Gold – FX – Dow – 1 November 2019

GOLD: Gold vs US Dollar, Euro and GBP

Gold/USD live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 1514 (1504)

Gold/USD LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↓) ↑ (↑)
% Risk
Weight
87 (85) 63 (61) 65 (52)
Allocation 100% (100%)

Gold reserves and asset re-allocation for insurance purpose.

Gold/USD clearly has the advantage of much fundamental support such as a weaker dollar, low interest rates and building of inflationary pressure. The technical picture is developing as we expect with the weekly risk weight turning up at the 60% level based on Friday's close. This is an indication that energy is building for another upside release that could take out the August high fairly soon.
This is a good time to increase allocation to Gold (and silver) within a traditional asset mix portfolio. No Change and maintaining full Gold investment allocation.

Last week: The $18 decline that started immediately following NY opening from 1518 to 1500 created a sharp ST oversold condition with some discovery near the close. The MT Weekly timeframe is shallowing and ready to turn up in our estimate. Several Central Bankers in Europe are concerned about the strong forward guide on QE and are said to be buying 'GOLD'. But there is no evidence of this and official reserves appear static for the larger Gold holding countries in Europe. Technical risk favours holding Precious metals Gold, Silver, Platinum, Palladium. Across professional investment communities there is little sympathy to increase holdings in traditional asset classes. Whereas Gold (and Silver) in any Long term analysis have performed as tghe best insurance engine based on an allocation of between 2 and 5% depending on base currency it is becoming a necessity to review such allocation with a view of increasing to between 10 and 20%. This is institutional where it said to be expecting new numbers showing a re-allocation from equities to Real estate and private markets. For private investors such allocation of free liquid assets into Gold and Silver may even be higher towards the 30 or even 40% level. Holding cash in Banks traditionally is a trusted risk, but is it? The technical risk weight analysis from Short term via Medium Term to Long term still validates a full allocation to Precious metals. This allocation should only be in physical form with a trusted custodian, not being a system bank. No Change


Gold/EUR live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 1356 (1357)

Gold/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
87 (89) 54 (57) 57 (43)
Allocation 100% (100%)
Gold vs Euro is still showing longer term downtrend pressure and little price change, but the overall pattern is very much in favor of Gold. Chart behavior indicates Gold may have ended the correction that started early September. Euro denominated asset portfolio's should consider a higher allocation to Gold to increase protection and insurance against price erosion in other asset classes that show high risk-weight. No Change.

Last week: The correction that commenced 3 Sept seems to have ended on 20 October with a firmly established ST uptrend that has somne way to go yet with MT risk weight now at a more neutral level expecting that to turn up and follow the market to new intermediate highs. No Change


Gold/GBP live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 1170 (1172)

Gold/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
78 (84) 25 (33) 40 (20)
Allocation 100% (100%)
Gold vs GBP has dropped a little more percentage wise since the Sept 4 high and due to a strong pound sterling the past few weeks. Technically this Gold/GBP pair looks strong medium term, so no change in maintaining a full investment allocation. Sterling denominated portfolio's should consider increasing the allocation to Precious metals by between 5 and 10%.

Last week: Most, if not all, the Brexit speculation is now fully embedded with risk being taken off. This should stabilize GBP and even weaken it. Gold should benefit MT in this scenario. MT Weekly risk is becoming fairly neutral in the normal corrective scenario since early September. No Change


SILVER: Silver vs US Dollar, Euro, GBP and Gold/Silver ratio

Silver/USD live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 18.08 (18.00)

Silver/USD LT-M MT-W ST-D
Trend ↓ (↑) ↑ (↑) ↑ (↑)
% Risk
Weight
68 (72) 55 (54) 67 (62)
Allocation 100% (100%)
Silver is showing very similar risk weight patterns as Gold and waiting to show more medium strength. No change in full investment allocation.

Last week: A large buyer clearly entered the market this week resulting in a decent rally on Thursday 24 October with strong follow through to peak at 18.33 on Friday before dropping back to close at 18.00. All risk weight time frames in positive mode. Our patient initial target is still 21.13 being the horizontal target high established in July 2016. If this happens with the MT risk weight making a new High we we should expect further strength along the timeline. But any risk scenario will be revisited if the advanced unfolds as expected and most likely at this moment. No Change


Silver/EUR live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 16.19 (16.23)

Silver/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↑) ↑ (↑)
% Risk
Weight
72 (78) 53 (54) 57 (45)
Allocation 100% (100%)
Silver versus Euro similarly has every potential to reach the 2016 high within the next 3-6 months. Price to risk weight is in favour of price turning up before year end. No change to full investment allocation.

