Metals – FX- Indices – update – close 19 July 2019

GOLD: Gold vs US Dollar, Euro and GBP

Gold/USD Price Live, Weekly risk position analysis relative to Hourly, Daily, Weekly and Monthly data
(Previous week in brackets)

Gold/USD Month Week Day
Close 19 July: 1425 (1415)
Trend Direction Up (Up) Up (Down) Up (Up)
Risk Weight 70-85 (70-85) 80-85 (80-85) 65-75 (50-60)
Allocation 100% (60%)

A very strong week for precious metals saw Gold vs USD break the 6 year high on Thursday and close above the August 2013 highs in consecutive days. This and the fact of a visible continued uptrend, as well as a very strong move in Silver, was reason to lift our allocation to 100% again on Friday morning. Due to the continued uncertainty in other main asset classes, Gold and Silver, across the board, have become more strategic allocations in the overall portfolio.

(Daily Gold chart suggests lower risk of a more substantial correction, however no definitive technical view. If, during the coming week we approach 1390 and the ST Daily shows risk weight divergence vis a vis the MT Weekly we return to 100% invested.
A clean break of 1434 on Daily basis opens a clean air market and return to the 1800 level with a full allocation. These are the triggers, so no change for now)


Gold/EUR Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Gold/EUR Month Week Day
Close 19 July: 1269 (1255)
Trend Direction Up (Up) Up (Up) Up (Up)
Risk Weight 80-90 (80-90) 75-85 (75-85) 80-85 (65-70)
Allocation 100% (60%)

In spite of relative high risk weight, the same really applies to Gold vs EUR. We believe that holding allocated physical Precious metals in a secure location and away from immediate systemic risk is favoured over bank deposit.

(A huge price to risk-weight bearish divergence in MT Weekly time frame confirms the temporary downside risk for gold. Gold vs Euro now trades at 90% of the all time high recorded in September 2012. We would be looking to get back into full allocation either if Gold/USD breaks 1434 or a price correction that delivers bullish divergence in ST Daily timeframe or a risk-weight divergence between daily and weekly)


Gold/GBP Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Gold/GBP Month Week Day
Close 19 July: 1139 (1126)
Trend Direction Up (Up) Up (Down) Down (Down)
Risk Weight 85-95 (85-95) 85-90 (85-90) 80-90 (70-80)
Allocation 60% (60%)

Even though Gold vs GBP looks a little more overbought there is no sign of bearish divergence except for ST Daily. This could mean a short pause in the uptrend and we have held back on full allocation for this pair for now. Gold is now within just 3% of the all time high close, whilst many active western style economies have already seen new all time highs for gold. Because Gold typically is a relatively small allocation of total assets, it is prudent to not risk against the primary LT trend and we would be looking to go full allocation if the all time high breaks or if ST and MT show bullish pricce risk divergence. No change for nowe.

(Gold/GBP is at 94% of the all time high recorded in Sept 2011. Large correction risk appears more limited but not out of the woods. Given trend direction we also wait for full allocation if Gold/USD breaks above 1434 or a bullish divergence in ST timeframes)


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

Silver/USD Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Silver/USD Month Week Day
Close 19 July: 16.18 (15.20)
Trend Direction Up (Up) Up (Up) Down (Up)
Risk Weight 30-45 (25-35) 65-70 (60-70) 85-90 (40-50)
Allocation 100% (100%)

Last week's very strong rally was overdue and we were absolutely right to hold on and follow the technical picture. The LT trend only just started and Silver usually lags Gold if demand picks up in earnest. This move is a sign that the LT trend in metals has ways to go and silver could benefit substantially. Furthermore silver trading has experienced unusual high volume prior to this move indicating a potentially more substantial investment, possibly by a sovereign buyer even. No change.

(Silver still shows relative weakness, but risk-weight remains at much lower levels than gold with trend direction still in favor of upward movement. No change)


Silver/EUR Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Silver/EUR Month Week Day
Close 19 July: 14.41 (13.48)
Trend Direction Up (Up) Up (Up) Down (Up)
Risk Weight 45-55 (40-50) 65-75 (60-70) 85-95 (40-50)
Allocation 100% (100%)

Silver looks a little overbought ST. Last week's rally meant breaking a 3 years downtrend with plenty room to further advance on risk weight. No change.

