Metals – FX- Indices – update – 30 Dec 2018

Precious Metals: Gold & Silver vs US Dollar, Euro, GBP, Ratio


Gold/USD

Stay long with the strong LT trend and an advancing lower risk weight. With Weekly and Daily in higher risk weight territory it is entirely possible that this pair may slow or even retract a bit, but the trend is Up and there is no divergence of any kind that would suggest an end. Besides it looks like Silver is finally taking a lead which could positively affect Gold and also Platinum.

(We are raising allocation to Gold to 100% of the Portfolio allocation maximum within a diversified portfolio. This maximum is of course a matter of personal preference. That preferred allocation to gold can now be increased to further limit any major exposure to the banking sector due to a relatively and uncomfortably higher cash level)

Gold/USD Month Week Day Hour
Dec 28 close 1281 (1256)
Trend Direction Up (Up) Up (Up) Up (Down) Up
Risk Weight 25-40 (25-35) 85-90 (80-90) 85-90 (75-80) 55-65
Allocation 100% (100%)

Silver/USD

Last week's risk increase to max position was right on time to benefit from a bit of a break in the Gold/Silver ratio. Otherwise a similar yet even stronger looking picture than gold going forward.

(The increase to 80% allocation of Max silver percentage of total Precious metals preference was triggered last week. We now increase again and immediately to 100%. Even though Silver has not taken a lead in the recent price advance of precious metals, its technical behavior actually follows gold. The silver allocation (see also the Ratio) risk is both technical and fundamentally defensive at this moment)

Silver/USD Month Week Day Hour
Dec 28 Close 15.33 (14.61)
Trend Direction Up (Up) Up (Up) Up (Down) Up
Risk Weight 10-20 (10-15) 65-75 (50-70) 85-90 (70-80) 65-75
Allocation 100% (80%/60%)

Gold/EUR

Gold vs EUR looks a little more tired than vs USD. Without any sign of divergence, this pair also should experience further advance MT and LT.

(Short and medium Term (Daily and Weekly) are now approaching high risk weight levels but still in uptrend. As LT shows a very strong Uptrend, that LT drives the entire space. In terms of risk we favor Euro now vs Dollar. Because other major asset classes are now in established LT downtrends, the gold allocation can be increased to 100% of the preferred maximum asset allocation to Gold within a Precious metals portfolio)

Gold/EUR Month Week Day Hour
Dec 28 Close 1119 (1105)
Trend Direction Up (Up) Up (Up) N (Up) Up
Risk Weight 40-65 (40-60) 95-100 (90-100) 85-90 (85-90) 80-90
Allocation 100% (80%)

Silver/EUR

Stay with full allocation. This market is far from finished.

(We follow the Gold space and wish move the Silver allocation in EUR portfolio's up to 100% by London fix time on Dec 24. We could see a little bit of initial weakness on Monday, but the risk profile favors a maximum Silver allocation vs EUR. Also see Gold/Silver ratio)

Silver/EUR Month Week Day Hour
Dec 28 Close 13.40 (12.84)
Trend Direction Up (Up) Up (Up) Up (Down) Up
Risk Weight 15-30 (15-20) 75-85 (65-80) 85-95 (60-70) 75-85
Allocation 100% (60%)

Gold/GBP

We could see a bit of pause due to ST and MT high risk weight. Gold started an uptrend late 2015 and paused for a full 2 years until 3 months ago and is now breaking out its flag formation. We will need to see some kind of divergence between price and risk weight in both ST and MT time frames before a possible intermediate top can be considered. This may take quite a while to develop. Stay put with max allocation.

(This pair also seems to follow the Dollar and EUR picture, hence we also increase to max gold allocation of 100% in this portfolio with immediate effect)

Gold/GBP Month Week Day Hour
Dec 28 Close 1006 (992)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 40-65 (40-65) 85-90 (85-95) 80-90 (80-85) 15-25
Allocation 100% (80%)

Silver/GBP

This month's action appears to complete a significant low risk weight in Long term time frame. ST high risk weight may pause the uptrend for a short while as in between 1 and 3 weeks of more range bound price activity, but the overall risk is to the upside. Stay with Max allocation.

(Same as pairs above. We increase to 100% of allocation maximum. Also see Gold/Silver ratio)

Silver/GBP Month Week Day Hour
Dec 28 Close 12.08 (11.56)
Trend Direction Up (Up) Up (Up) Up (Down) Up
Risk Weight 15-30 (15-25) 80-90 (70-90) 80-90 (75-85) 50-60
Allocation 100% (60%)

Gold/Silver Ratio

Silver appears to break downward from its recent 8 week duration attempt to move lower. The break towards 83.00 with down trending risk weight indicates much further weakness in the ratio. Time to move Silver to 50% allocation of the PM space investment.

(ST and MT last week did close higher which was expected. The range trading trend has not yet finished and we keep silver allocation at 30%. 70% Gold and 30% Silver) All time high: 1941 = 97, 1991 = 90

AU/AG Ratio Month Week Day Hour
Dec 28 Close 83.56 (85.60)
Trend Direction Up (Up) Down (Down) Down (Up) Down
Risk Weight 85-90 (85-95) 60-70 (75-80) 10-40 (50-60) 20-40
Allocation 50% AG (30% AG)

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

Euro/USD

The narrowing risk weight range in monthly time frame supports to be fully hedged on long dollar exposure. Short dollar exposures only covered on cash basis.