Last week: Silver/Euro looks like it may correct into the 16.00 handle and if that happens a similar scenario will play out for Silver versus other majors. However any drop will likely create an oversold ST image and a similar price resistance objective applies for Silver against Euro. With 2 previous peaks at 18.97. No Change


Silver/GBP live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 13.99 (14.01)

Silver/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
63 (73) 35 (40) 55 (30)
Allocation 100% (100%)
As GBP is likely to enter a period of more volatility coming into the Dec general elections. 2 months ago Silver was stronger against GBP than against any of the other major currencies and appears to be building a strong technical base for a similar move and taking out the Sept 4 high at 16.20. This does require some patience and No Change to full allocation in a GBP denominated investment portfolio.

Last week: Silver/GBP reacted fully in line with the global silver move this week. No Change.


Gold/Silver Ratio live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 83.42 (83.25)

GOLD/SILVER Ratio LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↓)
% Risk
Weight
41 (44) 40 (40) 30 (34)
Allocation 50/50 AU/AG (50/50 AU/AG)
Even though Silver always appears to have more manipulative properties than Gold meaning another correction in the direction of 90 cannot be excluded, the current risk weight scenario across time frames favours further weakness of the ratio. The technical space looks like the 75 ratio level is on the cards before we reach 90. And ot is way to long term equilibrium which could take a few years. No Change.

Last week: Risk-weight remains in favour of Silver. Along the volatile road towards a ratio 50 and below we will see many peaks and throughs. Patience will reward the investor staying with Silver. No Change


FX: EUR/USD, USD/CHF, GBP/USD, USD Index, GBP/EUR, Bitcoin

EUR/USD FX live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 1.1160 (1.1075)

EUR/USD LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↑ (↓)
% Risk
Weight
16 (7) 55 (42) 82 (72)
Allocation 100% (100%)
Euro/USD technically is still showing momentum to reach and take out the June high at 1.14. No change to keep long dollar transaction exposures fully covered. This applies to companies with dollar receivables and investment portfolio's with a large element of USD risk. Increased risk of a weaker US stock market also increases the currency risk. European based investment in US dollar based equities would reduce overall market risk by reducing the USD risk in this scenario. No Change.

Last week: The way we read this market is that the USD has turned down about one month ago. Risk weight sentiment certainly indicates this with a very oversold LT-Monthly in uptrend and weekly risk in fairly strong and still early uptrend. It means any ST attempt to strengthen the Greenback through intervention is likely to fail. Natural pressure on the USD may come from re-allocation away from US equity and bond markets by foreign investors and institutional investors. No Change keeping 100% dollar long exposure covered


USD/CHF FX live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 0.9847 (0.9935)

USD/CHF LT-M MT-W ST-D
Trend ↓ (↑) ↓ (↓) ↓ (↑)
% Risk
Weight
50 (54) 60 (68) 35 (50)
Allocation 100% (100%)
USD/CHF starts to look a little weaker technically that it has done for at least a year and is now stepping into a similar and longer potential dollar weakness scenario. It looks like only heavy intervention or manipulation from sovereign related influencers can stop this market from turning south. No Change.

Last week: CHF is still struggling to move away from that par level. It is a matter of time even though we may see this level for some time to come. Risk weighs on a weaker dollar, thus a fully forward covered long dollar exposure is the right approach to managing transaction risk. No Change


Cable GBP/USD FX live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 1.2925 (1.2815)

GBP/USD (Cable) LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
42 (25) 85 (78) 82 (82)
Allocation 100% (100%)
Cable turned back up last week following general USdollar pressure. This market starts to look a bit heavier but the risk weight uptrend is still in force to maintaining a fully hedged long dollar transaction exposure. No Change.

Last week: GBP turned mildly down and with ST showing bearish divergence in its own time frame the ST correction may last a bit. From a risk perspective any fresh exposure cover can be delayed until we see ST bullish divergence. Further unwinding of BREXIT positions may put some pressure on Cable in the short run but the leading time frame is the LT risk weight trend which is up after just turning from an oversold level. No Change


USdollar Index Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 97.12 (97.83)

USD Index LT-M MT-W ST-D
Trend ↓ (↑) ↓ (↓) ↓ (↑)
% Risk
Weight
75 (88) 25 (45) 12 (22)
Allocation 100% (100%)
All time frames still show bearishness with the LT looking very bearish indeed. ST looks a little stretched and may pause within the next few weeks before resuming the down trend and falling in line with the LT risk weight trend direction. NO change keeping long dollar exposures covered.

Last week: The USD Index ST and MT risk weight is in the process of diverging versus LT. This looks like a downtrend correction and will continue to give the USD some room to strengthen but the LT Monthly trend is looking to turn down from an overbought level. No Change in maintaining a fully covered long dollar exposure


GBP/EUR FX live price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 1.1578(1.1560)

GBP/EUR LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
58 (45) 90 (87) 75 (86)
Allocation 60% (80%)
We reduce our Short Sterling cover from 80% to 60%. Reason is that ST has turned down and Weekly MT is in overbought territory. The type of pause or correction that may develop much reduces the risk of a lighter GBP position.

