A popular trade lately has been short the gold miners and long the bullion or ETF.

As I understand it, the trade is based on the notion that few institutions want (or are able) to hold non-dividend paying gold stocks.

The other side of the trade, Bullion, is more liquid than the miners, and easy to rationalize in a low interest environment.

I'm guessing Kinross has been a target for this trade, since it's off the radar of most investors who would prefer to own Barrick, Newmont, or Goldcorp.

Look at it from a hedge fund perspective. On one side, you have a commodity in a near-perfect decade long uptrend with growing institutional ownership, including central banks - on the other side you have a highly cyclical industry where shareholders consist almost entirely of insiders and retail, both of which are easily spooked in a crisis.

Even if you guess wrong on the miners and they go up, you still make money until they overtake bullion, at which point you close the trade. If they go down together, bullion has to fall faster than the miners before you lose, and how likely is that?

ebear