GOLD FORECAST

Gold/USD	LT-M	MT-W	ST-D
1498 (1529)
Trend	↓ (↓)	↓ (↓)	↓ (↓)
% Risk Weight	78 (80)	62 (65)	18 (35)
Allocation	100% (100%)

If investors around the world have not yet committed to at least 20-25% of their liquid assets to Precious metals it may be a little late now due to the business shutdown of Swiss refiners in Ticino, Switzerland if confirmed on Monday 23, and if one can still get hold of physical Gold and Silver, you should do so up to at least 25% of total liquid assets or even 50%.
All time frames have turned down during the past week but in highly critical times the behavior of technical tools also require a closer observation. Divergences may trigger much quicker than usual and markets can turn around very rapidly and stay overbought or oversold for a long time whilst price discovery continues in one direction, up or down.
This time round the uncertainty about the ultimate effects of the Covid-19 Corona outbreak can drive markets to extremes in a very short period of time. We feel comfortable with the thought that real money will always protect some of our financial wellbeing whilst not be exposed to leverage of any kind.
Owning a traditional hard asset is absolutely critical in times of economic stress, whilst the emphasis should not be on protecting one’s entire portfolio as this is impossible. Many investors would be lucky to protect just 30 to 50% of their original portfolio value adjusted for inflation.
Unfortunately we did not manage to add to our fully allocated Gold position last week and this time we will wait for markets to settle down somewhat or possibly act or extreme movements if they develop.

Last week:

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

Silver/USD	LT-M	MT-W	ST-D
12.55 (14.68)
Trend	↓ (↓)	↓ (↓)	↓ (↓)
% Risk Weight	45 (47)	20 (25)	11 (12)
Allocation	100% (100%)

The totally unexpected happened and our position is at a loss in dollar terms, not in Euro terms. Silver tanked to a tick low of 11.63 before settling in a range above the $12 handle. Extraordinary circumstances are making us hold our breath, yet this market is going to become one of the leading insurances for investors and we see zero risk in holding an above average allocation in our portfolio. We did not manage to acquire more physical silver last week at a reasonable price as premiums were extraordinary. The Swiss refiners were working at full capacity and no wealth investor is selling any physical Gold or Silver. The demand however is substantial. With Swiss refiners now rumoured to close for business on Monday 23 March the ripple effect of this overdue measure can be huge. Switzerland serves about 65% of total world refined precious metals and thus satisfies near 90% of the western world demand. That demand can no longer be met. Full stop. Hedge funds long on futures, if they get the chance, may challenge Comex for delivery. Is this the final straw that breaks down the unnatural link between paper and physical. One well known financial market commentator in alternative media is predicting this weekend that Europe will confiscate gold. We’ll see. So, there is no reason to panic in our view. Owning Gold and Silver up to at least 25% of total liquid assets and not that much else is probably all the protection people need. Clearly markets will develop massive financial opportunity, but who cares if the only matter of importance is one’s health. We are not out of the woods by a long shot, so this has become a long term play as it has been for 18 months already. No Change.

Last week: 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.

GOLD/SILVER Ratio	LT-M	MT-W	ST-D
118.00 (103.60)
Trend	↑ (↑)	↓ (↑)	↓ (↑)
% Risk Weight	70 (75)	88 (88)	78 (85)
Allocation	50/50 AU/AG (50/50 AU/AG)

Last week we’ve tried to purchase more silver, but margin’s were so ridiculous we’ve left it. Since we only buy physical, which was still in very high demand the option did not seem relevant under these extremely volatile conditions. Derivatives is not an option for us so it doesn’t matter as these are not normal times and we have basic portfolio protection in place. It is impossible to predict where traders or sovereign manipulators take this market in the next few days or weeks.Technicall the Gold/Silver ratio sits at an extreme bearish divergnce level on the Long term time frame. Missing an opportunity at an extreme is an opportunity lost but otherwise no big deal in the wider scheme of things. No Change and still looking for an equilibirium level nearer 50 on the ratio. Right now we would say. Do not sell any physical metals and especially Gold, Silver and Platinum until they reach the levels that are consistent with free market price discovery. Right now that already indicates a gold or Platinum price of nearer $10,000 and Silver at $125 all things being equal which they are not. Against other currencies is less relevant too at this stage as fiat may become worthless with the kind of extreme monetary financing that takes place today and tomorrow.

Last week: 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