Gold – FX – Dow – 13 December 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)

GOLD: Gold vs US Dollar, Euro and GBP

Close 13 December: 1475 (1460)

Gold/USD LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↓) ↑ (↓)
% Risk
Weight
81 (80) 19 (15) 56 (65)
Allocation 100% (100%)
Where alt-media fundamentals meet our risk weight technicals is nicely portrayed in last week’s interview from USA Watchdog.

The concern of a greatly manipulated and futures driven market underpinned with paper gold derivates substituting hard physical gold in Comex contracted vaults is reflected in what we conclude from our risk weight trend analysis.
In longer term time frames the weekly is still in bullish divergence mode versus Monthly. The LT Monthly is higher risk but nowhere near a major technical top. It will take many months or even years for that to become evident provided the MT Weekly and ST Daily maintain good momentum during the advance. Gold is an asset class that has proven insurance characteristics if the long term allocation is under 10% of total assets. This means that holding gold is a necessary choice to protect against sudden events in a typical diversified portfolio of stocks, bonds and commodities. The Watchdog interview above is one of many hundreds of media items having challenged some of the more suspicious mechanics by major financial market participants.
We remain fully allocated so no Change.

Last week: A simple reminder of what ‘Risk being your friend’ really means; Risk is your friend if a position in financial markets is under reasonable control, not leveraged and that protects your total assets to a large degree. Speculation is fine, but only in limited size with stops at a preset maximum of risk exposure.
The current financial market space is widely reported on by many very well known analysts and the clear consensus is one of great uncertainty, with current stratospheric prices in stocks and bonds. Most of the high risk warnings come from alternative media contributors seeking protection in hard assets whilst mainstream keeps pushing the bull market. Because most small and many large speculators, serving smaller investors, ultimately loose money on their investments, the buck will stop somewhere and at a moment that comes as totally unexpected in their perception. Yet the warning signs are hot and we only comment based on what our tools tell us. Not being exposed when risk is seriously high, based on experience and simple technical analysis, is usually the road to safety. 1929(stocks), 1980(gold and silver), 1990-2000 (house prices), 1987 (stocks), 2000 (stocks) and 2008 (most asset classes) are easily forgotten, yet reminders of what might be in store for us. Human psychology is to believe that ‘it will be different this time’ but it NEVER is. The pattern of Recovery, Expansion, Recession and Depression will not be broken except for the actual duration of each of these business cycles which today is being dominated by unprecedented and extreme monopolist interventions.

Turning our attention back to Gold again, the yellow metal was strong all week and being hammered in the last 5 hours of trading on Friday Dec 6 due to positive consumer sentiment in the US. Data is coming from a new month and even though the risk weight trends are down, there is little price change as such week on week whilst the divergence between the MT Weekly and LT Monthly is still in play. The scenario and preference to maintain a fully invested position is driven by the fact that this market is still up 400 dollars from the Dec 2015 low whilst risk weight has not shown a serious peak formation in the MT and LT trends. Hence we remain highly confident having increased our total exposure relative to total assets to 25%.
This insurance policy approach using hard assets will protect against the worst possible and yet unimaginable scenario at this stage in the economic cycle. In the last week of 2019 we will make a Gold price forecast for 2020.


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 13 December: 1327 (1321)

Gold/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↓) ↑ (↓)
% Risk
Weight
81 (81) 15 (14) 28 (48)
Allocation 100% (100%)
It appears that the correction from the early September Gold high is ending with the MT Weekly turning up in bullish divergence versus Monthly risk weight (15 vs 81). We stay with full allocation, a position now held for more than 14 months. No Change.Last week: As against the USD Gold may even weaken a bit further and the same picture and analysis drives this Gold/EUR pair. No Change to being fully invested. In the last week of 2019 we will make a Gold price forecast for 2020


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 13 December: 1104 (1110)

Gold/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
65 (65) 6 (6) 18 (15)
Allocation 100% (100%)
Gold has lost more value to GBP the past 4 months than against other major currencies. GBP’s strong Brexit related performance of course is not backed by any reliable fundamental economic forecast which is what shows in our trend analysis. We forecast a ‘buy the rumour, sell the fact’ event as Brexit is now going to be fact and attention will focus away on the real economic performance. We actually expect sterling to weaken and gold to recover to a level well above last week’s recorded low. No Change.Last week: GBP has been relatively strong causing gold to tumble a little bit further than against other major currencies. The Outlook for Gold however is as positive as against USD and EUR with MT being in Low risk position dipping below the risk weight low in May whilst prices are 200 pounds higher. That is considered bullish divergence. 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 13 December: 16.89 (16.55)

