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Gold Futures (Apr 2021)Gold Futures (Apr 2021)Gold Futures (Apr 2021)

Gold Futures (Apr 2021)

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GCJ2021 trade ideas

Gold still setting itself for upside to $2,351 with SMC ExplainCup and Handle formed on Gold recently. We had a break above the brim level. Now we are having some kind of retracement, for Smart Money to pick up orders before heading on up. 7>21>200 Price>200 RSI>50 Target HKEX:2 ,351 SMC: Sell Side Liquidity order block is just below the handle of the C&H. This is also where the powerful 200MA is. When the price came down, Smart Money swept the liquidity of selling (bought into them) and hence the price shot up. I am still very much bullish with Gold - Until further notice.
COMEX:GC1!Long
by Timonrosso
Gold is expensive. Don't waste it!Investing physically in most commodities is almost impossible due to operational constraints: they tend to be voluminous, expensive to store, move and insure, and can be very perishable. Most commodities investments are, therefore, made through futures contracts and therefore suffer, most of the time, from negative roll yield. However, this is not true for precious metals. Gold and silver are durable, they carry a high price tag per weight and, therefore, can be stored very cheaply in bank vaults. Overall, physical investments in gold or silver are easy and cost-efficient. When investing in gold or silver, investors have the choice between: Physical holdings using, for example, physically-backed exchange-traded products (ETPs) Futures contracts (which can also be replicated in a synthetic ETP) But which one is the most efficient? When investing physically in gold, the cost of investing is known in advance. For physically-backed gold ETPs, the total expense ratio can be as low as 12 bps per year. On the contrary, when investing in futures contracts, the cost of investing is not known in advance as it is subject to a roll yield linked to the shape of the futures curve, which can change at any time. So, investors need to ask themselves ‘how often is the cost of investing in futures contracts above 12bps and how often is it below 12bps?’ The result is very clear. Over the last 15 years, a futures-based investment in gold has underperformed on average by 0.94%1 per year compared to physical investment. A lot more than 12bps! More importantly, looking at one-year holding periods, physical gold has outperformed futures-based gold 99.1%1 of the time. Even considering the 12bps of costs of a gold ETP, physical gold outperformed 97.8%1 of the time. Even on short investment periods, physical gold outperformed most of the time (89.8%1 of 3-month investment periods). Why is physical gold a more efficient investment? The shape of the futures curve drives the cost of investing in futures-based gold. In contango, investors bleed money through the roll yield. For gold futures investment to outperform physical gold in the medium term, the roll yield needs to be under 12bps per annum. The curve needs to be in a very slight contango or in backwardation. In backwardation, the investor benefits from the roll yield (instead of paying it). Unfortunately for investors in futures contracts, the gold futures curve is driven by very stable factors that lock it in contango most of the time. Looking at the long history, the average roll yield between the first and third futures for gold is -1.5% (that is, the third contract was 1.5% more expensive than the first one). The curve was in backwardation only 79 days over the 12,107 business days between January 1975 and February 2023, that is, only 0.66% of the time. When investing in gold futures, whether it’s a stand-alone gold investment or as part of a broad commodity investment (like in the Bloomberg commodity index), investors are hoping that the gold curve will remain in backwardation for a large portion of their investment period. But, in more than 50 years of history, this has never happened for periods longer than 15 days. What about silver, then? Silver futures' behaviour is very similar to gold futures. The average roll yield between the first and third futures for silver is -2%. The curve was in backwardation only 81 days between January 1975 and February 2023. Over the last 15 years, a futures-based investment in silver has underperformed on average by 1.29%1 per year compared to a physical investment. WisdomTree is the leader in Europe for commodity exposure in exchange-traded products. As such, we aim to offer our investors the most innovative strategies to invest in commodities.
