Published On: Wed, Feb 20th, 2013

Reverse Gold ETF

A Reverse Gold ETF is a trading vehicle that has its price tied to the price of gold.

The internal mechanisms of the ETF or Exchange Traded Fund are designed to move in an inverse direction as to the price of gold.  Whereas a normal Gold ETF such as SPDR Gold Trust (GLD – NYSE) has its price related to 1/10 ounce gold and move up and down with the same percentage gains as gold in the spot market, the Reverse Gold ETF will move inversely to the gains and losses of gold in the spot market.  In other words, if gold moves up 2%, the Reverse Gold ETF will move opposite, or down 2%.

Reverse ETFs such as these are used by traders to take a short position in a commodity or equity index without the need for a margin account that is required by normal shorting of an equity or ETF.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.