Gold price: On the futures markets, the mood is turning

Hope for short squeeze is growing

Image result for goldThe futures markets are known to trade much higher gold than the cash markets, but only on paper rather than in physical form. Futures & options thus have a particularly strong influence on the gold price .

As a reminder, a gold future moves the equivalent of 100 troy ounces of gold (current value: $ 123,000 as of: 10/22/2018). So if you buy (sell) a gold contract, you would get $ 1,000 richer (poorer) if you see a $ 10 rise in gold prices .

In order to be allowed to bet, one must deposit however a certain margin of security (margin). However, if the price of gold massively in the “wrong” direction, you have nachschießen more capital. If this does not happen, the position can be “forced liquidated”.

Conclusion: Here it is less about crisis, asset or inflation protection, but above all speculation with the character of a bet (see table).

Facts about trading gold futures on the commodity exchange

Contract Size:

 

100 troy ounces

 

Trading Time (USA, Central Time): Sun (5.00 pm) to Fri (4.00 pm)
Number of open contracts: 472,903 (19.10.2018)
Turnover Gold Futures: 192.180 (19.10.2018)
Collateral per contract (margin): 3,400 USD

Source: CME Group

 

The events on the futures markets should still be watched with eagle eyes. For example, once a week, the US regulator Commodity Futures Trading Commission (CFTC) informs about the current sentiment on Comex.

The Commitments of Traders Report (CoT ) lists the long and short positioned futures of the main groups of market participants. These are players from the gold industry (commercials) as well as non-commercials and non-reportables.

One thing was particularly noticeable this year: a huge sell-off was observed among big appointment speculators. Judging by this one can attest to the gold price almost relative strength.

Big speculators are more optimistic again

Thus, since Jan. 23, the net long position (mostly optimistic) of large speculators totaling 214,000 futures has completely vanished and into a net short position (mostly pessimistic) of negative until October 9 38,000 contracts transformed.

As a result, the number of long-positioned futures fell to its lowest level since February 2016, while the short exposure of almost 218,000 contracts even reached the highest level since August 2008, when the US investment bank Lehman Brothers was still solvent.

The massive sentiment reversal from January to October was caused by a 126,000 reduction in the long side and nearly 127,000 futures on the short side.

In the current CoT report published on Friday, the first signs of relaxation were announced. The lousy mood among the big speculators has turned completely. On a weekly view, its net short position of minus 38,200 contracts has turned into a net long position of plus 17,700 futures. If the gold price continues to trend upwards, it could come to a so-called short-squeeze.

That is, the pessimists are forced to close their short positions to limit losses.

The gold price would then have to help in much higher regions.

Outlook for the current week

Statistically, September is the seasonally weakest month for equities in the US and Germany, but so far this year, October has been relatively disappointing. This has helped the gold price after a several-month decline at least a bit on its feet.

However, the negative correlation to the asset class shares, which the yellow precious metal has said has not really worked out so far. Obviously, stockbrokers are not worried about the future prospects of equities, despite the recent technical correction.

Europe is concerned not only with geopolitical trouble spots and the future development of world trade, but also with the impending disorderly Brexit and debt sustainability of Italy.

On Thursday, this issue should also be dealt with at the ECB press conference after the central bank’s interest rate decision. Italian-born ECB chief Mario Draghi should be able to assess this problem particularly well. Now it remains to be hoped that he can accompany his solution without bias.

 

Gold price: On the futures markets, the mood is turning

Hope for short squeeze is growing

Image result for goldThe futures markets are known to trade much higher gold than the cash markets, but only on paper rather than in physical form. Futures & options thus have a particularly strong influence on the gold price .

As a reminder, a gold future moves the equivalent of 100 troy ounces of gold (current value: $ 123,000 as of: 10/22/2018). So if you buy (sell) a gold contract, you would get $ 1,000 richer (poorer) if you see a $ 10 rise in gold prices .

In order to be allowed to bet, one must deposit however a certain margin of security (margin). However, if the price of gold massively in the “wrong” direction, you have nachschießen more capital. If this does not happen, the position can be “forced liquidated”.

Conclusion: Here it is less about crisis, asset or inflation protection, but above all speculation with the character of a bet (see table).

Facts about trading gold futures on the commodity exchange

Contract Size:

 

100 troy ounces

 

Trading Time (USA, Central Time): Sun (5.00 pm) to Fri (4.00 pm)
Number of open contracts: 472,903 (19.10.2018)
Turnover Gold Futures: 192.180 (19.10.2018)
Collateral per contract (margin): 3,400 USD

Source: CME Group

 

The events on the futures markets should still be watched with eagle eyes. For example, once a week, the US regulator Commodity Futures Trading Commission (CFTC) informs about the current sentiment on Comex.

The Commitments of Traders Report (CoT ) lists the long and short positioned futures of the main groups of market participants. These are players from the gold industry (commercials) as well as non-commercials and non-reportables.