Silver/USD LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
62 (60) 9 (9) 40 (30)
Allocation 100% (100%)
Last week’s bottom at 16.52 reflects a risk weight bullish divergence in the daily time frame. With the MT Weekly at a low risk sub 10 level, we would expect a price recovery, hence a low risk entry level. We remain fully invested. No Change.Last week: Silver clearly has suffered most last week during Fridays sell off. The outcome of this weeks Silver analysis, like all outcomes the past year, is that we are far away from peaking action. Just haven’t seen anything that comes close to a longer term top and it shouldn’t of course after a 6 year slide with little recovery. Signals are weakish at this moment but the long term picture shows no sign of being tired, besides a short term pause perhaps. 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 13 December: 15.18 (14.95)

Silver/EUR LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
63 (62) 8 (10) 26 (25)
Allocation 100% (100%)
Silver Euro picture is a near mirror copy of Silver/USD hence no Change.Last week: Silver Euro is broadly the same picture, so no change in staying with a full allocation.


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 13 December: 12.63 (12.58)

Silver/GBP LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↓ (↓)
% Risk
Weight
51 (50) 4 (5) 14 (15)
Allocation 100% (100%)
The low last week following another spurt of Sterling reflects a 22% fall from the high in September, yet still holds well above the entry level close to 11.00. With Medium Term weekly now at a real trend turning level, Silver would be a purchase call once the ST Daily risk weight trend turns up. No Change.Last week: A 20% drop from the peak in September is of course significant with half of that due to a fierce recovery of GBP in Forex markets. Given the apparent bullish divergence between risk and price now against the May low at 11.20 we can see the potential for a much stronger recovery of Silver vs GBP in the coming quarter. 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 13 December: 86.88 (87.86)

GOLD/SILVER Ratio LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
44 (45) 82 (77) 62 (78)
Allocation 50/50 AU/AG (50/50 AU/AG)
The Gold Silver ratio has recovered approximately 64% of the Q2 drop 93.44. Patience is likely to be rewarded. We forecast a level of 54.00 which technically is a 62% correction of the entire advance between May 2011 and the summer high of 2019. We cannot exclude some upward pressure in the coming weeks given the trend direction (↑) of LT and MT risk weight. No change to remaining evenly invested between Gold and Silver whilst leaning a little in favour of Silver.Last week: The Gold/Silver ratio is pointing up in all timeframes and diverging in Daily whilst MT is showing a very steep acceleration, possibly not finished yet, whilst LT Monthly is neutral and pausing. No clear bottom has been reached and we focus on this ration returning to an equilibrium level closer to 50. 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 13 December: 1.1116 (1.1055)

EUR/USD LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↓) ↓ (↓)
% Risk
Weight
22 (20) 54 (48) 83 (75)
Allocation 100% (100%)
We still consider the Jan 2017 as the low because that price low gave bullish divergence in the LT time frame. The Monthly timeframe is leading indicator given that MT is in a fairly neutral direction (54) range. We remain very much in favour of a full dollar receivable transaction risk hedge.Last week: The Dollar keeps dropping on us against the direction of risk and it may, looking at the charts and indicators, not be finished. We would like to see a sign of peaking action MT in order to deviate from our bearish stance on the greenback. No Change


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 13 December: 0.9822 (0.9897)

USD/CHF LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
47 (50) 58 (74) 13 (16)
Allocation 100% (100%)
USD/CHF remains range bound and the correct risk approach is still being fully hedged on long dollar transaction risk.Last week: As expected this USD/CHF did find resistance again above par and looks it may continue to hover around this price level for a while longer. The overall picture is still in the direction of dollar weakness being the greater risk and we remain fully in favor of 100% hedge against long USD dollar transaction exposure


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 13 December: 1.3305 (1.3130)

GBP/USD (Cable) LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
58 (60) 90 (88) 87 (93)
Allocation 100% (100%)
The LT downtrend of the USD remains primary focus and also against GBP. We expect a bit of pressure on Cable the next few weeks. The price cushion however calls for remaining hedged in case the USD support fades and dollar bulls decide to finally call it a day.Last week: DDay is Thursday 12th. No one knows. Technicals in our view point towards GBP ending its bull run but may appreciate still against the USD which is considered weaker. Short term cable may pause or even drop sharply given the very overbought risk weight level. As long as we do not see ST bearish divergence the better approach is to stay fully covered on long dollar exposures which thus far has been the right approach since the middle of this year. 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 13 December: 97.18 (97.68)

USD Index LT-M MT-W ST-D
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
65 (81) 32 (38) 20 (83)
Allocation 100% (100%)
The Dollar Index still looks like it has just started to roll in a definitive bear trend unless the market is again under the influence of TTR (Trump Tweet Rally). No Change is prudent risk management.Last week: The USD Index against the basket looks heavier than the individual dollar charts against majors. This confirms the preferred position of full cover against long dollar transaction risk


