Hedge Funds Are Buying Gold, But How Can 'Average Joe' Capitalize?

• On Monday, New York’s Comex market saw gold futures with February delivery dates lose some of the ground gained on Friday.
• The decline was mainly driven by a stronger U.S. dollar and renewed overall weakness in commodity markets.
• According to a recent mining.com article, “The likelihood that Fed will raise rates from near zero where they have been since December 2008, before the end of the year prompted large futures speculators or ‘managed money’ investors such as hedge funds to dramatically raise bearish bets on the metal over the past five weeks.”

Over five consecutive weeks of selling, amidst weak gold prices, hedge funds have dumped over 150,000 lots -- or roughly 425 tones of gold. So, now the market is in its largest net short position ever, barely below 1.8 million ounces.

So, how can “Average Joe” capitalize from this trend?

Well, binary options might offer an interesting option – with relatively low collateral.

Related Link: Will The Fed Raise Or Not? Here's A Binary Way To Play The Event

What Are Binary Options?

Investing via binary options is just that: Playing a binary event. “Binary options are limited risk contracts based on a simple yes/no market proposition like will the markets go up by the end of the trading week,” binary options trading site Nadex explained.

How To Trade Gold With Binary Options

Via binary options, investors can put money down on the results they expect, with limited risk.

For instance, if you believe gold futures contracts (February) will trade above 1080 at 1:30pm, you can Buy the binary option Gold (Feb) > 1080.0 (1:30PM). If you believe gold futures will trade below 1080, you can Sell the binary option.

Check out a full explanation of how to invest in these binaries and how much you could win or lose here.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.