Last week: The overall uptrend is still alive and seems to have paused temporarily. We'd like to see the ST risk weight trend to follow through on the downside and either provide a signal to reduce the hedge to well below 80% or re-enter at a lower level. No Change for now


BTC Bitcoin Price, Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 9226 (8655)

BITCOIN BTC/USD LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↑) ↓ (↑)
% Risk
Weight
54 (55) 25 (15) 62 (45)
Allocation 0% (0%)
BTC actually looks a little bullish again with resistance at the connecting downtrend line since the Dec 2017n high. That resistance comes in at 12640. We do not participate in Bitcoin due to this market not offering the trust that investors require in the way market liquidity transpires. So, No change due to high risk at any level. For speculators this is the perfect market to learn the ropes, but stay small and do NOT ever leverage.

Last week: Volatility returned to Bitcoin last week with a sharp drop towards 7,300 and a subsequent strong reversal to 9,000 at the end of the week. At least this gives hope for many investors who see their asset values float with changes of 30% in a matter of day. ST and MT risk weight did indicate this possibility of course, but this market is still well beyond acceptable portfolio risk allocation. No Change

Remaining 'opening up' gap still to fill at 2828. We exclude weekend action to determine opening gaps as major players are not participating in size.
If this market is poised to turn from extremely overbought (Dec 2017) to completely oversold, it doesn't appear to be finished.


INDEX: US30, S&P500, Brent crude oil

Dow Jones Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 27347 (26958)

US30 (Dow Jones) LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
87 (90) 80 (82) 87 (92)
Allocation 0% (0%)
The Dow is showing a Deja Vue scenarioand it is not possible to predict any final top as a result of massive QE and further lowering of short term interest rates in the USA and Europe, whilst the latter also increases its bond purchases with MT tenor. All risk weight time frames remain in either Overbought or Bearish divergence position which makes the risk of mholding these assets too high. No change.

Last week: With Apple and Microsoft over 1T market cap and Alphabet and Amazon a little under, just these fours moguls now average 984B mc which is truly mind boggling and probably causing much concern with certain authorities. There are now plenty statistics expecting an economic recession, which if it happens is likely to spread universal. Our risk weight only becomes higher although one cannot exclude spikes of any size. That does not however remove the indicator of high correction risk that could even be dramatic if unpredicted, like black swan, events unfold. The fact that new highs appear harder to reach is a sign of that high risk being very present in every day trading and investing. Such high risk scenario is the reason why greed can turn risk into being your biggest enemy. Hence No Change


S&P 500 Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 3067 (3022)

Standard & Poor 500 LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
90 (89) 90 (76) 92 (91)
Allocation 0% (0%)
Another All time high close at 3064 and at month end October. Short Term Daily Risk weight is at 92%. We call this overbought territory. The MT Weekly time frame is in an uptrend at 90% and looking to rol over to bearish diverge relative to price and Risk weight in May and June of 2019. The Long Term Monthly risk weight also looks to want to roll over into bearish divergence in relation to the Jan 2018 high at 2877 with risk weight at 95% and the September 2018 High at 2942 with risk weight at 92%. This is an unprecedented bubble of a proportion that could shake investment markets without warning. Our technical risk approach to the Standard and Poors index does not permit any allocation under these extreme conditions. No Change.

Last week: All of the largest companies in the S&P 500 can be considered systemic participants. A substantial devaluation could have a widespread effect on future returns which may affect hundreds of million of people depending on a price index proof pension fund. This already is a major problem today with interest rates at zero. Risk weight at overbought level in all time frames shows massive vulnerability that is increasingly difficult to time. One can be certain that many of the largest investment fund managers are extremely concerned because bubbles do not offer the comfort of high liquidity when they pop. No Change


Brent Crude oil Weekly update risk analysis relative to Long Term Monthly(LT-M), Medium Term Weekly(MT-W), Short Term Daily(ST-D) and Hourly(not shown) data
(Previous week in brackets)

Close 1 November: 61.55 (59.25)

Brent LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↑) ↓ (↑)
% Risk
Weight
27 (29) 29 (27) 62 (92)
Allocation 0% (50%)
Brent could again turn up but our risk weight indicators taken from Stochastic, RSI and MACD do not offer a consistent enough picture to enter this market with low risk. The LT Monthly time frame looks potentially bullish but it has not been confirmed yet. The massive Aramco IPO may also influence short term activity as it is likely to issue a total of 5% of the stock in the near future which would be about a $100 Billion cash value.
Timing of the tranches for IPO is very critical in order to make this an orderly series of transactions.
Bottom line is that we do not yet see a new low risk entry point for Brent, hence No Change.

Last week: Brent rallied nicely after we removed our allocation. With ST risk weight at 92% and diverging vis a vis MT and LT, we feel more comfortable not having a position until this market shows its hand which will likely be driven by geo-political events. No Change for now

Posted in A - All Financial Blogs | 2020 Forecast.