One thing was particularly noticeable this year: a huge sell-off was observed among big appointment speculators. Judging by this one can attest to the gold price almost relative strength.

Big speculators are more optimistic again

Thus, since Jan. 23, the net long position (mostly optimistic) of large speculators totaling 214,000 futures has completely vanished and into a net short position (mostly pessimistic) of negative until October 9 38,000 contracts transformed.

As a result, the number of long-positioned futures fell to its lowest level since February 2016, while the short exposure of almost 218,000 contracts even reached the highest level since August 2008, when the US investment bank Lehman Brothers was still solvent.

The massive sentiment reversal from January to October was caused by a 126,000 reduction in the long side and nearly 127,000 futures on the short side.

In the current CoT report published on Friday, the first signs of relaxation were announced. The lousy mood among the big speculators has turned completely. On a weekly view, its net short position of minus 38,200 contracts has turned into a net long position of plus 17,700 futures. If the gold price continues to trend upwards, it could come to a so-called short-squeeze.

That is, the pessimists are forced to close their short positions to limit losses.

The gold price would then have to help in much higher regions.

Outlook for the current week

Statistically, September is the seasonally weakest month for equities in the US and Germany, but so far this year, October has been relatively disappointing. This has helped the gold price after a several-month decline at least a bit on its feet.

However, the negative correlation to the asset class shares, which the yellow precious metal has said has not really worked out so far. Obviously, stockbrokers are not worried about the future prospects of equities, despite the recent technical correction.

Europe is concerned not only with geopolitical trouble spots and the future development of world trade, but also with the impending disorderly Brexit and debt sustainability of Italy.

On Thursday, this issue should also be dealt with at the ECB press conference after the central bank’s interest rate decision. Italian-born ECB chief Mario Draghi should be able to assess this problem particularly well. Now it remains to be hoped that he can accompany his solution without bias.

 

Price slump on US stock market raises gold price

Image result for goldSince the gold price was recently close to the 20-month low, it has been up significantly since then. The windfall in the S & P500 is the main reason for tailwind. All the more gold fans should be watching the development of US equities.

The S & P500 has fallen close to the six-month low, and there has been panic in the market recently. Just since the beginning of the month, the index has fallen by 8.8 percent , which is the largest monthly loss in many years. In return, investors have shifted some money into gold, the gold price quoted at around $ 1,230 per ounce near the three-month high.

In the euro-based gold price , the index has risen to four-month highs after the euro slipped close to the 52-week low against the dollar .

On the one hand, rising US interest rates are pulling the dollar higher. On the other hand, the worsening economic data from the euro zone and fears of a strong debt increase in Italy push the euro down.

There are a lot of reasons for the price slump on the S & P500

Image result for goldA lot of factors caused the S & P500 to suddenly turn down sharply, causing the downtrend to continue over the next few months. So far, many investors believed that US companies could decouple from the slowdown in the global economy and that the current quarterly season would confirm that. However, exactly the opposite is the case. In turn, companies either deliver weak numbers or give profit warnings , causing stocks to collapse.

Take a look at the papers of semiconductor manufacturers Texas Instruments, or Advanced Micro Devices (AMD), or the world’s largest construction equipment manufacturer Caterpillar. Some companies point to weak demand, others, like Caterpillar, to rising raw material costs.

These are news investors do not like at all. The danger is great that the quarterly season will turn out to be much worse than many investors expect, after which the price decline is likely to persist for many individual stocks and thus for the S & P500.

US housing market sends strong warning signals to the overall economy

The second drag factor is that investors are starting to react more intensively to the increasingly weak data from the real estate market. Sales of new homes have fallen significantly more recently than expected.

The reason is that interest rates on mortgage loans have risen to seven-year highs . As a result, investors are worried that the sharp rise in interest rates over the next few quarters will put even more pressure on consumers and businesses, and that other sectors may be in trouble, such as the auto sector, especially as General Motors and Ford’s shares Year lows have collapsed.

Should the US economy cool off significantly in the coming quarters, or even slide into recession, then the stock market is likely to reflect this a few months earlier. Therefore, the recent slide should not surprise anyone.

I assume that with a continued slide in the stock market, some “experts” will soon say investors’ concerns about a possible recession are completely unfounded.

If you hear something like that, then all of your warning lights should come on. If the “experts” claim that the situation is under control and the problems “contained”, then the opposite is the case, then the hut is already burning brightly.

Gold fans should closely watch the development of the S & P500. I expect the US stock market correction to widen significantly. The next few months will show how the gold price will react to developments in the US stock market.

Price slump on US stock market raises gold price

Since the gold price was recently close to the 20-month low, it has been up significantly since then. The windfall in the S & P500 is the main reason for tailwind. All the more gold fans should be watching the development of US equities.

The S & P500 has fallen close to the six-month low, and there has been panic in the market recently. Just since the beginning of the month, the index has fallen by 8.8 percent , which is the largest monthly loss in many years. In return, investors have shifted some money into gold, the gold price quoted at around $ 1,230 per ounce near the three-month high.

