Risk explained

Every weekend, we attempt to publish a risk analysis, like the below GOLD/USD table, for each of the markets shown in our forecast analysis including crypto assets if crypto becomes more influential in the global space. We do follow Bitcoin (BTC) as this ‘currency’ is the leading non-sovereign monetary asset.
If you care to examine your own preferred technical tools they are more likely than not to confirm a similar feel to our % Risk weight number in each of the time frames.
We simplify risk level by using a single risk weight figure (like 88 or 25) instead of a range (85-90 or 30-20) as this will give a better and more subtle visual how percentage risk weight and potential divergence moves from one week to the next.

  • Trend (Direction) = Up (↑), Down (↓) or N (neutral = undecisive trend at any risk weight level)
  • % Risk Weight* = 90 is high, 10 is low. High risk does not mean overbought (and vice versa), but more likely to go down if trend direction is already Down.
  • Allocation* = X% = Core position should currently not be more than X%
  • * In other words, if you core position is 10% of total asset allocation (the example of 60% allocation means a total asset allocation of 6%)

FX allocation: The allocation % is mainly applicable for transaction and economic risk. Typically our approach can best be applied to the approximate defined exposures over a period of 12 months.


Gold Price Forecast relative to
Long Term Monthly (LT-M)
Medium Term Weekly (MT-W)
Short Term Daily (ST-D)
and Hourly (not shown) data
(Previous week in brackets)


Gold/USD LT-M MT-W ST-D
1589 (1571)
Trend ↑ (↑) ↑ (↓) ↑ (↓)
% Risk
Weight
84 (83) 76 (72) 77 (40)
Allocation 100% (100%)

Gold/USD live price


Comment: A weekly analysis of course does not provide action guidance in real time. In faster markets with high volatility, the hourly and daily risk weight can play an important short term role for timing an entry or exit.
If the risk signal is very strong (=% risk weight extremely low across timeframes) the risk allocation can be as high as a 100%. I.e if your chosen max allocation for Gold is 10% of liquid assets, that 10% would represent a 100% position.

Risk management is not speculation and it is not forecasting based on a black box tool by an industry guru. Fundamental beliefs can play an important role, but they should determine proper timing of a sale or purchase. For that we always need guidance from technical trading tools using price momentum and other indicators. Only technical tools follow the net market effect of all participants, whether manipulative or not. Black Swan events happen seldom, and if they do, warning signals will already have been visible from various market indicators for a long time, often with hindsight unfortunately. That is also the case today, which is why so many bubble markets are at shown to be at high risk. better safe than sorry.

One of the big questions in 2018 is/was: where do I re-allocate funds from high risk bubble assets? This depends on personal circumstances and traditional hard assets like real estate and precious metals, certain other commodities critical to daily needs as well as food agriculture are safe havens. Smaller individual, well researched, stocks could still easily move against the main tide, unlike the Indices we track on this page.

One prediction we will make: in coming years we will see several secure asset tokens appear as functional payment facilities in the decentralized blockchain domain. These tokens, and there will be many, shall be traded against each other and a rapidly increasing number of people will own them on their private wallets, invisible to others. Smart action should include early adoption and purchase of some of these tokens whilst moving fiat assets away from the present banking system. These tokens will thus be backed by hard assets that simply continue to be kept in safer existing locations. The strongest tokens will be backed by the strongest assets in a secure environment and tokens will become your better alternative for fiat currency.  Mobile application access, transferrable in a split second. A decentralized Internet database environment, like the new Web 3.0 will play an important role in this process.