I noticed that gold and the sp500 are at parity today…and that got me thinking. If one happened to go long gold and short the SP500 a few years back, what would your situation be like today. Not surprisingly, you would be up 100% on your investment. Have a look at the chart, get familiar with the pattern, and pull up a chair.
Long Gold, Short S&P500
As you can plainly see, we’re in a consolidation pattern right now. Volatility is EXTREMELY low, and the chance for a gut-wrenching move in either direction is entirely possible. If you believe that things are getting better, and that prosperity is on the way, then maybe you should go long the SP500 and short gold. However, if you think we’re in for a rocky road ahead, you may want to do the opposite and get long gold and short the crap out of the SP500. As much as I despise the GLD ETF, it’s still a trading vehicle that (somewhat) tracks the price of gold enough to make it useful. At this point you can enter a neutral trade (50% upside risk, 50% downside risk) by purchasing one share of GLD and shorting one share of SPY. Depending on your risk tolerance, and your preference, you can give yourself a bias in either direction by modifying your ratio of shares long vs. shares short. Since each share is trading at roughly the same price, this is an easy trade to tweak in your favor as the trend becomes more apparent. Maybe you don’t like the SP500 and you want to short your country’s index of choice. Be my guest, the charts more or less look the same (except for Japan…the mother of all carry trades)! Don’t believe me? See for yourself:
Long Gold Short India
Long Gold Short China
Long Gold Short Korea
Long Gold Short Malaysia
Long Gold Short Singapore
Long Gold Short Taiwan
Long Gold Short France
Long Gold Short Germany
Long Gold Short The Queen
Long Gold Short Japan
