Dusting Up the Gold Miner Hedge

I sold the direct hedge positions on the miners (DUST) as HUI has dropped to within 2 points of the beginning of the key support zone. Indirect hedges of sorts are long USD and even long stocks, insofar as the cyclical stuff has been going up while the counter-cyclical miners have been going down. It’s not really hedging I guess; it’s really more like balancing.

As with DGLD before it, I don’t want to be greedy about a precious metals short position or to fear a now-exposed long miner stance. It served its purpose and as with other stock sales recently, to keep holding the leveraged DUST would have me feeling downright piggish. Profit is profit and now, risk is by definition of the price drop, less in the miners than it was at the overbought high of 220 (HUI).

I am still on alert for the miner rally’s caution flags that have come up, but I’ll manage that risk in other ways now that we’ve taken 18 points off of the Gold Bugs index. Even as of Friday gold bugs were getting short-term over bearish and today might have put them even further into anxiety mode. But support is right there per the earlier post. Keep an eye on your parameters and have discipline with emotions.

I still think the next real buying opportunity may be out on the next seasonal cycle, but today may have been a ‘cover your hedges’ opportunity. Or maybe not. The market owes me nothing right now and I’ll just try to look at things squarely each day in service to a bigger picture that is slowly – and man, do I mean slowly – moving forward across all markets.

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