Global Easing: The Perfect Storm for Gold

The past few weeks have seen a major shake-up in the global economy, as central banks from around the world have taken aggressive actions to try and boost their respective nations. Of course, investors everywhere have been rejoicing as not only have major benchmarks charged forward, but excessive money printing and easing on a mass scale makes a number of assets extremely attractive. One of the best investments to make during a time of currency debasement is gold, as this precious metal has long been one of the most popular safe havens and store of value [for more gold news and analysis subscribe to our free newsletter].

It all started with Mario Draghi and the EU who announced a bond-buying program that could technically feature unlimited bond purchases of three year maturities of those nations who are swallowed by debt. Some of those countries include Spain, Greece, Italy, and Portugal, but there are still others in the EU who are having trouble. Next came Big Ben Bernanke and the Fed who announced an extremely aggressive open-ended QE of $40 billion per month until they see fit. That could mean years of continual money printing and a falling greenback. Both of these events sparked a lot of interest in gold, but another nation has thrown its hat into the ring, creating a perfect storm for this yellow commodity.

Japan will try yet again to fix an economy that has been broken for the better part of two decades, as deflation wreaked havoc on what was once one of the most prosperous nations in the world. The Bank of Japan went all in this week as it announced a jump in its asset-purchasing program of about 10 trillion yen. With yet another major economy printing money at will, it seems that gold is slated to make a strong run higher, as some of the most powerful currencies around the world will inevitably lose value given the massive dilution of the money supply [see also How to Play $10,000 Gold].

Below, we outline three ways to take advantage of gold’s perfect storm.

  • SPDR Gold Trust (GLD): The second largest ETF in the world is always an obvious choice, as this physically-backed fund is easily among the most popular funds in the world.
  • 2x Gold Bull/S&P 500 Bear (FSG): This product goes long gold futures with a 200% leverage while shorting the S&P 500. If you are of the mindset that all of this easing will eventually cripple stock markets and help gold, this may be the perfect play for you. Note that if the S&P continues to perform well, FSG will struggle [see also Marc Faber Warns: Store Your Gold Overseas].
  • 3x Long Gold ETN (UGLD): If you really want to lever up your bet, go with UGLD, as it offers 300% leverage on gold futures contracts. Of course this fund will be extremely dangerous so it is best left to active traders who fully appreciate the risks of the product.

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Disclosure: No positions at time of writing.

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