Metals – FX- Indices – update – close 26 April 2019

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

Gold/USD Month Week Day Hour
Close 26 April: 1286 (1276)
Trend Direction Down (Down) Down (Down) Up (Up) Down
Risk Weight 65-70 (65-70) 15-20 (10-20) 20-30 (5-10) 80-85
Allocation 75% (50%)

We return to 75% allocation from 50%. The general technical picture after last week's further expected drop and recovery to current levels on Friday is more bullish with a touch of uncertainty. The rapid drop of weekly risk weight (still in downtrend) and a relative strong price hold well above last year's low are the primary reasons for re-allocating. The stronger USD dollar last week was the driving force for initial weakness across hard assets and other commodities.

(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)

Silver/USD Month Week Day Hour
Close 26 April: 15.05 (14.99)
Trend Direction Down (Down) Down (Down) Up (N) Down
Risk Weight 35-45 (35-45) 10-15 (10-20) 25-40 (25-30) 80-90
Allocation 75% (50%)

The silver technical picture remains a near perfect copy of gold and we return to a larger allocation at 75%.

(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)

Gold/EUR Month Week Day Hour
Close 26 April: 1152 (1136)
Trend Direction Down (Down) Down (Down) Up (Up) Down
Risk Weight 75-85 (70-85) 30-35 (30-40) 45-60 (10-15) 75-80
Allocation 50% (50%)

The Gold/EURO spread does not show quite the same strength which is due to a strong dollar and an even more rapid price recovery to 1152 this past week. We are looking to increase the allocation again but not quite yet.

(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)

Silver/EUR Month Week Day Hour
Close 26 April: 13.49 (13.33)
Trend Direction Down (Down) Up (Down) Up (Down) Down
Risk Weight 50-60 (50-60) 15-20 (10-20) 45-65 (15-20) 80-90
Allocation 75% (50%)

Silver/Euro looks stronger after early weakness and a stronger recovery second half of the week. We prefer to increase our allocation again to 75%.

(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)

Gold/GBP Month Week Day Hour
Close 26 April: 994 (982)
Trend Direction Down (Down) Up (Down) Up (Down) Down
Risk Weight 65-75 (65-75) 25-30 (20-30) 45-65 (15-20) 75-80
Allocation 75% (50%)

The risk weight development in different time frames looks more neutral but leans towards a fresh Medium term price rally. We prefer to return to 75& allocation only one week after last week's drop from 100% to 50% allocation.

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

Silver/GBP Month Week Day Hour
Close 26 April: 11.65 (11.54)
Trend Direction Down (Down) Up (Down) Up (Up) Down
Risk Weight 40-50 (35-50) 10-20 (10-20) 55-70 (30-40) 80-85
Allocation 75% (50%)

The same image applies to Silver/GBP. We return to a larger allocation at 75%.

(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)

GOLD/SILVER Ratio Month Week Day Hour
Close 26 April: 84.78 (84.80)
Trend Direction Up (Up) Down (Down) Down (Down) Down
Risk Weight 75-85 (75-85) 80-85 (85-90) 30-40 (15-35) 30-45
Allocation 50% AG (50% AG)

No change except we lean towards a larger allocation Silver than Gold up to max 60%, although we keep it formally at 50/50.

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


EUR/USD Month Week Day Hour
Close 26 April: 1.1140 (1.1240)
Trend Direction Down (Down) Up (Up) Down (Down) Down
Risk Weight 5-10 (5-15) 15-20 (15-20) 10-15 (50-65) 55-65
Allocation 100% (100% hedge)

The USDollar rose 1% across the board last week. Just like staying out of equities and Oil, this market may still surprise based on stronger than expected official economic growth. The technical picture however is not at all favourable for USDollars, hence we remain with full hedge on USD long exposure. This is a time to not only consider currency trading risk from operations but also longer term translation and economic exposures. No change, 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)

USD/CHF Month Week Day Hour
Close 26 April: 1.0190 (1.0135)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 80-90 (80-90) 75-85 (65-80) 85-90 (90-100) 10-15
Allocation 100% unch

$/Swiss again is touching the highs of the relatively narrow 7% trading range that has been in place since early 2015. The picture is no different and current levels dedmand a serious look at translation as well as economic exposures with a longer term bias. No change.

