3. PORTFOLIO STRATEGY THREE GOLD ETFs FOR THE DOLLAR ENDGAME

Portfolio Strategy: Three Gold ETFs for the Dollar Endgame

1. Two-Phase Dollar Cycle

2. Relative Performance (Phase 1) - clean line chart comparing SGLN, AUCP, GDXJ under a “Dollar Crunch” (DXY↑, liquidity↓).

3. Gold Sensitivities (Phase 2) - bar chart showing approximate leverage to gold (SGLN 1×, AUCP 1.5×, GDXJ 2.5–3×).

4. ATR-Based Trailing Stop - simple visual of price vs trailing stop band.

5. Portfolio Allocation - pie or stacked bar showing 40 / 40 / 20 split and respective roles.

Framework and Rationale

This section examines how a gold-weighted portfolio might behave across two distinct phases of the dollar cycle.

Phase 1 represents a dollar liquidity squeeze; Phase 2 represents a loss of confidence in fiat money.

The focus is on three London-listed ETFs: SGLN (iShares Physical Gold), AUCP (L&G Gold Mining), and GDXJ (VanEck Junior Gold Miners UCITS).

Each vehicle captures a different layer of exposure — physical metal, senior producers, and high-beta junior miners.

(Insert – “Two-Phase Dollar Cycle: Dollar Crunch → Dollar Break”)

Phase 1 – Dollar Strength and Liquidity Tightening

In this phase, real yields rise and the dollar index (DXY) strengthens.

Liquidity leaves emerging markets and speculative equities, creating risk aversion.

The key mechanism is forced de-leveraging: investors sell what they can, not necessarily what they should, in order to pay their debts.

SGLN tends to remain resilient.  Gold is sold for cash but simultaneously benefits from safe-haven flows and, in sterling terms, from a weaker pound.  The ETF’s low tracking error and physical backing make it an effective capital-preservation tool.

AUCP declines moderately.  Large producers suffer from falling sentiment and, to a lesser degree, lower short-term bullion prices, but their positive cash flow and dividend yield absorb part of the shock.

GDXJ reacts sharply.  Juniors are sensitive to financing conditions; they often fall two or three times more than gold itself.  A 15–25 per cent correction is typical during risk-off episodes.

Relative performance of SGLN, AUCP and GDXJ during dollar-strength periods

Practical note: investors should treat such drawdowns as accumulation opportunities rather than reasons to exit.

Position sizes can be scaled gradually when RSI falls below 40 and volume contracts, indicating capitulation rather than fundamental weakness.

Phase 2 – Dollar Weakness and Monetary Repricing

This phase begins when markets conclude that the Federal Reserve has lost control of real yields.

Fiscal deficits widen, policy credibility erodes, and inflation expectations re-anchor higher.

The narrative shifts from “tight money” to “unpayable debt.”

SGLN becomes the portfolio’s anchor.  As central-bank demand rises, the ETF’s price tends to advance broadly in line with bullion.  Gains of 50–100 per cent are historically consistent with similar monetary resets.

AUCP benefits from margin expansion: producers’ revenues follow bullion while their costs (energy, labour, reagents) adjust more slowly.  Leverage to the gold price is roughly 1.5×, with dividends maintaining investor confidence.

GDXJ becomes the high-beta sleeve.  Smaller miners experience operational leverage; historical analogues suggest potential 3–5× moves once gold establishes a new base above previous highs.

(Insert – “Estimated sensitivities of SGLN, AUCP and GDXJ to bullion price changes”)

Trade Management and Exit Discipline

The challenge in this environment is not identifying the trend but managing exposure as volatility expands.

ATR (Average True Range) provides a practical way to frame trailing exits without being prematurely stopped out.

1. During consolidation: use the 14-day ATR to estimate expected daily range.  For example, if ATR = 2.5 USD, a normal fluctuation is ±2.5 USD around recent closes.

2. During the breakout: allow a wider tolerance — roughly one ATR below the weekly closing high.  This converts ATR from a defensive stop into a trailing exit that locks in profits while respecting trend volatility.

3. When volatility contracts after a spike: reduce position size or rebalance into SGLN to maintain portfolio stability.

(Insert placeholder: small technical diagram – “ATR-based trailing stop illustrated on GDXJ weekly chart”)

Position Weighting

A practical distribution reflecting both protection and asymmetry could be:

ETF Exposure Type Typical Beta to Gold Suggested Weight Role

SGLN Physical bullion 1.0 40 % Core hedge and liquidity reserve

AUCP Senior producers 1.5 40 % Income and steady participation

GDXJ Junior miners 2.5–3.0 20 % High-beta growth sleeve

(Insert placeholder: infographic – “Sample portfolio allocation across gold tiers”)

Assumptions

Liquidity cycles drive performance differences more than simple bullion moves.

ATR and moving averages are practical, objective tools for risk control.

The long-term value of miners derives from cash flow sensitivity to gold, not short-term sentiment.

Diversifying across the gold-exposure ladder (metal → majors → juniors) allows participation through both deflationary and inflationary phases of the dollar cycle.