Long Gold, Short Silver (by Gary)

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Hi Slopesters… Gary from biiwii posting after reading that Tim is going short the GLD. 

I realize that gold has spent much of Hope '09 / Full Tout '09 running with the positively correlated stuff.  But on a relative basis to all the pumped up games, gold is counter-cyclical.  Therefore, I would prefer to short the real precious metals wild man, silver.

Here is a chart that simply takes the Gold-Silver ratio (GSR) I showed last week, and flips it over.  Silver has not got much room to run here in relation to gold if the red resistance line holds true.  Silver, unlike gold is very much of positive correlation to the mini speculative mania that I believe is in a process of flaming out.


On a risk/reward and technical basis, I like gold over silver.  On a fundamental basis (only one of them is an ancient tie to monetary value – oops, sorry… gold bug moment 🙂 I really like gold over silver.  This would come into play for gold stock holders who would like to hedge positions. In my case, the 2x silver short ZSL might be a good hedge against the 2x gold long UGL I bought yesterday per this post along with some gold stocks that I have decided to hold, come hell or high water.

So, my point here is not to boost or pump gold but rather to point out a relative short opportunity that looks better to me, and has a more positive correlation to gold stocks and the broad markets to boot.  ZSL is the only short position I dumped into yesterday's downside, and I would like to see that resistance line approached once again.  Then, I think silver could be a compelling short – relative to gold and likely, in its own nominal terms as well.

Silver moves like a madman, in both directions.  If you are not sure about it, stay away from it. This is not a recommendation.  Just a note that I have used ZSL and will likely do so again in guarding my portfolios.  If we truly have a resumption of the bear market, silver is going to plummet relative to gold.