Gold – FX- Dow – 6 Sep 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 6 September: 1507 (1520)
Trend Direction Up (Up) Down (Down) Down (Down)
Risk Weight 85-90 (80-90) 85-95 (90-95) 50-65 (65-75)
Allocation 100% (100%)

The above chart shows a 15 year support line and a parallel resistance line just to get an idea where this market is targeted, which for now is around 2400-2500 on this linear scale chart. Since the Sept 1999 low of 253 up to the 2011 top at 1920 we have seen 8 serious LT risk weight tops. So far, since the Dec 2015 low at 1046 we have had 2 with the current move not yet finished and given the strength of the most recent 12 month advance the LT risk weight high looks weakish at this moment and will likely move much higher again in future. A finish of long term risk weight should not be expected until we see bearish divergence in LT time frame only. MT weekly is overbought at this moment and turning down whilst Daily ST is likely to reach a bullish divergence status. A very strong asset class typically continues for a long period of time and given the unprecedented monetary experiences since 2008 this is not a market to take for granted. Even though current weakness may continue technically with a potential price objective of 1400, which is the end of the previous consolidation range, we strongly recommend staying with the full allocation. Having seen every major currency making new lows versus gold except USD (!5% below all time gold high) and CHF (10% below all time gold high), it will just be a matter of time. The old high at 1920 is not so much a target anymore but may only act as a short term resistance shield once we get there.
If dollar weakness sets in, the old high wil quickly become history. That's the technical picture. No Change.

Last week: Gold peaked last Monday at the Sydney opening reaching $1555/oz and closed at the lows. The current rally that started just over one year ago is of such proportion that the risk scenario will be based on best expectation of risk weight impact where short term risk weight is more likely to diverge vs MT and LT risk weight levels causing this market to advance until a major top is reached. Such early signal is more likely to appear in a MT time frame. Even though MT and LT risk weight level is rather high experience learns it can remain high as long as the price trend is not broken whilst a price advance can be significant. As of now only Gold vs USD and vs CHF have not yet reached new all time highs. That can happen very quickly once the US$ starts to depreciate towards a better equilibrium level which appears to be close to a US$Index of 85 compared to 99.00 today. If that starts to materialize Gold vs US$ is likely to accelerate higher and quickly reach new all time highs and (well) beyond. the wealth preservation strategy is to simply stay with the long term trend and sit tight at least into 2020. Our general risk approach is of lT nature and therefore No Change to our allocation. From a trading perspective it is correct to immediately take out between 30 and 40% at a decent profit with a view to reverse and re-enter if the ST risk weight trend turns back up from a bullish divergence position. The current correction could be a full 8-10% from the recent high into the low 1400's level


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

Gold/EUR Month Week Day
Close 6 September: 1365 (1375)
Trend Direction Up (Up) Down (Up) Down (Down)
Risk Weight 85-95 (85-95) 85-90 (85-95) 55-70 (75-85)
Allocation 70% (70%)

Last week we took out 30% of our allocation because this pair looked a low risk trade to cash some profit with a view to fresh entry ast lower level. The same argument applies to GOLD/EUR as GOLD/USD, but because the USD still looks highly vulnerable technically the risk of a larger drop vs EUR is an opportunity risk worth taking whilst giving some short term profit protection. We will re-enter our 30% unallocated if ST vs MT divergence is confirmed or just below 1300 if both ST and MT get to oversold risk weight again. No Change.

Last week: The August close was 1 Euro shy of the 2012 monthly high close whilst we set a new all time high close on Tuesday 27 August 2019. Our LT risk analysis however calls for a reduction of risk and we take out 30% of the position until we see a bullish divergence appearing between the ST and MT time frame or if another event calls for a reversal. The 30% exit will protect the remainder of the investment allocation at a price level well below the entry level


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

Gold/GBP Month Week Day
Close 6 September: 1226 (1248)
Trend Direction Down (Up) Down (Down) Down (Down)
Risk Weight 90-95 (85-95) 85-90 (85-95) 35-60 (65-70)
Allocation 60% (60%)

GOLD/GBP comfortably reached a new all time high at 1282 last week and for now stays well above the 1195 high from 2011 which now has become MT support. A similar ST risk as above applies to this pair potentially even reaching the end of the June/July consolidation range at 1140. We do not trade price targets, only risk levels and we are looking for a full allocation entry at some point in the (near) future. This could be on full bullish divergence trigger between ST and MT/LT risk weight. No Change for now.

