Gold: Up, Down and Sideways

by JDH on April 16, 2016

It was an interesting week, with gold up, down, and back to about where it started.  But first, some comments from the Buy High Sell Higher Forum.

As I have reported in previous weeks, I have been playing the swings in gold with NUGT – Direxion Daily Gold Miners Bull 3x Shares, a 3 times leveraged ETF.

Sunseeker made a good comment about ETFs.  He makes the very valid point that just because the ETF’s goal is three times leverage to the underlying security (in this case a basket of gold mining shares), there is no guarantee that this will actually happen.  I agree, and the longer the time frame, the less likely you will get the leverage you expect.  As Sunseeker points out, one of the reasons is rebalancing of the portfolio, which impacts the return.

That’s why, for me, vehicles like NUGT are short term trading vehicles.  I expect to hold them for a few days at most, and that’s it.  If I get the trend right, I make money, and the “tracking” is relatively close.  If I want to hold something for the long term, I buy stocks.

So what am I buying?

Currently, my holdings include two “blue chips”: FNV.TO – Franco-Nevada Corp. and RGL.TO – Royal Gold Inc.  If you want something to “buy and hold”, these are good picks.  Franco-Nevada is currently paying a dividend of 1.3%, and Royal Gold is paying 1.69%, so even if the price of gold remains flat, you earn more that what you get in a bank savings account.

I then have a basket of juniors.  I don’t invest significant money in any of these, because they could do great, or go bust, so I like to spread it around.  I currently have positions in a bunch of juniors, some of which have done well, some of them less so.  The beauty of a rising gold price is that, at the moment, all of them are in the money.

As for NUGT, it traded at $78 on both Monday and Friday, so it was an up and down week that ended where it started.  I’ll assume this is a pause that will build the base for the next rise, so I look for higher prices over the next week or two.  We shall see.

Thanks for reading.  See you next week.