In conjunction with a buy signal in our "Gold Plan" timing model we added an allocation to the iShares MSCI Global Gold Miners ETF (RING) in both our Income and Growth model portfolios, notes Jim Woods, editor of Successful Investing.
In our growth portfolio, we also added an allocation to SPDR Gold Shares (GLD). GLD is an ETF pegged to the price of gold bullion. This fund doesn’t offer the upside potential of gold mining stocks, but it is the easiest way to gain exposure to physical gold, as the fund is pegged at the price of gold bullion.
Until we get our next equity "Buy" signal, RING and GLD are great ways to have some exposure to a sector that is doing well from the dual tailwinds of low interest rates and a weakening U.S. dollar.
The Fed is at the heart of this tailwind, as interest rates are likely to remain low and the stimulus in the economy remains an inflationary driver (gold thrives in an inflationary environment).
As we did in the Income and Growth portfolios, we added exposure to our Aggressive Portfolio based on the Gold Plan Buy signal. Yet instead of adding a single-beta gold mining fund such as RING to the mix, we opted for the leveraged gold fund — the Direxion Daily Gold Miners Index Bull 2X Shares (NUGT).
Note that this fund used to be a 3X levered fund, but on April 1, the fund’s leverage was lowered to 2X due to liquidity issues that occurred during March’s violent market volatility. Yet despite the leverage change, NUGT remains the best way to aggressively play a Gold Plan Buy, and was thus chosen to be our recommendation.
