Commodity ETF
stock trading strategy
for precious metals ETF stocks
How to trade ishares ETF
for silver and gold
Precious metals commodity ETF shares are one of best way how to invest into these specific commodities. Especially precious metals exchange traded funds like ishares Gold ETF and ishares Silver ETF are heavy traded as they are experiencing big demand from investors around the world.There are several strategies usable for trading these commodity ETFs. They are typically based on these main ideas:
- Fundamental ideas for holding gold or silver long term
- Momentum strategies as these precious metals exchange traded funds are in strong trending moves
- Gold / Silver ratio trading strategy
Fundamental ETF trading strategy
for Gold ETF and Silver ETF
I am not big fan of holding of commodities for long term using buy-and-hold style of investing. I do think that commodities are not best way how to invest for long term. Stocks and bonds offer much better long term investment opportunity then commodities. And especially gold and silver are commodities which are not much usable. They are only being bought as inflation hedge. But this idea is not confirmed by history.It does not mean that it is not wise to hold some gold or silver in your portfolio. Just the holding period should be much shorter then decades or so. It is necessary to implement more active approach to commodity ETF investing. It is very profitable to participate on strong trend moves in precious metals ETFs when they occur. They can be up or down. You can check strategies described below.
Momentum strategy based on trend analysis
Commodities can ride very strong trend moves. They can go up a lot and also down a lot. You can see example of these trends on charts of ishares ETF for gold and silver .
ishares Gold ETF long term stock chart
ishares silver ETF long term stock chart
There were entries for mid-term orientated investor/trades, too. Position trade with long ishares Gold ETF IAU could be entered in 2007 when it broke to new high above 7 and then in 2009 when it broke above 10. It was also possible to reentry trades in pullback to these levels. This
breakout and pullback strategy
is powerful strategy for trending markets.
Gold / Silver ratio strategy
This strategy expects that gold and silver trade long term in defined range. As you can see on the chart of this ratio the typical range extremes are 46 and 60.
The strategy is usable in situations when these extremes are breached and ratio is moving far from them. As you can see on chart it was at then end of 2008 and then in mid 2011 . This strategy expects that these extremes are not sustainable and ratio will return to typical trading range. So it is worth to trade this ratio accordingly. In 2008 it was shorting gold ETF and going long silver ETF and in 2011 by shorting silver ETF and going long gold ETF. I personally traded this strategy on my account and used my
Global macro research notes
as background for this trading idea. As as final note I would like to mention possibility to trade directly some
gold related stocks
like gold mining companies. These stocks could be also used in several different stock trading strategies.
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