold and silver you own, in physical form or via ETFs, is to purchase inverse ETFs. I like the ProShares UltraShort Gold ETF (NYSEARCA:GLL) and the ProShares UltraShort Silver ETF (NYSEARCA:ZSL). For mining shares, I recommend the Direxion Daily Gold Miners Bear 3x Shares (NYSEARCA:DUST).
Make sure you stay tuned to my Monday morning columns in Money and Markets going forward.
I am keeping an especially keen eye on ALL commodity markets, and I’ll keep you fully informed.
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended inUWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whoseaccuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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