Metals – FX- Indices – update – close 12 April 2019

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

Gold/USD Month Week Day Hour
Close 12 April: 1290 (1292)
Trend Direction Down (Down) Down (Down) Down (Up) Down
Risk Weight 65-70 (65-70) 25-45 (40-55) 35-45 (20-25) 5-10
Allocation 50% (50%)

Our aim is always to only participate in a Low risk longer term play environment and right now we are almost fully in cash. The PM space is both interesting and frustrating for many, especially if allocation weight is relatively high. Dec 2015-Jul 2016 was a firm rally from a strong low risk bottom. Since that time Gold/USD has traded in a narrowing but wide 20% sideways range. In Elliott terms perhaps a complex ABCDE wave 2. The current shorter term risk is for the market to weaken a little further. Without trying to predict a low print price objective (maybe between 1200-1260) This market is working towards a new low that is more likely than not to precede a major rally. This is a technical observation. Gold being a Tier1 asset of 'Trust' may well start playing a role in this observation/

(The present technical picture forces a (possibly temporary) reduction of the position to 50% of allocation. Given the continued high risk position of the other major asset classes the allocation will continue to be held based on the statistical minimum required portfolio asset allocation of Gold (typically 5-10% against most currrencies))


Silver/USD Month Week Day Hour
Close 12 April: 14.95 (15.40)
Trend Direction Down (Down) Down (Down) Down (Up) Down
Risk Weight 35-45 (35-45) 15-30 (30-45) 20-35 (25-30) 10-20
Allocation 50% (50%)

The picture for Silver is very similar to Gold, except for a weaker tendency since the 2016 high. With Silver now trading at or near cost of production it will be a good strategic hold. We stay with a minimum allocation waiting for a stronger entry point.

(Silver USD shows similar higher risk of temporary correction as Gold and performs the same asset risk protection. Hence staying with 50% of allocation)


Gold/EUR Month Week Day Hour
Close 12 April: 1133 (1144)
Trend Direction Down (Down) Down (Down) Down (Down) Down
Risk Weight 70-85 (75-85) 35-45 (50-60) 35-50 (35-45) 5-20
Allocation 50% (50%)

Vs Euro Gold is now in a ST, MT and LT downtrend. Impossible to say how long this will last. For EUR based investors it is critical to maintain a minimum allocation as insurance because ST and MT risk weight is moving lower fairly rapidly.

(As per last week's analysis we have reduced our allocation to 50%)


Silver/EUR Month Week Day Hour
Close 12 April: 13.24 (13.43)
Trend Direction Down (Down) Down (Down) Down (Down) Down
Risk Weight 50-55 (50-60) 20-35 (40-50) 20-35 (30-40) 10-25
Allocation 50% (50%)

EUR/Silver is also rapidly moving into low risk weight territory. Price action is indeed down but not alarming. A minimum allocation should be kept.

(The technical picture shows short term higher risk of further correction. We reduce the allocation to 50% (A full allocation typically represents a minimum % protection in a fully allocated portfolio across asset classes. This protection level should vary between 5% (institutional) to 25% (private))


Gold/GBP Month Week Day Hour
Close 12 April: 987 (990)
Trend Direction Down (Down) Down (Up) Down (Up) Down
Risk Weight 65-75 (65-75) 25-30 (30-35) 55-65 (30-35) 30-40
Allocation 50% (100%)

The risk weight spectrum now favors reducing the position to a minimum of 50% of the chosen allocation.

(No change. A close below 971 triggers a 50% reduction of allocation)


Silver/GBP Month Week Day Hour
Close 12 April: 11.43 (11.55)
Trend Direction Down (Down) Down (Down) Down (Up) Down
Risk Weight 35-50 (40-50) 10-20 (15-20) 30-40 (25-30) 15-25
Allocation 50% (100%)

Same as last week. A daily close below 11.40 is reason to (temporarily) reduce the allocation to 50%. Price is close to trigger level and unfortunately the technical risk is for a slightly larger than expected temporary price erosion. Sustained relative weakness for a slightly longer period will most likely find price support in across time frames low risk weight.

(A daily close below 11.40 is reason to (temporarily) reduce the allocation to 50%. No change for now)


GOLD/SILVER Ratio Month Week Day Hour
Close 12 April: 85.94 (85.26)
Trend Direction Up (Up) Up (Up) Up (Down) Down
Risk Weight 75-85 (70-85) 85-90 (80-85) 70-80 (45-55) 55-65
Allocation 50% AG (50% AG)

As long as Silver remains historically weak with relatively high risk weight indicators, one should stay with the 50/50n allocation mix.

(Investors in PM should maintain the ration at 50% Gold and 50% Silver. (It looks like Palladium peak is in the Platinum finally eyes more positive. An partial 1/3rd allocation to Pt is an acceptable option)


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

EUR/USD Month Week Day Hour
Close 12 April: 1.1297 (1.1212)
Trend Direction Down (Down) Down (Down) Up (Up) Down
Risk Weight 5-15 (5-10) 15-20 (15-25) 45-60 (10-20) 30-40
Allocation 100% (100% hedge)

The Dollar camme of it's highs again as expected. No change in hedging strategy as risk weight across time frames is for the USD to continue to find heavy resistance on every rally.