Last week: Gold vs GBP did reach a new all time monthly high close and signals a LT further advance. Otherwise the same risk anaylis applies as with EUR and since our position is 'only' 60% allocation we will be looking to a full entry in the ST once we see clear signals of a pause in the advance ending which could be in the 1150-1200 price range. No Change.


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 6 September: 18.15 (18.33)
Trend Direction Up (Up) Down (Up) Down (Down)
Risk Weight 60-80 (45-70) 85-90 (85-95) 70-85 (85-90)
Allocation 100% (100%)

We have ended the week marginally below last week's close having see a fast 6% rally and drop in the meantime. This is silver at its best with high volatility once we get some serious movement. Silver may attempt to frighten us again, but it will either be short term of medium term and temporary. This commodity is at the start of a move that first needs to hurdle 21 after which there is clean air into the 40.00 level which could be a parabolic move shooting off like a rocket. No Change because the technical cushion is strong at lower levels.

Last week: Silver outperformed Gold substantially last week which shows in the ratio dropping nearly 6%. The LT trend is still strong and any pause will mean that the ST elastic moves towards the LT and then continue a fresh stretch upward. This could take several weeks if it happens but the LT risk picture is a directive to stay with a full allocation aiming initially for the 2016 high at 21.15. No Change.


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

Silver/EUR Month Week Day
Close 6 September: 16.47 (16.68)
Trend Direction Up (Up) Down (Up) Down (Down)
Risk Weight 75-90 (60-80) 85-95 (90-95) 70-85 (85-95)
Allocation 100% (100%)

The risk weight picture of Silver vs EURO is very similar and although the USD potential weakening argument also stands, Silver is more likely to break 19.00 and find clean air to double in price that to break the strong cushion at the 12.50 area of price low's about 12 months ago and the 1280 low as recent as last May. No Change.

Last week: Equally Silver/Eur appears on its way to the 2016 high of 19.11. As against Gold, EUR looks technically a little stronger and we may see a pause in this advance of unknown length. That possible pause shows in the wider risk weight range in the LT Monthly time frame. Because LT moves are finished until they are we will stay with the full allocation, so No Change.


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

Silver/GBP Month Week Day
Close 6 September: 14.76 (15.06)
Trend Direction Up (Up) Down (Up) Down (Down)
Risk Weight 75-85 (60-80) 80-90 (85-95) 60-80 (85-90)
Allocation 100% (100%)

This is the exact same technical picture for Silver as against EUR and whilst GBP has been relatively strong as a result of a higher chance of No Brexit, we would expect buyllkish divergence to emerge in the near future. The entry cushion at around 12 GBP per troy ounce is strong. Therefore risk to maintain full allocation is small. There will be more volatility for sure and the ST downtrend is not over. We feel confident to stay with a full allocation. See comment below on the Gold/Silver Ratio. No Change.

Last week: The ST/MT objective is breaking the 2016 high at 16.00. The risk analysis is very similar to that of Silver/EUR and we stay with the LT allocation. No Change.


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

GOLD/SILVER Ratio Month Week Day
Close 6 September: 82.70 (82.52)
Trend Direction Down (Down) Down (Down) Up (Down)
Risk Weight 40-65 (60-80) 15-25 (15-30) 10-20 (0-10)
Allocation 50/50 AU/AG (50/50 AU/AG)

3 months seems like ages ago when we reached a Gold/Silver ratio high of 93.44. In the meantime this ration has fallen 11.5% with a massive 3.5% further drop and reversal just in a matter of days. Our position looks low risk both ST technically whilst the recent drop is being absorbed and our LT expected shake out towards equilibrium nearer 45.00 is historically certain to happen. High volatility will be the natural image with this pair and we are confident that keeping an even or even slight overweight silver allocation in the precious metals asset class will prove a strong investment protection allocation in the Long Term. No Change.

Last week: The LT correction which we have been expecting for a long time has acceleterated by 5 big figures last week and this trend is not finished. Price also penetrated a MT uptrend support line by several days now. Daily risk weight is getting oversold and we may see a pause sometime soon, but the LT trend prevails at this stage. No Change.


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 6 September: 1.1025 (1.0986)
Trend Direction Down (Up) Down (Up) Up (Up)
Risk Weight 5-10 (5-15) 15-20 (15-25) 30-45 (10-20)
Allocation 100% (100%)

We are technically fighting a very resilient USD even though the USD rally of the past 18 months looks tired at current risk weight levels compared to the EURO low reach in January 2017. In the final analysis risk is against the USD right now and has been for a while. No Chnage to maintaining a fully hedged long dollar transaction exposure.