MCX:GOLD1!
by aneekaguptaWTE
How Much Gold Does Your Portfolio Need?Economists make forecasts to make weathermen look good. Trying to forecast trends in complex systems is never easy. As with weather, financial markets are influenced by a myriad of factors which can make prediction akin to gambling. Time in the market beats timing the market so a far safer bet is building a diversified and informed portfolio. As mentioned in our previous paper , gold is a crucial addition to any well-diversified portfolio. Gold offers investors the benefits of resilience during crises, diversification, and low volatility while also being a good hedge against inflation. With crisis ever-present, from pandemics and geo-political conflict to financial instability and recession, uncertainty is on everyone’s lips, including central banks which bought a record 1,135 tonnes of gold last year. Central Banks have shown no signs of slowdown going into 2023, buying 74t in Jan and 52t in Feb, the strongest start to central bank buying since 2010. It is clear why, with rising global inflation due to 2 years of unprecedented QE. A decade of cheap money has its costs which are coming back to bite both consumers and central banks. This is now being played with collapsing banks and crumbling businesses. Though governments may term these exceptions, they’re the inevitable consequence of hiking rates too fast. And even though inflation has now started to cool, it is proving stubborn and the risk of recession looms. In crisis, institutions and individuals rush to gold. It’s no wonder then that gold prices spiked in March nearing an All-Time-High above USD 2,000/oz. Gold continues to trade above the key 2000 level even in April. Even now crises show no sign of slowing. Recession talks have become commonplace and phantoms of 2008 haunt with bank collapses. The world is increasingly moving towards reshoring and friendshoring, and de-dollarization is talked about more and more. It is almost inevitable that gold will break its all-time-high soon. But, buying gold is the easy part, in fact, our previous paper covered 6 Ways to Invest in Gold. Managing gold as part of a larger portfolio is more nuanced. Allocating the right amount, finding the right entry, and knowing when to cash out are all critical. This paper aims to address two questions – 1. What are the key drivers of gold prices in this decade 2. How should investors use gold in balancing portfolios to navigate turbulent times? What Propels Gold After Its All Time High? SVB and Credit Suisse pushed it to its brink. In fact, spot prices in India, Australia, and the UK sailed even above their All-Time-High. But what propels gold now? Financial Instability Was Credit Suisse the End? “The current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come.” - Jamie Dimon Unfortunately, Credit Suisse was likely just a symptom of the larger problem. 2-years of near-free money has inevitably led others to make risky bets which catch up to them during periods of QT. Additionally, Credit Suisse and SVB’s collapse were both set off by an unprecedentedly aggressive rate hiking cycle. Fed is stuck between a rock and a hard place as they try to control runaway inflation with aggressive rate hikes. Higher rates for longer increase the risks of financial instability. Stubborn Inflation and Recession Risks Stubborn inflation? Wasn’t inflation on its way down after almost a year? Yes and No. Although yearly inflation has definitely cooled in most countries from their peak last year, inflation continues to tick up month-by-month above the targets that central banks have set for themselves. It is not expected to reach below their targets even before 2025 in many countries. This is because although energy and commodity prices have cooled with demand waning, core inflation continues to remain stubbornly high. Additionally, food and energy prices are still volatile. On the back of this, recession risks remain high. Recently released FOMC meeting minutes showed that officials expect a recession in the second half of the year. A recession in many countries now seems inevitable. Gold shines during recession and high-inflation environments. High Interest Rates Wasn’t the Fed done hiking? Currently, CME’s FedWatch tool shows a ~72% chance of another 25bps hike next month despite the surprisingly low US CPI print. Does another 25bps matter? What’s more important is that 25bps is the peak rate and most central banks are calling this summit a pause and not a pivot. As such, rates will likely remain high for the remainder of 2023. Gold tends to perform well during high interest rate and risk-off environments. Escalating Tensions, Friendshoring, and De-Dollarization Last but definitely not least are central banks and their gold-buying binge. Though some of this can be explained by the ultra-high inflation. It is undeniably also driven by rising political tensions. The conflict in Ukraine continues to rage and the US extend its trade war against China with the CHIPS act. This is driving many of the largest economies to reshore and friendshore key supply chains. This