(BUY) ETFS Leveraged Precious Metals

Back on March 4th I warned that gold had become severely overextended and that a bit of caution was necessary. Gartman was also calling a top and he's a great short-term trader. At that time gold was $984, subsequently it ran to $1033 and some change in about 9 days. The article can be viewed here: Dennis Gartman: Short term top for gold


Gold has now corrected and is stuck in a trading range between $850 and $950. I believe now is an opportune time to establish long positions again in both gold and silver.





Because I believe that this bull market in precious metals has a long way to run, I am looking for leverage on the upside. Leverage, however, is a double-edged sword. It will magnify your returns but it will also magnify any losses. This is the reason most people get burned playing the futures markets. A good compromise, I believe is to invest in leveraged ETF's which offer leverage, without having to deal with margin calls and 'over-extending', pyramiding, too much 'heat', whatever you want to call it.

ETF Securities offers a 2X leveraged Precious Metals ETF which tracks twice the daily movement of the DJ-AIG Precious Metals Sub-Index. This index is weighted 73% to Gold and 27% to silver.



There is a small fee (0.98% p.a.) but I believe the costs are neglible in relation to the gains we will see over the long-term.

This is a long-term buy and hold. Expect to hold this through to the end of the bull market, which, IMO will last well into the next decade. When exactly this will be, I don't know. But I am confident that when it comes around it will be very obvious as commodities will be the subject of every cocktail party conversation. When the metals get overextended too far above their 200 EMA, sell a third to a half of your holdings, then when it corrects and bases again, begin accumulating. This is a formula that will treat you well as this bull market unfolds.

Please keep in mind that these products should not be a replacement for owning physical, gold or silver. (Or some form of allocated, confidential and secure holdings with rock-solid rights to ownership and delivery on demand)

As of today the security data is:

Last price (USD) 39.53 19/06/2008 Change since previous close (%) 2.94%
NAV (previous day) 38.73 18/06/08
The security trades on the London Stock Exchange under the symbol LPMT. If you do not have direct access to the LSE through your web platform, you should call a live broker and they should be able to help you out.