Dow Gold Ratio

I consider long GLD/short SPY the "control case", so to speak, for that investment thesis. I hadn't thought about the IRA issue, so bad on me. Although if you went long GLD in your IRA and short SPY in your regular account it might work out to a tax advantage, since you are likely to lose money on the short over time...? Just speculatin'.

I also wanted to look at non-leveraged ETFs for comparison because leveraged ones have some of their own problems with failing to track the magnitude of change or even its direction... if you're not familiar with this I can start another topic in the ETF forum.

I'll try to test some other variations on that theme later. Anyway, I agree that for an IRA, FSG may be more appropriate. The only thing that concerns me is how new the fund is, so I would watch its performance closely and keep it on a leash. As with all things.

The company offering that ETF, by the way, offers several unusual leveraged pairs. I expect somebody to offer a long gold/short silver ETF, and vice versa, soon.

Eric - this is a nice setup, have you considered buying calls on these ETFs?

I'm still getting my feet wet with options.  I like the limited downside risk of buying a call (i.e. the money you put up is all that you can lose, but upside is unlimited).  Challenge is determining the proper timing and strike price.

never had a clue about how to approach this, although I've been aware of the concept in general.

Thanks to all for sharing your expertise!!!!

Eric,

Nice chart.  Looks familiar---

Given the phase shift on the nikkei:gold & dow:gold chart that I posted earlier in this thread. And given the fact that the nikkei has been going down for over twenty years, is widely unloved, and in fact has made a lower bottom than its 1980 nikkei:gold ratio (at least according to Gold versus Paper). Perhaps being long gold, long japan, short USA will be a good strategy.

I'm not a big fan of the EWJ etf because it's composition is quite different than a general nikkei tracker. But luckily, there is a new Nikkei 225 ETF coming out shortly which ought to behave more along the lines of SPY, DIA, etc. It will be under the ticker NKY.

Here is the story: http://www.indexuniverse.com/sections/news/9377-us-listed-nikkei-225-etf...

For more on why Japanese equities might be a buy right now, Mish did a piece not so long ago here: http://globaleconomicanalysis.blogspot.com/2011/05/meeting-with-saxo-ban...

Here is a snipbit:

"I do like Japanese equities and also gold, but the latter can correct significantly at any time.
Steen also likes Japanese equities for the same reasons that I see: After 20+ years of deflation, many Japanese corporations are trading at book value with little or no debt on their balance sheets. That is in distinct contrast to the equity valuations elsewhere.
One difference of opinion I had with Steen is that I am bearish on the Yen, but he is bullish, at least for a while.
There were about 60 people in the room and I asked how many had investments in Japan. Only a few hands went up. I asked the same question at a recent gold conference show I attended and only one hand out of 120 went up.
The best time to buy something is when everyone ignores the sector. The same was true of gold in 2000."

Additionally, one could intermittently short the dollar or the euro to maintain gold exposure in a rising price environment. Darien Wealth went for a strategy like this not to long ago. Here is a link to that piece: http://darienwealth.com/post/5262325754/positioning-for-the-inevitable-d...

Any thoughts?