(Same picture applies to Euro where the price chart is also challenging a resistance level currently at 13.48. If that breaks there is light into the 17.00+ level or 20%. We stay with full allocation)


Silver/GBP Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

Silver/GBP Month Week Day
Close 19 July: 12.93 (12.09)
Trend Direction Up (Up) Up (Down) Down (Down)
Risk Weight 45-60 (40-55) 75-80 (75-80) 85-95 (55-65)
Allocation 100% (100%)

Silver also broke a 3 year downtrend and closed above it the entire week. We cannot exclude a potential pause, but remain fully allocated in Silver versus GBP.

(Silver/GBP sits just above the 2016-2019 resistance line with a mixed trend and risk-weight level. We stay with full allocation and the LT trend)


Gold/Silver Ratio Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

GOLD/SILVER Ratio Month Week Day
Close 19 July: 87.75 (92.75)
Trend Direction Down (Up) Down (Up) Down (Down)
Risk Weight 85-95 (90-100) 75-85 (85-95) 5-15 (75-85)
Allocation 50/50 AU/AG (50/50 AU/AG)

The knock in the ratio took it back to the level of 8 weeks ago.The trend is down and we see an as yet unconfirmed bullish divergence between ST and MT/LT risk weight. So, No change to holding at 50% in Silver.

(MT Standard deviation resistance is at the 102 level. With the ratio above LT historic highs and risk weight in overbought territory we feel comfortable staying with even a slight overweight Silver to Gold allocation)


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

EUR/USD FX Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

EUR/USD Month Week Day
Close 19 July: 1.1217 (1.1270)
Trend Direction Up (Up) Down (Down) Up (Up)
Risk Weight 10-15 (10-20) 40-55 (55-65) 20-25 (20-30)
Allocation 100% (100% hedge)

The dollar continues to look very vulnerable in spite of the almost weekly attempt to prop up the dollar. We can only wonder who the buyers are as we cannot believe it is sovereign. A high risk play. Remain fully hedged on long dollars.

(Technically (and fundamentally) there appears to a fight for survival of the world reserve currency going on. Trend and risk weight demands a fully hedged long dollar exposure)


USD/CHF FX Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

USD/CHF Month Week Day
Close 19 July: 0.9830 (0.9830)
Trend Direction Down (Down) Up (Up) Down (Down)
Risk Weight 45-65 (45-65) 20-30 (15-25) 30-50 (65-80)
Allocation 100% (100%)

Trend and Risk weight still favor a fully hedged long dollar exposure.

(Trend and risk weight across time frames confirms that long dollar exposure should remain full covered for the normal transaction risk horizon which typically is 6-9 months)


Cable GBP/USD FX Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

GBP/USD (Cable) Month Week Day
Close 19 July: 1.2490 (1.2560)
Trend Direction Down (Down) Down (Down) Up (Up)
Risk Weight 15-20 (10-25) 10-15 (10-20) 20-35 (15-30)
Allocation 100% (100%)

Hovering near the 1 and 3 years lows, Cable is clearly seeking a bottom. Risk weight is closer to getting seriously overbought than ever, thus a fully hedge short cable exposure is the only strong recommendation to make.

(Cable tried to challenge the Dec 2018 lows last week but recovered slightly from 1.2440 to 1.2560. In spite of a relatively strong USD, the Trend and risk weight levels across time frames call for a fully hedged long dollar transaction exposure. I.e losing on this position appears a lower risk than vice versa)


USdollar Index Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly price data

USD Index Month Week Day
Close 19 July: 97.07 (96.72)
Trend Direction Down (Down) Up (Up) Down (Down)
Risk Weight 75-85 (75-85) 35-50 (30-40) 55-65 (60-75)
Allocation 100% (100%)

The dollar Index is in the process of making a LT right shoulder which, if materialized, suggests an eventual drop to 75. That won't happen tomorrow of course, but prudence requires staying out of dollars at this moment.

