Update on NUGT

Since last few weeks NUGT has been going down. Currently, it’s trading around $20. As a matter of fact, this ETF is down almost 27% since it was added to my portfolio.  There are many issues surrounding this downturn. However, if we also won DUST, which is the opposite of NUGT than we need not worry as it’s up more than 100% since the time it was added to the portfolio. Let's quickly look into some of the factors impacting NUGT at high level.  At this point, I am putting an HOLD to NUGT. I will re-evaluate after some time. But let's analyze the Pros, Cons and Strategy.

Cons:

i. US Dollar is almost at its 4 years high. Strong dollar hurts the commodities price and so also Gold. Dollar has been on the up turn against all the major currency viz. EURO, Pound, Yen etc. This is a major catalyst.

ii. Continued strength is US stock market. Investors are expecting better return with equity rather than gold. 

iii. Tame Inflation. Inflation is very low stands at about 1.5%.

iv. Reduction of interest rate in Europe to almost 0%  
v.  Reduced tension in Russia, Ukraine and Syria

Pros:

i. In short term, Indian festival "Deepavali" is coming on Oct 23rd when gold may see some bounce. 

ii. After that, the Chinese New Year could help gold to some extent.

iii. I read on some article that there are record-breaking new short positions coming into the U.S. dollar. Coincidently, there have been massive long positions taken in the euro by the commercial traders, which are considered to be the "smart money". If that's true, dollar strength may reduce and that may help commodity.

Strategy:

i. As said earlier I can hedge NUGT by buying some DUST. If NUGT falls DUST will go up. 

ii. If we did not buy too much than we can do dollar cost average. If we bought enough than I can sell some part of the position from my Trading portfolio, take capital loss  and held the remaining position with patience. I am sure Gold will bounce back but it's just a matter of time. But when exactly that's going to happen? Nobody knows the answer.  

iii. Catching the falling knife is very dangerous. However, if we look back history, when equity goes on sale, buying at that time and holding for a foreseeable period of time with patience can provide enormous return. 

Finally, it's investors' own decision what best suit them and act accordingly. 

Disclaimer: This blog is meant to provide my personal opinion rather than professional recommendation to buy/sell any stock, ETF, mutual fund or any other security(s). As an investor, it’s your hard earned money and you decide what is best for you. The above are merely my own suggestions and please contact a professional money manager to buy/sell any security. I do not earn any money by writing this blog. I have position on whatever security I write on the blog and avoid recommending any security that I do not follow.