(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)

GBP/USD (Cable) Month Week Day Hour
Close 26 April: 1.2904 (1.2977)
Trend Direction Down (Up) Down (Down) Up (Down) Down
Risk Weight 30-40 (30-35) 40-50 (50-65) 5-15 (10-25) 60-75
Allocation 70% (70%)

Sterling still looks a little weaker than other majors in our risk weight models. We stay with 70% hedge on short Cable exposures and wait for further indications to consider Long term hedge on translation and economic exposures.

(Direction is still very uncertain. As the US dollar generally keeps meeting resistance we prefer to remain hedged on long dollar positions for about 70%)

GBP/EUR Month Week Day Hour
Close 26 April: 1.1565 (1.1550)
Trend Direction Up (Up) Down (Down) Up (Up) Down
Risk Weight 70-80 (70-80) 60-70 (70-75) 30-40 (10-20) 30-45
Allocation 50% (50%)

Sterling still looks a little weaker than Euro but risk direction is not clearly defined by the technical spectrum. No change.

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

BITCOIN BTC/USD Month Week Day Hour
Close 26 April: 5314 (5258)
Trend Direction Up (Up) Down (Up) Down (Up) Down
Risk Weight 5-15 (5-15) 85-90 (85-95) 50-60 (65-70) 40-60
Allocation 0% (0%)

Bottom line is that this market is for young speculators and older opportunists. They may win the day if the monopolist elite loses the game, but they lack long time market experience. No change, be smart, stay out. We are actively eyeing blockchain developments offering tokens with hard or softer asset backing and interesting smart contracts that can generate a real return on investment. The distributed ledger technology has major advantages which goes way beyond Bitcoin and other doubtful crypto assets.

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

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 26 April: 26543 (26560)
Trend Direction Up (Up) Down (Up) Down (Down) Up
Risk Weight 70-90 (75-85) 95-100 (95-100) 65-75 (85-90) 85-90
Allocation 0% (0%)

The Equity markets around the globe have shown incredible resilience and strength against our risk parameters. We have stayed out, losing opportunity. The technical picture however calls for extreme caution and we simply do not participate as long as that risk level remains high. If gravity no longer seems to apply, one must be extremely cautious. Better safe than sorry. No change.

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

Standard & Poor 500 Month Week Day Hour
Close 26 April: 2939 (2905)
Trend Direction Up (Up) Up (Down) Down (Down) Up
Risk Weight 70-90 (70-85) 95-100 (95-100) 80-90 (75-80) 90-95
Allocation 0% (0%)

No different for S&P or other major indices around the globe which all have very similar characteristics driven by continued Central bank supply of credit at very low rates. No change, high risk.

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

USD Index Month Week Day Hour
Close 26 April: 98.05 (97.37)
Trend Direction Up (Up) Up (Up) Up (Up) Up
Risk Weight 85-95 (85-95) 80-85 (75-85) 85-90 (40-50) 35-40
Allocation 100% (100%)

A near 1% rally of the index now appears to the developing a divergence of price to risk weight in MT(Weekly) and ST(Daily) time frames. Any further USD advance is not impossible but highly suspect. The most recent history where the US world currency defied gravity was during the strong 1984 into 1985 rally. It was driven way above normal transaction volumes and got tanked big time once markets finally realised the economic imbalanceas. The technical picture in such circumstances can only determine risk and will almost always lose opportunity, but only until the market turns.

(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)

Brent Month Week Day Hour
Close 26 April: 71.57 (71.97)
Trend Direction Up (Up) Down (Up) Down (Up) Down
Risk Weight 40-50 (40-50) 90-95 (95-100) 65-80 (90-95) 5-15
Allocation 0% (0%)

A large move up in line with recent short term trend was followed by the a big drop on Friday 26 April. Oil remains a high risk investment and a downward Long term bias. We may be wrong but risk weight across time frames calls for extreme caution.

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

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