Last week: EUR reached a new low reaching a LT support range since 2015. We believe the US$ is technically peaking and to hold naked long US$ is much higher risk that being fully hedged. Last week's reversal day was challenged on Thursday and Friday creating a fresh ST downtrend. Of course we cannot exclude further pressure whatever its fundamental cause but Risk weight analysis still demands a fully hedged transaction exposure. In the final analysis the average price movements against the hedged position are relatively small and the biggest risk still favors a reversal of US$ strength. No Change.


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

USD/CHF Month Week Day
Close 6 September: 0.9875 (0.9892)
Trend Direction Up (Down) Up (Up) Down (Up)
Risk Weight 45-55 (45-55) 30-45 (20-30) 60-70 (75-85)
Allocation 100% (100%)

Risk weight across time frames does no longer offer high confidence Short Term. Even though this pair has traded within a narrow range for many years the MT trend is now unclear. Experience learns that the odds are in favor of CHF, but Short term anything can happen, hence a higher risk preference to stay with a fully hedged long dollar exposure. In a more speculative investment scenario we would be flat. No Change.

Last week: Since the Swiss Central bank remove the peg ag EUR in 2014 this clearly is the most boring pair in the Foreign Exchange space with the current price at a 5 year equilibrium level. Over par is likely to prove hard to sustain and we stay with the LT trend whilst ST is developing possible bearish divergence vs MT Weekly. No Change.


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 6 September: 1.2275 (1.2136)
Trend Direction Down (Down) Up (Up) Up (Down)
Risk Weight 10-15 (10-15) 15-30 (10-20) 65-85 (50-70)
Allocation 100% (100%)

Last week's reversal of Pound Sterling vs USD came technically as expected, although the move came as an immediate reaction to Boris Johnson's multiple defeat in the Commons and House of Lords. For now we see no reason to change the risk preferred full hedge of long dollar exposures.

Last week: Bearish divergence between ST and MT is driving cable down again. MT and LT oversold risk weight condition demand to remain fully hedged on Long Dollar exposures vs GBP. No Change.


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

USD Index Month Week Day
Close 6 September: 98.01 (98.81)
Trend Direction Up (Down) Up (Down) Down (Down)
Risk Weight 85-90 (80-90) 65-70 (65-75) 50-65 (80-90)
Allocation 100% (100%)

The USD Index is still leading the technical picture of what to expect from USD performance against individual major currencies. The dollar index still looks very vulnerable to changing its near 10 year direction downward in earnest. Why this hasn't happened yet is debatable at great length and looks to be just a matter of time. It is a bit similar to the Gold/Silver ratio, World reserve money against the other lot. That also seeks an equilibrium closer to the long term standard deviation median at lower levels. The technical picture still prefers a fully hedged long dollar exposure against the basket of majors. No Change.

Last week: The US$ Index is a nice example of markets defying gravity. There is something fishy about markets that turn Up from Down in all time frames in a matter of one week. Surely the Index can push higher and extend its rather unnatural risk behavior, but it smells like manipulation by large operators such as sovereign traders. Risk weight analysis makes it harder as a result of the change last week, but the technical picture continues to show heavily contested dollar pressure. Equilibrium is around the 85-90 level and we know from the last 4 years that a dollar move is likely to go substantially beyond that level and it would not surprise to see a test of the 2008-2010 dollar lows. No Change.


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

GBP/EUR Month Week Day
Close 6 September: 1.1127 (1.1035)
Trend Direction Up (Down) Up (Up) Up (Down)
Risk Weight 20-30 (20-35) 35-50 (20-40) 85-90 (80-85)
Allocation 100% (100%)

We stay with our preferred position and remain fully covered on short GBP transaction exposures. This NOT our speculative position although even that appears lower risk. Companies with EURO denominated accounts Europe with short GBP transaction or even translation exposure must be covered. Equally British companies with a short EURO exposure can, for now, exchange on a spot requirement basis.

Last week: This pair reached an intermediate low 3 weeks ago at 1.0725. The LT trend is still down but the upward widening risk weight range to 20-35 indicates this market could turn up more decisively. It may be hard to comprehend given the absurd Brexit related events in the UK. Yet no one really knows the ultimate 'price to pay' outcome. We stay with a positive full hedge on short GBP exposures vs EURO. No Change.


