With all the craziness in both the world economies and the markets, many investors are turning precious metals as a hedge, or to diversify their holdings. The problem is that I cant watch tv or listen to the radio without hearing some company telling the world to buy gold. Is Gold too high? Has inflation and fear been baked into the Gold market? Finally, is there a way to trade Gold that most people aren't thinking of right now?
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Is the price of Gold too high? Here is what I am seeing right now. GLD, the Gold ETF, has broken into all time record highs of 170, which is amazing. For every guy out there that’s saying its going to 2000, theres another one that’s saying its going down. I will say this; the last few days look more fear driven than anything else. So short term, Gold looks overbought. But if the fear continues, we very well could see $2000 an ounce Gold. So the biggest question on everyone looking to get into Gold is how do I get in with minimal risk? Well options could be one way of doing just that!
Options on GLD are very liquid, meaning the efficiency of getting in and out of a GLD trade is fantastic! Right now the volatility on GLD options is high, as is the price. Spreading makes the best sense here. Still concerned that this ETF is out of your price range? There are several gold mining stocks that are priced lower than GLD but move at or better than GLD on a percentage basis. Finally, you could try looking at Silver, which is also called the Poor Mans Gold. SLV is the ETF you would be looking at, and it too trades options. Either way, you have much better reward to risk ratios with options!
Stay safe, stay hedged!
Vice President and Co Founder, Optionetics