This is going to be the most subjective and least quantitative post out of the 500 odd posts I have written. I am not a gold bug, and while I have written that gold shares are attractive relative to gold in the past, I don’t see a lot of strategic value of gold to a portfolio (tactical, yes). Gold is currently above both its 50 and 200 day SMAs.
That having been said, and this is probably an Occam’s 5th Grade level observation, but is there anyone out there that believes that if/when gold breaks through the 1000 level, it doesn’t zoom straight to 1300 or 1500? Once that huge psychological barrier of 1000 is broken (it has already been tested once) I think the sky is the limit.
A simple strategy would be to buy gold (futures, GLD, or gold shares are probably even better than GDX) call options far out of the money. Since I have no idea when gold might break 1000 (if it ever does) it could also make sense to buy a call spread and keep rolling them over until gold gets to 1000.
Just a thought.
PS If there is anyone who doesn’t think that risk management is important, then you clearly don’t know anyone who (still) owns Russian stocks.