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 13 December: 1.1970 (1.1860)

GBP/EUR LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↑) ↑ (↑)
% Risk
Weight
80 (80) 93 (93) 82 (90)
Allocation 50% (50%)
Since 50 years GBP is an inflation lead currency just like French Francs, Spanish Peseta’s Italian Lira and Portuguese Escudo were before 2002. The most dramatic drops were of course agains at Dmark and Guilder but even against the Euro basket, Sterling history would indicate a drop below par in coming years. Technically the rally may not yet have finished although GBP looks heavy. We feel comfortable with the reduced fifty % hedge against short GBP exposure with a view to fully eliminate once LT risk weight turns down is likely to turn down based on shorter time frame indicators. Important for GBP based companies with Euro payables exposure we would enter into a fully hedged position right now in an amount equal to one year transaction exposure.Last week: 50% cover is still the right psychological cover level after having benefitted from a very strong pound since July. The market edged a little higher still but risk in ST and MT time frames is very high. With the British election coming up Thursday 12th the most likely scenario is a buy ‘the rumor sell the fact approach’. With high risk weight we prefer to preempt such a possible scenario and rather have a low cost opportunity to re-enter at a lower level or even flat level in due course. No Change


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 13 December: 7258 (7523)

BITCOIN BTC/USD LT-M MT-W ST-D
Trend ↓ (↓) ↑ (↓) ↓ (↑)
% Risk
Weight
46 (47) 18 (16) 18 (70)
Allocation 0% (0%)
Staying completely away from this highly volatile market is what we advocate. Even for small positions this kitchen can prove pretty hot and not worth the trouble. Speculation does not fall within a risk management environment and this cannot change regarding crypto currencies until they are allowed to become and are widely trusted to become means of mainstream payments.Last week: No Change of course, but we’ll do a fresh analysis covering 2020 expectations in coming weeks

Remaining ‘Gap open’ (July 2017) still to fill at 2828. We exclude weekend action to determine opening gaps as major players are(were) not participating in size during weekends.
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 13 December: 28135 (28015)

US30 (Dow Jones) LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↓) ↑ (↑)
% Risk
Weight
95 (95) 94 (93) 78 (45)
Allocation 0% (0%)
Both MT and LT risk weight is beginning to touch horizontal resistance whilst LT Monthly may well show bearish divergence versus the Jan 2018 price high of 26,700.
The Dow Jones Industrial index remains high risk and we stay out. No Change.Last week: A drop and another rally this week. The scenario of the last 2 years. Risk remains as high and we don’t look back at an opportunity that wasn’t to be. Risk is king and protects from ending up in tears. 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 13 December: 3169 (3145)

Standard & Poor 500 LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↓) ↑ (↑)
% Risk
Weight
97 (97) 96 (96) 85 (55)
Allocation 0% (0%)
Since the 2009 bottom, the large corrections of 2014 and 2018 appear small with hindsight. This highly subsidised market remains such high risk that with every new high an entry to diversify into stocks becomes less likely. Arguably a missed opportunity and not even a large one as we removed our participation at the 2700 level in 2018. We need to see risk weight level in LT time frame much closer to 10 before a Long entry will be considered. At some point in the more distant or not so distant future such a risk weight level can be predicted as markets are always expected to react by a significant percentage at some point. No Change.Last week: The ST scenario is definitely bullish again but MT and LT risk weight are too high for comfort. ST risk weight can turn on a moment notice and the risk is that LT and MT take over as primary direction. That fresh direction can only be down because risk weight in LT and MT time frames will remain verynhigh as long as priced stay up here from one week to the next.
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 13 December: 64.99 (64.27)

Brent LT-M MT-W ST-D
Trend ↑ (↑) ↑ (↓) ↓ (↑)
% Risk
Weight
33 (32) 43 (41) 82 (61)
Allocation 0% (0%)
Daily time frame turned down in bearish divergence mode against the 64.60 price high 3 weeks ago. This situation stops us from entering a long position as the LT timeframe is nows trending up at the 35 risk weight level. A fresh after the september opportunity gain looks fine in LT but MT and ST do not confirm a low risk entry, hence No Change.Last week: The strong drop last week was followed by a similar, slightly stronger rally this week. Time frames and risk weight except MT are up with ST Daily potentially showing bearish divergence.
There is absolutely no fundamental signal from the Aramco IPO to threatening talk only of supply reduction. The latter being highly unlikely given the need for much more cash in all of the oil producing countries. Risk remains too high for comfort so we propose a no change attitude for now.

Posted in A - All Financial Blogs | 2020 Forecast.