Since I am not sure what exactly the market will “hate” next week or in the weeks to come; it seems to change by the day; I want to build up ‘protection’ (hedging) another way, and we’ll use gold. Gold is more of a sentiment indicator than anything to do with fundamentals. During this market rebound the Gold ETF (GLD) has not really fallen much – that is not a good sign. Remember, gold is the ultimate Armaggedon trade and in the past an inflation hedge (although it appears black gold has taken that mantle since last fall). So with the “all clear” signal once again launched by CNBC (“it’s all priced in”) it seems curious that gold is not correcting. Frankly with all the paper money being printed off (and or proposed) along with my assumption of yet another stealing of your grandchildren’s future (i.e. the ‘2nd stimulus plan’ I believe will be coming around election time) I am surprised gold is not $1200-$1400

Instead of the ETF I’ve used Kinross Gold (KGC) in the past and it has done well for us, so I am going back to the well. Since this is a “sentiment” trade (to me) if the market strengthens this trade should fail, and vice versa. After spiking north of $25 at the height of the bailout talks (that was just this past weekend and Monday folks – even though it feels eons ago), it has now retraced below $23 and we’re adding it here in the the $22.80s. If it breaks down below $21.50 (or the Gold ETF breaks down) we’ll most likely be out.

In this case I won’t mind if this trade does not work because it should mean other things in our portfolio are. So while this is a “long” position technically, mentally I consider it a “short”/hedge. Note – I am not a gold bug, nor a gold expert and buying a gold miner instead of the metal straight up can always be an error. But directionally this will either provide a hedge during further downside or not work if the market rebounds. So we might be out of this in a few days, a week or it might be a few months.

I debated getting into Kinross at the end of June but didn’t pull the trigger (down at $21) [Jun 26: Gold. Back from the Dead?] We threw what was left of the cash we raised today, that had not been applied to index shorts into this position, and created a 2% stake in Kinross Gold (KGC).

[May 5: Closing Precious Metals]
[Jan 30: Starting New Position in Kinross Gold]

Long Kinross Gold in fund; no personal position

Last 5 posts by Trader Mark

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