Tuesday, April 28, 2015

Why I am short gold today

I sold off all of my money in equities today. Not that I am particularly bearish going into tomorrow’s Fed meeting, just that I don’t have a good feel for what may come out of the meeting.  I expect I will be buying back in after a few days, once things settle down.

The one thing I did keep is a short position in the Miners, Junior Miners and in Silver, via the 3x ETFs.  The reasoning, such as it is, is that the general consensus is that the Fed will be dovish when it announces tomorrow.  I judge this on the fact that gold and silver have exploded to the upside this week.

The strategy is no matter what the Fed announces, good things happen.

·         If they are dovish as expected, then nothing much will happen.  I should get the benefit of those ETFs going down through the daily rebalancing, or through a small selloff.
·         If they are a bit more hawkish, I expect Gold will sell off big time, dragging the miners down with it.

I see it as a win/win, or at least a win/not lose.  It’s the concept of going against a crowded trade. 

I’ll know tomorrow if it works.  If I don’t get shaken out before that.