Being a fundamentalist when it comes to investing, I am always looking for investing ideas when the "perceived value" of the investment is trading higher or lower than it's "intrinsic value". There is probably no greater asset that trades with more perceived value than the precious metal GOLD.
When conditions warrant like a global financial meltdown Gold is on everyone's list. However, when the facts change as John Maynard Keynes once said, I change my mind. Here are the new facts against Gold.
1) The Financial Panic of 2008 is entering it's last chapter. Read the paper.
2) Inflation is not an issue. Have you seen CPI numbers lately?
3) How many commercials on television have you seen to buy gold? Enough said.
4) The price of Gold has entered a "comfort zone" between $900 and $950
5) I counted no less than 40 blogs on this site defending Gold and 4 against.
The bottom line is the evidence is building that the gold frenzy has a lot of headwinds going forward. Throwing in a stronger U.S. Dollar and competition from equities may begin to varnish the shine on this all too faviorite asset class alternative. Finally, if the big money in hedge funds, pension funds, and ETF products starts looking for the door look out below. So here is the trade I am suggesting if you think Gold is headed much lower. Buy the ProShares Ultrashort Gold (NYSEARCA:GLL) with Gold currently around $930. A slide in Gold to $830 puts in a potential 20% gain using this ETF because of it's 200% inverse relationship with the price of Gold. GLL currently trades about $15.30 a share. I would look to take out the GLL trade at a target price of $18 a share.
Disclosure: Our firm currently has a position in the ETF (GLL) Proshares Ultrashort Gold ETF.