Whether you're interested in hedging your long gold position or simply want to take advantage of a potential decline in the gold miners, the gold miners present an appealing opportunity in capturing alpha.
Nice gold chart. I wasn't sure why you'd short gold miners when gold was clearly bullish (since they are so closely correlated). Once gold reaches your target then the gold miners should be a great short I think.
It's basically a hedge spread bet. Notice for the chart on the right there was a broken head and shoulders. I trade the chart. The chart represented (at the time) that gold miners would decline or rise with less velocity than gold. Here is the spread between gold and gold miners. Notice, had you been long gold and short gold miners with an equivalent dollar amount you would be profitable.
If you fall in mud with a banana in one pocket and an apple in the other, the banana will be okay but apple will not. If you're stranded on an island the banana will spoil quickly, while the apple will last longer. Both fruit, different environments. Gold miners are suffering longer term during price depreciation because of the leverage involved in exploration and borrowing costs. In an environment in which gold rises steadily and is in a long term bull trend, gold miners will do better than gold.