How to Profit from a Decline in the Price of Gold
When an investor sells an investment short he profits when the price of the investment falls. Short gold ETFs work the same way. The price of the ETF rises when the price of gold decreases. Conversely, the price of the ETF declines as the price of gold rises.
Short gold ETFs make it easy for an investor to profit from a decline in the price of gold. ETFs trade just like stocks. They are listed on the major stock exchanges, they have ticker symbols and can be bought or sold throughout the day.
One of the most popular short ETF is the Powershares DB Gold Short. The ticker symbol for this ETF is DGZ. This ETF is designed to conversely mimic the price movement of an ounce of gold. If gold falls by 2% then this ETF will gain in value by approximately 2%.
For an investor that wants to double down on his belief that the price of gold will decline there are also double short gold ETFs. The double shorts move two times the amount of the price that gold. One of the most popular double short ETFs is the Powershares DB Double Short. The ticker symbol of this ETF is DZZ. If the price of an ounce of gold decreases by 2% then this ETF will gain in value by approximately 4%.
Short and double short gold ETFs are great tools for an investor who believes that the price of gold will decline. They can also be used to hedge an existing portfolio. As with any other investment, an investor should make sure a short gold ETF makes sense for his financial circumstances before investing.
Published by Eric Scott
Eric is a freelance writer specializing in small business, investing and local Chicago news. View profile
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