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Goodbye, Precious…
(…Metals : Gold, Silver, Platinum, Palladium)
We are contra-consensus (as usual) in thinking that the current levels, albeit depressed, are still not compelling enough to warrant a core portfolio allocation.
Here are few reasons why Gold is beaten by other assets :-
Don’t need Metals to hedge inflation, there are income-generative ways to do that, aplenty
Don’t need them to hedge the USD Index, (see above)
Price action is not remarkable and momentum is notably absent. In fact, technically the patterns for all Precious Metals are vulnerable.
Don’t need them to hedge or diversify against a market correction.
We will look again when we next re-visit our asset allocations - but for now, irrespective of whether the market flies upwards or corrects through yields or geopolitics, whether inflation spikes or settles - there are better and more lucrative ways to hedge or balance a portfolio. With short duration sovereign and corporate bonds yielding so strongly, alongside several other income-rich sources of hedging and security, why receive zero with Gold?
This counter-consensus view trickles through to USD/ZAR, other commodities currencies and also the Mining constituents of the GDX and GDXJ ETFs.
We are also not so convinced that the USD Index is set to collapse just yet (we have remained Long DXY), which would have been a key driver for a Long Gold/Silver core allocation.
There may an attractive price to re-enter - but we do not think today’s price is that price.
For now, Core (Medium term/Long term) allocation to Gold and Silver is Zero. That could change quickly - but in the meantime there are better places to play.
Tactical (short term) trading positions will still take place in all these instruments, with strict time and risk management parameters.
FX / Commodities / Shorter Term Trades
Positions opened in:
XAU & XAG
EUR/GBP
DXY
USD/ZAR
November VIX
December Nasdaq Futures
December S&P 500 Futures
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