Gold – FX – Global – 20 December 2019

GOLD & SILVER 2020

Gold/US Dollar, Silver/USD, Gold/Silver Ratio

On Dec 20, 2019 we removed the analysis of Gold vs GBP and EUR and Silver vs GBP and EURO for practical reasons. There can and will be intermediate differences between Gold’s/Silver’s behaviour vs different major currencies, yet the overall trend is generally the same as it will also be against lower volume but important currencies which more often show a weaker tendency against gold because of stronger inflationary pressures such as CAD and AUD etc. And until or if the USD is ever replaced as the global reserve currency we will focus on these pairs to determine the larger risk weight and trend in gold and silver prices.


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/USD LT-M MT-W ST-D
Close 20 December: 1478 (1475)
Trend ↓ (↓) ↑ (↑) ↑ (↑)
% Risk
Weight
81 (81) 23 (19) 70 (56)
Allocation 100% (100%)
The technical picture remains focussed on the risk weight divergence between Weekly and Monthly. It is not until the stretch in risk weight between these two time frames is much smaller that we can consider a temporary adjustment to our holding (EUR based) since Q4 2018. No change for now and remain fully invested in Gold.

Last week: Where alt-media fundamentals meets our risk weight technicals is nicely portrayed in last week’s interview from USA Watchdog. See video here

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 takes 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.


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)

Silver/USD LT-M MT-W ST-D
Close 20 December: 17.16 (16.89)
Trend ↓ (↓) ↑ (↓) ↑ (↑)
% Risk
Weight
63 (62) 13 (9) 68 (40)
Allocation 100% (100%)
With MT risk weight having turned bullish following the expected ST price recovery we stay focussed on our long holding. The LT risk weight is only at 63. A bigger push from the MT is more likely and can easily turn LT into a positive trend again with some way to go. N0 Change.

Last week: 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


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)

GOLD/SILVER Ratio LT-M MT-W ST-D
Close 20 December: 85.72 (87.88)
Trend ↑ (↑) ↓ (↑) ↓ (↓)
% Risk
Weight
42 (44) 80 (82) 30 (62)
Allocation 50/50 AU/AG (50/50 AU/AG)
No Change.

Last week: 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


FX 2020

USD Index, EUR/USD, GBP/USD, USD/JPY, GBP/EUR, Bitcoin

On Dec 20 we are adding the USD/Japanese Yen pair to our analysis as it is the second largest currency pair in international fx markets.

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 20 December: 97.69 (97.18)

USD Index LT-M MT-W ST-D
Close 20 December: 85.72 (87.88)
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
68 (81) 32 (38) 48 (20)
Allocation 100% (100%)
No Change.

Last week: The Dollar Index still looks like it has just started to roll in a definitive bear trend unless the market is again under 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

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)

EUR/USD LT-M MT-W ST-D
Close 20 December: 1.1076 (1.1116)
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
22 (22) 61 (54) 55 (83)
Allocation 100% (100%)
No Change.

Last week: 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


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)

GBP/USD (Cable) LT-M MT-W ST-D
Close 20 December: 1.2980 (1.3305)
Trend ↑ (↑) ↓ (↑) ↓ (↓)
% Risk
Weight
59 (58) 83 (90) 25 (87)
Allocation 100% (100%)
We expected a pause in the GBP rally given its strong momentum during the UK election campaign and before. GBP might drop an other 2 points before recovery sets in. This is the technical picture which can be reliably adopted as a risk management approach. No change therefore in maintaining a fully covered dollar receivable hedge.

Last week: 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


USD/JPY 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)

USD/JPY LT-M MT-W ST-D
Close 20 December: 109.39 (109.31)
Trend ↑ (↑) ↓ (↓) ↓ (↑)
% Risk
Weight
41 (40) 82 (85) 80 (42)
Allocation 50% (0%)

This is a first time analysis. It looks like we would have been marginally long dollars since middle of September or early October following a bullish divergence in the Medium Term time frame and a bottoming and possible turning action of the LT time frame. As both ST and MT have turned down from a relatively high risk level we believe this is the right moment to immediately turn this around and establish a cover for dollar receivables at 50% of 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)

GBP/EUR LT-M MT-W ST-D
Close 20 December: 1.1700 (1.1860)
Trend ↑ (↑) ↓ (↑) ↓ (↑)
% Risk
Weight
75 (80) 85 (93) 20 (82)
Allocation 50% (50%)
In spite of bullish divergence developing between ST and MT GBP/EUR sees LT pressure even though LT is still in uptrend. With weekly having turned down and the large cushion from existing position plus opportunity profit we choose to stay with 50% cover on short GBP exposures for EUR based companies whilst staying fully covered on short EUR risk for GBP companies.

Last week: 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.


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)

BITCOIN BTC/USD LT-M MT-W ST-D
Close 20 December: 7187 (7258)
Trend ↓ (↓) ↑ (↑) ↑ (↓)
% Risk
Weight
47 (46) 19 (18) 55 (18)
Allocation 0% (0%)
This market remains highly speculative. LT in downtrend slowing down and possibly moving up as a result of an upturn in the MT risk weight trend. ST however is spurting up within a relatively narrow price range. Relative as the movements remain pretty volatile for members of the traditional investment community, with whom we identify ourselves. Thus far our stand down has been driven by risk aversion at any cost (of opportunity). No Change.

Last week: 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

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.


GLOBAL 2020

S&P500, Brent Crude Oil

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)

Standard & Poor 500 LT-M MT-W ST-D
Close 20 December: 3223 (3169)
Trend ↑ (↑) ↑ (↑) ↑ (↑)
% Risk
Weight
97 (97) 96 (96) 97 (85)
Allocation 0% (0%)
This week we have abandoned the Dow analysis because it is so close to that of S&P whilst the S&P500 has a broader impact on world markets which still seem to largely follow the USA. We are out of this market since Q3 of 2018. We’ve seen a major drop and another major rally into new all time highs. Everything technical is simply very high risk and history has learned that it is better to lose the final 10, even 20% of a move than being trapped in a reverse that has no liquidity. When all time frames are 95% plus something is going on and one should not challenge that kind of risk with any significant portfolio allocation. Pure spec is another matter although right now even that is ‘risk off’. No Change.

Last week: 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


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)

Brent LT-M MT-W ST-D
Close 20 December: 66.10 (64.99)
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
35 (33) 52 (43) 94 (82)
Allocation 0% (0%)
Oil prices look like they are behaving as if the world economy is in the best shape ever. Technical evidence however is not confirming. ST keeps getting into high risk range whilst we still haven’t seen a real bullish divergence bottom in the MT and LT times frames. This is enough reason to remain very suspicious of the MT price range. The triangle formation since the high of Oct 2018 could continue for a few more months and then either turn sharply up or down. Since it is impossible to detect a clear trend based on risk weight we continue to stay on the sidelines. No Change.

Last week: 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.

Posted in A - All Financial Blogs | 2020 Forecast.

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