Investors Can Make Money While Gold Is Down, Says One Fund Manager
(Kitco News) - While many investors are waiting for a potential short-squeeze to breathe new life into the marketplace, one fund manager is benefiting from gold’s definitive downtrend.
In a report Monday, Insch Capital Management said its gold-based currency fund saw a monthly return of 6.4%, reversing its 12-month 6.24% loss. Since its inception in February 2015, the fund has seen a gain of 57.1%. During the same time, gold prices have declined nearly 4%.
Christopher Cruden, chief executive officer at Insch, said, in a telephone interview with Kitco News that the firm’s proprietary trading system started signaling a clear downtrend in late-June and since then, the fund has been net short gold against most major Group of Seven currencies. The fund is short 11 risk units out of a total of 14 trading units.
Cruden said that the fund is currently long one risk unit against the British pound and it has no position in gold vs. the Japanese yen. It’s not surprising the fund sees potential in gold against the pound as the currency has fallen to more than a one-year low against the U.S. dollar. The pound has struggled as ongoing Brexit negotiations raise risks for the nation’s economy.
The firm’s gold fund trades gold as a currency against the U.S. dollar, Australian Dollar, Canadian dollar, Japanese yen, British pound, Swiss franc, and euro.
While not a market strategist or technical chart analyst, Cruden said that he sees further room to the downside in the global market, as the yellow metal struggles to find momentum with prices hovering above last week’s fresh 12-month lows.
“The trend looks very strong and single-minded to the downside after spending a long time in a sideways pattern,” he said. “The path of least resistance appears to be lower. Our job is to just hang on to gold’s coat tails for as long as we can.”
According to the analysts at Insch, this is the sixth time the Fund has been net-bearish against most of its currency pairs. The last time the system signaled a clear bearish trend was in early December 2017, when the fund saw a monthly gain of more than 8%.
What makes this latest downtrend fascinating is that it is much longer than previous short periods. On average, the fund’s short-trends last about eight trading sessions, analysts say. In this latest downtrend, the fund has been net short for 23 trading days.
Cruden noted that the fund’s latest gains came after a relatively frustrating start to the year when gold was trapped in a relatively narrow trading range with no clear price trend.
The difficulty in making money on the downside is the fact that a downtrend doesn’t usually last as long as an uptrend, he added.