Explore Your Options  |  JUN 2008

Explore Your Options by Tom Gentile

Explore Your Options by Tom Gentile FIGHTING INFLATION Commodity prices are surging. With the Federal Reserve lowering rates aggressively, I am now more worried than ever about the risk of inflation. Is there a way to trade inflation directly, like an inflation index? Interesting question. I don’t know of any index that has been created to trade inflation directly. Indirectly, gold has historically served as a good hedge against the risk of inflation. During times of inflation, gold prices tend to rise, and during periods of falling prices or deflation, gold prices tend to fall. If you don’t have a futures account, another option is to trade the Street Tracks Gold Fund (GLD), which is an exchange traded fund that holds the yellow metal. No options are listed on the GLD, but could be listed in the near future. Alternatively, you can take bullish positions in gold mining companies or on the PHLX Gold and Silver Mining Index ($XAU), which is an index that tracks the performance of 12 gold mining stocks.

by Tom Gentile