(No change. Current moments of dollar strength appear to produce low risk weight levels in all time frames. Trump talk does not translate into a risk of Long term dollar strength)


USD/CHF Month Week Day Hour
Close 12 April: 1.0020 (0.9990)
Trend Direction Up (Up) Up (Down) Down (Up) Down
Risk Weight 80-85 (75-85) 60-70 (55-65) 85-90 (60-70) 30-45
Allocation 100% unch

No change in being fully hedged on long dollars exposure, even though the hovering around the 1.0000 level may continue for a while longer.

(A mixed picture still requires long dollar exposures to remain fully hedged)


GBP/USD (Cable) Month Week Day Hour
Close 12 April: 1.3025 (1.3025)
Trend Direction Up (Up) Down (Down) N (Down) Dowen
Risk Weight 30-40 (30-40) 60-70 (70-75) 30-40 (30-45) 15-25
Allocation 70% (100%)

The picture looks a little weaker for GBP. Rather than waiting for a stop at 1.2770 we reduce our long dollar hedge recommendation to 70% from 100%.

(GBP is holding its own in spite of continued Brexit uncertainty. From a hedge perspective we would reduce to 70% on a close below 1.2770. No change for now)


GBP/EUR Month Week Day Hour
Close 12 April: 1.1555 (1.1610)
Trend Direction Up (Up) Down (Down) Down (Down) Down
Risk Weight 75-80 (75-80) 70-80 (75-85) 15-25 (60-70) 25-40
Allocation 50% (50%)

No change in 50% hedge on Long or short GBP/EUR transaction exposures.

(No change from last week. Mixed picture with risk weight leaning slightly towards drifting down a little)


BITCOIN BTC/USD Month Week Day Hour
Close 12 April: 5048 (5000)
Trend Direction Up (Up) Up (Up) Down (Down) Up
Risk Weight 5-15 (5-15) 80-90 (80-85) 70-80 (75-85) 50-65
Allocation 0% (0%)

No change. This manipulated low volume market is the primary cause for the large price swings.

(A relatively large 20% rally materialized the past week. Highly speculative upward pressure can easily expand, but this remain a very high risk price point with evident divergence between MT AND LT risk weight)

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, Dollar Index, Brent crude oil
US30 Month Week Day Hour
Close 12 April: 26412 (26426)
Trend Direction Up (Up) Up (Up) Up (Up) Up
Risk Weight 75-85 (75-85) 90-100 (85-95) 70-80 (90-95) 80-90
Allocation 0% (0%)

The DJII is still looking (very) high risk. Market for punters not LT investors.
No change, No position.

(MAINSTREAM is talking the market up supported by continued monetary financing and very low rates. Technical picture does not support this Index to be driven substantially higher. If the highs of last year are taken out, a substantial and rapid spike is still possible, but cannot be supported by technical risk weight which is already very high again. It is good luck to speculators whilst we advise a risk averse approach)


Standard & Poor 500 Month Week Day Hour
Close 12 April: 2907 (2893)
Trend Direction Up (Up) Up (Up) Up (Up) Up
Risk Weight 75-85 (70-85) 95-100 (90-95) 90-100 (90-95) 75-85
Allocation 0% (0%)

The S&P shows even higher risk weight especially ST and MT. Market for punters only not LT investors.
No change, No position.

(The same reason and picture applies to S&P even though all times frames are up. The high price to high risk weight technical picture favors a very careful investment approach for equities)


USD Index Month Week Day Hour
Close 12 April: 96.85 (97.36)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 85-90 (85-90) 70-80 (65-75) 45-55 (80-85) 55-65
Allocation 100% (100%)

The USD peaked again as it has done so many times since rally that started early 2018. Momentum appears to slow making the risk of a sharp drop much higher. Against the basket of US's major trading partner currencies we stay fully hedged on long dollar exposures.

(The dollar shows very high risk weight levels in ST and MT time frames. This risk must not be ignored and long dollar transaction exposures should continue to be fully hedged. Any short term expiries at slightly higher dollar levels should not represent a business risk. Keeping an eye on economic risk exposures may also become more opportune at this stage)


Brent Month Week Day Hour
Close 12 April: 71.55 (70.48)
Trend Direction Up (Up) Up (Up) Up (Up) Down
Risk Weight 40-50 (40-50) 95-100 (90-95) 90-95 (85-90) 65-70
Allocation 0% (0%)

No change in the general risk weight picture which remains high and thus a larger drop in price can be expected any time soon.

(The technical risk weight in all time frames does not support a reason for a sustained price advance. This market actually is becoming very high risk again. No change)

Posted in A - All Financial Blogs | 2020 Forecast.

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