Hello everybody,
amid easy enthusiasms about safe heaven assets, I want to show you what a store of value, namely GOLD, did during the last crisis, which can apply also now.
This time we have another instrument, Bitcoin, that was not on earth back then, but I consider as another option as safe asset.
I already explained in the previous update that the transition to gold in investor ptf is not,and should not be, immediate. Let's see why.
Looking at gold,I think that the so called flight-to-quality process has to be divided in three phases:
1- long term stock rally -awakening phase: after year of stock market going up, also gold does, a clear sign that investors fear mounts despite they are still LONG on stocks. They are preparing for the worse.
2- bubble bursts - liquidity phase: a potential catalyst for the recessions happens, markets start to go down. Cash is king in this phase, companies need money in their pockets to run the business, gold (and bitcoin today) are useless to them in this phase. They go down as well. Gold went down in 2008 to touch its local minimun on Nov 2008, 2months after Lehman went bankrupt.
3- storm ends - safe heaven phase: central banks intervene in the economy, injecting liquidity in the form of QE or interest rates multiple cuts. This make gold and other non-bearing dividend assets more convenient and less risky than traditional asset classes as bonds and stocks. Cash is trash at this point.
We are currently in the phase two, but this time I think the transition between the two phases will be much quicker than in 2008 for two reasons:
1- in 2008 it was a FINANCIAL crisis, that took time to affect the real economy. This time instead, things started from the economy and have ripercussions on financial markets in turn.
2- government all over the world are already printing money and increasing their deficits
OPERATIONAL IDEA
Gold is currently on a very strong support, 1450.
I expect gold to go to 1350 area for all the above mentioned evidences and then to restart its rally soon.
Looking at quotes on the market we see that for 8% out of the market options, the market is considering the UP scenario for gol more likely, as all else being equal, the call is almost 30% more expensive, meaning that the market thinks the opposite compared to past evidence!
Put 1350 may 2020 : 1800usd
Call 1610 may 2020 : 2300usd
Much will be based on tomorrow open in US and Europe, as many countries are shut from this weekend and production will go to 0 in many sectors. If gold breaks below 1450, I will consider buying the put 1360.
this is not a recommendation to buy or sell, just wanted to share with you my thought in this difficult times when we need to keep out mind rational and calm. Let me know what you think!
Bitcoin update will follow shortly, positive effects of the quarantene!!
STAY SAFE, STUDY AND DEDICATE TIME TO YOURSELF !
see you soon
amid easy enthusiasms about safe heaven assets, I want to show you what a store of value, namely GOLD, did during the last crisis, which can apply also now.
This time we have another instrument, Bitcoin, that was not on earth back then, but I consider as another option as safe asset.
I already explained in the previous update that the transition to gold in investor ptf is not,and should not be, immediate. Let's see why.
Looking at gold,I think that the so called flight-to-quality process has to be divided in three phases:
1- long term stock rally -awakening phase: after year of stock market going up, also gold does, a clear sign that investors fear mounts despite they are still LONG on stocks. They are preparing for the worse.
2- bubble bursts - liquidity phase: a potential catalyst for the recessions happens, markets start to go down. Cash is king in this phase, companies need money in their pockets to run the business, gold (and bitcoin today) are useless to them in this phase. They go down as well. Gold went down in 2008 to touch its local minimun on Nov 2008, 2months after Lehman went bankrupt.
3- storm ends - safe heaven phase: central banks intervene in the economy, injecting liquidity in the form of QE or interest rates multiple cuts. This make gold and other non-bearing dividend assets more convenient and less risky than traditional asset classes as bonds and stocks. Cash is trash at this point.
We are currently in the phase two, but this time I think the transition between the two phases will be much quicker than in 2008 for two reasons:
1- in 2008 it was a FINANCIAL crisis, that took time to affect the real economy. This time instead, things started from the economy and have ripercussions on financial markets in turn.
2- government all over the world are already printing money and increasing their deficits
OPERATIONAL IDEA
Gold is currently on a very strong support, 1450.
I expect gold to go to 1350 area for all the above mentioned evidences and then to restart its rally soon.
Looking at quotes on the market we see that for 8% out of the market options, the market is considering the UP scenario for gol more likely, as all else being equal, the call is almost 30% more expensive, meaning that the market thinks the opposite compared to past evidence!
Put 1350 may 2020 : 1800usd
Call 1610 may 2020 : 2300usd
Much will be based on tomorrow open in US and Europe, as many countries are shut from this weekend and production will go to 0 in many sectors. If gold breaks below 1450, I will consider buying the put 1360.
this is not a recommendation to buy or sell, just wanted to share with you my thought in this difficult times when we need to keep out mind rational and calm. Let me know what you think!
Bitcoin update will follow shortly, positive effects of the quarantene!!
STAY SAFE, STUDY AND DEDICATE TIME TO YOURSELF !
see you soon
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Or simply you don't want to risk it?
Trade forex, oil, crypto, indices, and keep 80% of the profits you make, while losses are covered!
Check it out now → ftmo.com/en/?affiliates=2427