(The dollar index which tracks the value of USD vs major world currencies remains in that broader 95 to 98 price range. We recommend no change to a full hedged long dollar exposure)


GBP/EUR FX Price Live, Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly data

GBP/EUR Month Week Day
Close 19 July: 1.1130 (1.1145)
Trend Direction Down (Down) Up (Down) Up (Up)
Risk Weight 30-45 (30-45) 0-10 (0-10) 25-40 (15-30)
Allocation 100% (100%)

The ST trend is clearly bottom building. MT is oversold and LT could easily turn up again within two months and at higher price level. No change.

(Short GBP exposures to remain fully covered with fwd contracts. No change)


BTC Bitcoin Price, Weekly risk position analysis based on Daily, Weekly and Monthly data

BITCOIN BTC/USD Month Week Day
Close 19 July: 10509 (11757)
Trend Direction Up (Up) Down (Down) Up (Down)
Risk Weight 55-75 (55-75) 65-70 (65-80) 30-40 (55-60)
Allocation 0% (0%)

Another 20% range week just behind us. This is not the right investment if managing a wealth preservation portfolio. Small specs only in this totally controlled environment. What may become interesting in the very near future are the crypto exchanges that offer merchant services and where any crypto currency can be exchanged into fiat. With systemic risk somewhere on the horizon, these exchanges may become our banks of the future. No change otherwise.

(This crypto looks a little heavy but is so volatile and unpredictable that it still cannot be part of a responsible investment portfolio. That view and those times may change if the monetary system is sufficiently moving into wider commercial acceptance of crypto tokens. That moment actually may be closer than most people think. No change otherwise)

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 risk position analysis based on Hourly, Daily, Weekly and Monthly price data

US30 (Dow Jones) Month Week Day
Close 19 July: 27154 (27332)
Trend Direction Up (Up) Up (Up) Down (Up)
Risk Weight 80-85 (80-85) 90-95 (90-95) 75-85 (80-90)
Allocation 0% (0%)

New all time high territory and still high risk-weight with clear bearish divergence. Of course interest rates are now widely expected to be lowered again which is nothing short of a tricky sovereign play. Lower rates are expected to generate more stock buy backs, yet this market cannot be technically traded from the long side with so many indicators in high risk zones. No change.

(The easy call is to follow price, a promise for lasting low interest rates and further announcements of large scale stock buy backs with borrowed money. The risk-weight numbers unfortunately demand a low risk approach which means no allocation. It is a missed opportunity and one we need to swallow. Question is where to put one's excess funds? Certain mining stocks, certain residential and/or commercial real estate and strongly established Crypto exchanges in major financial centres if they offer a tradeable token. As more of these new crypto exchanges are going global this is an area of investment to closely watch. No change for the Dow allocation at 0%)


S&P 500 Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly price data

Standard & Poor 500 Month Week Day
Close 19 July: 2977 (3014)
Trend Direction Up (Up) Down (Up) Down (Up)
Risk Weight 80-90 (85-90) 90-95 (80-95) 50-65 (90-100)
Allocation 0% (0%)

The exact same picture for S&P which atb the 19 July close looks a little more vulnerable than INDU due to a downturn in the weekly trend. No change.

(Even though we are seeing a mind blowing price level, the risk weight is simply not in favor of any allocation. The same view applies to this S&P broader index as INDU)


Brent Crude oil Weekly risk position analysis based on Hourly, Daily, Weekly and Monthly price data

Brent Month Week Day
Close 19 July: 62.65 (67.00)
Trend Direction Down (Down) Down (Up) Down (Up)
Risk Weight 35-45 (35-45) 30-35 (30-40) 20-30 (75-90)
Allocation 0% (0%)

Fundamentally the situation in the Street of Hormuz normally is a short across the bow and should have taken Oil much higher. It hasn't and this is a warning that our technical analysis may be correct. We haven't seen a serious bottom yet since the September 2018 high. We need patience before stepping back in and we feel comfortable with having unwound our brief long position a few weeks back.

(Crude is a tougher call and we are a bit uncertain. Having gone from long to flat again last week this market appear to be showing price support at the 61.00 level. Since the April high at 75.60 we haven't yet seen a proper bottom and in fact we haven't seen a proper technical bottom since the Dec 2018 low, which we missed because the Monthly time frame still showed a strong downtrend. That is a potential risk (picking bottoms) that appeared too high at the time. No change for now and for the same reason. LT Monthly trend is down)

Posted in A - All Financial Blogs | 2020 Forecast.

Leave a Reply