(Still range bound with USDollar attempting to finish the reaction to what already seems an established dollar downtrend since 2016. It probably will take little to start driving the dollar towards the late 2017 peak of 1.2500+. 100% hedge for Dollar longs. Dollar shorts should only cover on cash basis. No forward hedge)

EUR/USD Month Week Day Hour
Dec 28 Close 1.1440 (1.1370)
Trend Direction Down (Down) Up (Up) Up (Down) Up
Risk Weight 5-15 (5-10) 20-30 (20-25) 60-65 (55-65) 20-30
Allocation 100% (100% hedge)

USD/Swiss franc

Same risk analysis. $/Swiss long exposures fully hedged. Shorts covered cash only.

(Same story for US dollar exposures as for EUR)

USD/CHF Month Week Day Hour
Dec 28 Close 0.9840 (0.9920)
Trend Direction Up (Up) Down (Down) Up (Down) Down
Risk Weight 80-85 (80-90) 60-65 (65-70) 35-40 (30-40) 70-80
Allocation 100% unch

British Pound/USD

No change. Short cable exposure fully hedged. Dollar purchases only on spot when due.

(With or without Brexit. Cable looks even warmer than Dollar/Swiss. Same full hedge on Short cable positions and cash cover only for long cable exposures)

Cable Month Week Day Hour
Dec 28 Close 1.2690 (1.2640)
Trend Direction Down (Down) Up (Up) Up (N) Down
Risk Weight 5-10 (5-10) 10-20 (10-15) 60-65 (40-50) 75-80
Allocation 100% unch

British Pound/Euro

Risk weight across time frames indicates a little weaker bias for Sterling again. We suggest a 50% hedge either way.

(No change in hedge allocation. This market can go anywhere short term. No clear risk direction although GBP shows bottoming action due to price risk divergence (= equal price lows coupled with higher risk weight lows)

GBP/EUR Month Week Day Hour
Dec 28 Close 1.1100 (1.1110)
Trend Direction Down (Down) Down (Down) Down (N) Down
Risk Weight 40-50 (40-50) 15-25 (15-30) 45-50 (25-30) 80-85
Allocation 50% (60%)

Bitcoin/USD

If this market were mature and broadly traded with substantial liquidity, which it isn't, one could argue a case for temporary strength. However the LT time frame is till down and not finished. BTC shows the reverse image of Stock indices going into Oct 2018. Therefore: STFH and stay out!

(Bitcoin already has shaped its volatile reaction from the recent low and may show further rapid action/reaction in price. LT still in downtrend with daily already showing potential bearish divergence. Use strenght to unload positions if not done already a very long time ago. Better blockchain alternatives to crypto currencies will arrive sometime in 2019) 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.

BTC/USD Month Week Day Hour
Dec 28 Close 3838 (3840)
Trend Direction Down (Down) Up (Down) Up (Down) N
Risk Weight 5-15 (5-20) 5-10 (5-10) 50-60 (75-80) 25-30
Allocation 0% (0%)

INDEX: US30, S&P500, Dollar Index, Brent crude oil

Dow Jones

It is only 3 months since the All time high. Any strength facilitates selling if missed out on the earlier calls. This market only shows intermediate lows and has some way to go and not be touched until bullish price/riskweight divergence in Medium term time frames develops.

(Same as last week. There may be some bottom picking as there always is when short term indicators reach oversold weight area's. With the LT downtrend so strongly in place any shorter term time frames may easily continue in oversold conditions whilst prices tank. Rallies should be used to unwind positions not vice versa)

US30 Month Week Day Hour
Dec 28 Close 23062 (22445)
Trend Direction Down (Down) Down (Down) Up (Down) Down
Risk Weight 55-75 (45-70) 10-15 (5-20) 25-40 (0-10) 40-50
Allocation 0% (0%)

Standard & Poor 500

It is only 3 1/2 months since the All time high. Any strength provides an opportunity to sell if missed out on the earlier calls. ST to MT (daily and weekly) time frames show a bit of potential strength yet only lower lows thus far and no divergence of any kind. It will take a while before a more serious price low kicks in.

(Same as DJII)

S&P500 Month Week Day Hour
Dec 28 Close 2485 (2416)
Trend Direction Down (Down) Down (Down) Up (Up) Down
Risk Weight 45-70 (35-65) 10-15 (0-15) 25-40 (0-10) 50-55
Allocation 0% (0%)

Dollar Index

(Same as last week. Long dollar positions fully hedged within the general transaction risk time frame like 6 months or 12 months. Short dollar exposures only covered on cash basis)

USDIndex Month Week Day Hour
Dec 28 Close 96.40 (96.95)
Trend Direction Up (Up) Down (N) Down (Down) Down
Risk Weight 85-90 (85-95) 75-85 (80-85) 30-40 (35-40) 65-70
Allocation 100% unch

Crude Oil

In less than 3 months world oil prices have lost 62% the entire advance that started in late 2015. Arguably a Fibonacci target and we could see some volatile range trading. Participants in this market already feel serious pain. That puts a lid on much higher prices. This is not the time to invest in oil yet.

(This is now a tricky market for speculators. LT trend is strongly established but the the move has came stronger than anyone expected. One could easily see some strong reactions to the short term pressure in Oil. Our method of Risk measurement is better method for asset allocation purpose than any other kind of price prediction outlook based on fundamental analysis or technical models like EW or Cycles. This market should not be touched until LT and, MT and ST find some kind of balance. Bottoms do not exist suddnely without good reason and that creation of a bottom takes time. Markets do not turn overnight if a LT trend is ongoing. We do not predict price or time because it is not relevant. Our risk weight and trend direction only tells us the LT and ST trends at this very moment. It means that a LT bottom may be in only after a very long period of price discovery at the current $50's handle but also at much lower levels like $30 or much lower still)

Brent Month Week Day Hour
Dec 28 Close 52.25 (53.50)
Trend Direction Down (Down) Down (N) Up (Down) Up
Risk Weight 25-60 (25-60) 5-10 (5-10) 15-25 (5-10) 25-35
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

Leave a Reply