GOLD FORECAST

Gold/USD	LT-M	MT-W	ST-D
1529 (1673)
Trend	↓ (↑)	↓ (↑)	↓ (↑)
% Risk Weight	80 (88)	65 (81)	35 (71)
Allocation	100% (100%)

This Black Swan is nature’s response

Hundreds of alternative media influencers, most of them followers, have predicted a hard reset since the monetary crisis of 2007 and Thomas Piketty will get his desired result, but not on a silver plate. It took 37 days after the first case (1 Dec 2019) for the Chinese leadership to recognize that something serious was going on. The rest, since Jan 7 2020 is history and no one knows how this will end. What we do know today is that a big reset has been triggered by an international lockdown procedure that the world has never seen before. The liquidity crisis and most sectors of the economy will be enormous and only the banking system can provide immediate assistance backed by government guarantees and tax relaxation. The point is we are all guilty and we are going to pay a price. It may take a while but Gold will be a safehaven as a result. The price might be tenfold on a relative basis with Silver following. Palladium, dropping $1000 in 2 days, finally did what it should have done a long time ago taking the entire PM space along with it. It is entirely possible that production of metal slows down significantly.
The technical picture across the board of asset claases will prove correct although we may be wrong on timing in some individual cases. There is just no way back to where this started and the next few months and years will hurt.
As right now all risk weight trends in all Gold timeframes are pointing down, we will wait a bit with moving more cash into PM, but it will happen as all other asset classes are likely to suffer in the foreseeable future. The further 1.5T repo by the Fed is throwing ‘No money’ after bad. But there is no other alternative than allowing a complete meltdown. Central Banks all over the world will follow. The recipe for stagflation where PM is the ‘flation’ side.
Whilst this comment is about Gold and our cushion is still substantial we say the time is right to own as much as 50% of liquid assets in Precious metals and the other 50% in non cyclical assets (Food agro) and cash. No Change.

Last week: There are few markets showing investment quality. Precious metals is amongst those asset classes that is currently showing traditional protection. The kind that says that any portfolio should always have at least 3-10% of precious metals. We are up to 50% unleveraged with a slightlyu higher than equal silver to gold spread. Gold is up more against the USD mainly due to continued dollar weakness this past week.
Obviously the markets are on high alert due to the across nations Corona development forcing many business to tap into reserves. The Daily risk turned up folllowing price. Even though risk weight is high and potentially diverging in the MT timeframe, the cushion is significant to keep maximum protection.

Silver/USD	LT-M	MT-W	ST-D
17.31 (17.75)
Trend	↓ (↓)	↓ (↓)	↓ (↑)
% Risk Weight	47 (58)	25 (46)	12 (34)
Allocation	100% (100%)

Silver took another beating this week. Another 5% and we are back to square one. Is that a risk management problem? No. Is it as expected? No! The Long term risk weight is building a massive bottom by potentially developing quite strong bullish divergence. For that to materialize silver would probably need to make a new 2 year low, but it isn’t worrying technically. The MT Weekly time frame never got a chance to even develop bearish divergence and now we are looking at the opposite in a matter of days. Based on the Gold outlook, technically, but also fundamentally silver would still be our choice of higher weight allocation. So as we are growing into a higher allocation to Precious metals the spread of that extra allocation would now be 60% Silver, 20% Gold and 20% Platinum. Platinum only as a physical backed derivative. A prime regulated exchange to operate would be Bitpanda in Austria whilst Gold and Silver would only be in 100% legal physical ownership. We like to buy quality hard assets when they are cheap. This is one of those opportunities.
As we look to increase our PM portfolio away from cash in the bank we will update on timing.

Last week: Silver suffered and against technical expectation relative to gold by losing 2% in price and 4 on the ratio the past week. Without leverage on the position, which is still in very good shape, we feel comfortable staying fully invested. The more commodity/industrial type behavior is not worrying. Of course we aren’t sure if Corona is the Black Swan event. It clearly could be. If it is and the market requires a reset of some kind, silver should do extremely well. We may even experience shortage of production. No change.

GOLD/SILVER Ratio	LT-M	MT-W	ST-D
103.60 (96.23)
Trend	↑ (↑)	↑ (↑)	↑ (↑)
% Risk Weight	75 (75)	88 (85)	85 (88)
Allocation	50/50 AU/AG (50/50 AU/AG)

The Silver beating this past week folloiwing a week of mild to good recovery has driven the Gold/Silver ratio to all time highs and it may not even be finished yet. Does that worry? No! Just as we said some time ago where Palladium gets too expensive and Platinum too cheap, the stock markets being out of control at too elevated levels, the Silver ratio too offers the opportunity of a life time in our view. As we look to increase our PM holding with Silver, Gold and some Platinum, the moment of action will drive our ratio holding into the 70% level. For now no change and we stay with our current holding of roughly 50/50 with a little overweight in Silver. We simply wait for this ration to normalise into a level of equilibrium gain. Guidance would be between 40 and 60.
This holding represents ultimate insurance. With all the additional emergency money printing to support lack of business liquidity (No income, high cost) the next few months, this Precious Metals insurance will prove valuable through a period of stagflation or hyperinflation as some people still predict. All risk weight time frames are developing strong bearish divergence. Experience learns that this hardly ever fails to deliver for contrarians. No Change.

Last week: At some point in the not too distant future we will recognize that the current historically high level of the Gold to Silver ratio is a real trading opportunity at low risk. But as we know this ratio could peak several percentgage points above the all time high recorded in Febr 1991 at around 100. Nevertheless the technical behavior is that of heavy protection for reasons only known to the manipulators of this market. Yet they are market participants too and this ratio could become their biggest nightmare. We happily stay slightly overweight on silver with a view to even acquire more silver (and gold) as the overall portfolio position is still largely cash which for now is holdings its own except against the larger precious metals space