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

BITCOIN BTC/USD Month Week Day
Close 6 September: 10297 (9585)
Trend Direction Down (Down) Down (Down) Down (Down)
Risk Weight 60-70 (60-65) 40-45 (40-55) 75-80 (15-25)
Allocation 0% (0%)

Our favourite pair only because crypto will be the future for all of us. It is an unstoppable development that saves money for most participants except conventional Banks and traditional exchanges. Bitcoin however must mature first before it or many other crypto currencies become a stable medium of exchange. Technically Bitcoin is in a downtrend since June with narrowing volatility. In our view, and this is fundamental, it will take a few years before crypto currencies can shake hands with the regulated and monopolist fiat currency market. That is more likely to transpire at much lower levels. I.e sub 3,000 and more likely sub 1,000, but depending on whether hyper-inflation kicks into the fiat currency market due to massive digital money printing. We will follow this with much interest. No Change.

Last week: This crypto pair has now lost over 30% from the high three month ago, which is substantial by any comparison and compares to 45% relative the the current sub 10k level. The high volatility in this market is still unhealthy by any risk standard. This is a LT hold for people with sub 1000 entries and a ST hold for 'all or nothing' casino players. No Change.

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 6 September: 26797 (26403)
Trend Direction Up (Up) Up (Down) Up (Up)
Risk Weight 80-90 (80-85) 50-60 (45-60) 80-90 (60-65)
Allocation 0% (0%)

Not participating in an INDEX of a key world asset class can be frustrating if long term risk is the key concern. And LT risk has been high since at least 12 months ago. The upward pressure is clearly driven by the guarantee of continued substantial monetary accommodation. Short and Medium term risk favours a long position in this INDEX, but the LT risk remains highly suspicious. Risk management also requires avoiding outside normal range volatility. That volatility has been excessive since Dec 2017. NO Change.

Last week: August ended on a high note with 4 weekly moves of around 1000 points down and up. The Dow still has not managed to penetrate the slightly uptrending resistance line with highs from Jan 2018 via Sept 2018 and July 2019. Technically this market has become tricky because the Weekly MT risk weight around 50% may turn up from strongly down and although this does not violate our risk position of not being invested we could see another attempt to reach new highs if that happens. The August close does not give a clear signal in that direction and we cannot but stay out of this market for now. No Change.


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

Standard & Poor 500 Month Week Day
Close 6 September: 2979 (2926)
Trend Direction Up (Up) Up (Down) Up (Up)
Risk Weight 85-90 (85-90) 55-65 (50-60) 80-95 (60-75)
Allocation 0% (0%)

The all time high is only 6 weeks ago and we are only 40 points away. If that happens, which is clearly on the cards at this moment, Risk weight in all time frames will again show bearish divergence which is by definition very high risk. Both the Dow and S&P still drive stock markets around the globe simply because the investment power is greatest in North America. A big concern must be a world economic slowdown whatever its true cause. ST speculative active alert positions aside, this INDEX is high risk. No Change.

Last week: The August range is 2800-2940. We have not experienced this high volatility since dropping to the one year low at 2334 during Xmas 2018. The likelyhood of the same happing again this time is far from clear but the risk weight levels still favor bearish divergence potential with a volatile drop as a result. Risk analysis demands no risk and no position. No Change.


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

Brent Month Week Day
Close 6 September: 61.78 (59.19)
Trend Direction Down (Down) Up (Up) Up (Down)
Risk Weight 30-40 (35-40) 20-30 (15-20) 60-80 (60-65)
Allocation 50% (0%)

The risk of taking a 50% allocation seems relatively small at the close on Sept 6. The ST turn came on Sept 4 with the MT weekly trend showing clear strength too. LT Monthly is still in a narrow downtrend but the shorter time frames favour a rally that could possibly bring a low risk return in excess of 5%.

Last week: We have remained on the sidelines ever since the 2018 highs and missing an opportunity to participate in the rally towards 75 in April. Yet we avoided the risk of losing on such position which was the correct Risk analysis application in our view. We are again at levels where Oil could find some speculative support, but risk analysis tells us that it all it is. Our analysis favors low 40's as opposed to a fresh LT rally and only war could possibly change that. Whilst LT Monthly risk weight is in downtrend we cannot (yet) participate as a low risk investor in this market. No Change.

Posted in A - All Financial Blogs | 2020 Forecast.

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