also means relying less on the USD which can be weaponized by the US. De-dollarization has been underway for the last 23 years as the share of USD holdings in foreign exchange reserves has declined from 71.5% to 58.3% over the past 23 years. Current conditions make it more likely that the trend will accelerate. Gold inevitably benefits from all of this as it is one of the only assets that no other central bank can print or freeze. All of these factors will likely drive gold in the coming decade. But instead of setting a price target, investors can be prudent and methodical by properly allocating it as part of a larger portfolio. Using Gold in a Portfolio From 2000 until now, the following portfolios would deliver: Since 2000, gold has been the best performing asset out of the 3 main components of a basic portfolio – Large Cap stocks (SPY), Treasury Bonds (10Y), and Gold. Gold price has risen 609% compared to SPY at +193%. Investing in 10-year maturity treasury bonds would have netted investors 110% during these 23 years. As such, larger portfolio allocation towards gold would have yielded investors far more during this period. However, this comes at the downside of higher volatility. Gold has had an average 12-month rolling volatility of 15.8% over the last 23 years, slightly higher than SPY’s 14%. Still, not all volatility is bad, especially if the returns outweigh the risk. Volatility to the upside can be beneficial to investors. In order to measure the returns from the portfolio after accounting for higher volatility-associated risk, investors can measure the risk-adjusted returns using the Sharpe Ratio and Sortino Ratio. Sharpe Ratio measures the amount of excess return generated by taking on additional volatility-related risk. The higher the Sharpe Ratio, the better the portfolio is performing relative to its risk. The figure below contains the Sharpe Ratio for each of the portfolios across the last 23 years. Since each year had a different risk-free rate due to changing monetary policy, the Sharpe ratios vary for every year and there are periods during which gold-heavy portfolios have highest Sharpe ratios and others where it has the lowest. This highlights gold's sensitivity to changes in monetary policy. Sortino Ratio also measures risk-adjusted returns like the Sharpe Ratio however it only considers the risk of downside volatility. In other words, it measures return for every unit of downside risk. The figure below contains the Sortino Ratio for each of the portfolios. A key difference between the Sharpe and Sortino Ratios can be seen in the readings for 2009. Sharpe Ratio for a gold-heavy portfolio is the lowest in 2009 due to high volatility in gold prices. However, since this was volatility to the upside, the Sortino Ratio for a gold-heavy portfolio in 2009 is the highest. In 2023, a Gold heavy portfolio has performed the best and has the highest Sharpe and Sortino Ratio due to gold's relative overperformance amid the banking crisis. DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
Editors' picks
COMEX:GC1!Education
by mintdotfinance
4
Gold: Shaken, not stirred 🍸Like James Bond, gold seems to prefer shaking to stirring, as its recent movements suggest. In the course of wave B in turquoise, the metal has been bucketed about quite thoroughly and still has got some room left to expand the current ascent. As soon as wave B in turquoise is finished, though, gold should turn downwards and resume the overarching descent by developing wave (4) in yellow. However, there is a 35% chance that the precious metal could use the turquoise zone between TADAWUL:1830 and HKEX:1709 as an early exit, completing wave alt.2 in turquoise and shifting upwards from there.
COMEX:GC1!
by MarketIntel
GOLD Futures WeeklyGOLD Weekly Analysis: It has been trading in range for 980 days = 980 /365= 2.68 years approx Previously trend has been in upward momentum and then it went into consolidation(sideways) or can be considered accumulation as it is bullish rectangle. Ranges are good to trade as markets are in equilibrium and can brake either side but here the probability is high towards upside due to bullish rectangle Also from point A to B there was double bottom with the divergence on RSI but the bottom didnt break and RSI leads the price back to the range top to point C to $2078. From point C to D a wedge formation within the range and bullish divergence on RSI = reversal movement and moves the price from low of $1700 to $2040. Point is RSI has been effective in gauging the strength of direction. Now if the rectangle breaks then the next target from range brake will be 2500 Based on FIB projection first target will be (2300-2040=260) % Return = 260/2040= 12.74% Second target will be (2500-2040=460) % Return = 460/2040 = 22.54% By the time there is no divergence on RSI and price brakes the last 2 highs 2078 and we have some green candles visible to support the direction as well, longs can be initiated above 2080 to chase 2500 level. Remember this is weekly timeframe will take atleast a year to perform and the most important is SL:1640
COMEX:GC1!Long
by SMS14