In the euro-based gold price , the index has risen to four-month highs after the euro slipped close to the 52-week low against the dollar .

On the one hand, rising US interest rates are pulling the dollar higher. On the other hand, the worsening economic data from the euro zone and fears of a strong debt increase in Italy push the euro down.

There are a lot of reasons for the price slump on the S & P500

Image result for goldA lot of factors caused the S & P500 to suddenly turn down sharply, causing the downtrend to continue over the next few months. So far, many investors believed that US companies could decouple from the slowdown in the global economy and that the current quarterly season would confirm that. However, exactly the opposite is the case. In turn, companies either deliver weak numbers or give profit warnings , causing stocks to collapse.

Take a look at the papers of semiconductor manufacturers Texas Instruments, or Advanced Micro Devices (AMD), or the world’s largest construction equipment manufacturer Caterpillar. Some companies point to weak demand, others, like Caterpillar, to rising raw material costs.

These are news investors do not like at all. The danger is great that the quarterly season will turn out to be much worse than many investors expect, after which the price decline is likely to persist for many individual stocks and thus for the S & P500.

US housing market sends strong warning signals to the overall economy

The second drag factor is that investors are starting to react more intensively to the increasingly weak data from the real estate market. Sales of new homes have fallen significantly more recently than expected.

The reason is that interest rates on mortgage loans have risen to seven-year highs . As a result, investors are worried that the sharp rise in interest rates over the next few quarters will put even more pressure on consumers and businesses, and that other sectors may be in trouble, such as the auto sector, especially as General Motors and Ford’s shares Year lows have collapsed.

Should the US economy cool off significantly in the coming quarters, or even slide into recession, then the stock market is likely to reflect this a few months earlier. Therefore, the recent slide should not surprise anyone.

I assume that with a continued slide in the stock market, some “experts” will soon say investors’ concerns about a possible recession are completely unfounded.

If you hear something like that, then all of your warning lights should come on. If the “experts” claim that the situation is under control and the problems “contained”, then the opposite is the case, then the hut is already burning brightly.

Gold fans should closely watch the development of the S & P500. I expect the US stock market correction to widen significantly. The next few months will show how the gold price will react to developments in the US stock market.

Gold price defies strong US interest rate rise

After months of sideways trending, ten-year US bond yields have recently come close to multi-year highs. This gives the gold price additional headwind. The more exciting it will be how he will develop in the environment.

After the sharp slide between mid-April and mid-August, the price of gold has been trending sideways at around $ 1,200 an ounce for four weeks. On a euro basis, however, the price is at the lowest level since February 2016, which causes frustration for many gold fans. Over the past few months, he has had a significant headwind, especially from the rising dollar, and now comes another burden: the sharp rise in interest rates on ten-year US bonds .

Worries about US inflation are booming

Many experts are convinced that this is mainly due to the tightening of monetary policy of the US Federal Reserve . For many investors, it is a foregone conclusion that the Fed will raise interest rates at the next meeting on September 26, the next step will follow on December 19th. The US Federal Reserve would raise interest rates four times this year. In addition, the Fed has announced three further increases for 2019. However, this prospect has been known to investors for a long time and could have been priced into the market for a long time.

In my opinion, the sharp rise in 10-year US bond yields is mainly due to concerns about a return to US inflation . This is mainly due to the trade war between the US and China . With the US imposing punitive tariffs on more and more Chinese products, and eventually punitive tariffs on Chinese exports to the US of more than $ 500 billion annually, Chinese products in the US suddenly become significantly more expensive, fueling US inflation . The situation is exacerbated by the oil price of the US variety WTI, which has climbed by almost 20 percent since the beginning of the year and is thus close to the multi-year highs. That fuels inflation in addition.

Real interest is low

Image result for goldIn the environment , investors sell US bonds , which is why the interest rates for two-year securities have climbed to 2.8 percent – this is the highest level since July 2008. Those for ten-year securities have risen to 3.05 percent, so they are listed nearby the highest price since July 2011. Although this weighs on the gold price, but the headwind is not as large as it looks at first glance, as the real interest clearly shows. If it is calculated on the basis of interest rates on ten-year US bonds and subtracts US inflation from the previous 2.7 percent, the real interest rate is only 0.35 percent . Nevertheless, nominally higher US interest rates are a headwind for the price of gold, because the precious metal does not pay interest.

US interest rates could continue to climb significantly in the coming months, especially as the trade war is likely to escalate. In the environment will show how the gold price will develop, especially as he has headwind from the rising dollar.

Gold price defies strong US interest rate rise

After months of sideways trending, ten-year US bond yields have recently come close to multi-year highs. This gives the gold price additional headwind. The more exciting it will be how he will develop in the environment.

After the sharp slide between mid-April and mid-August, the price of gold has been trending sideways at around $ 1,200 an ounce for four weeks. On a euro basis, however, the price is at the lowest level since February 2016, which causes frustration for many gold fans. Over the past few months, he has had a significant headwind, especially from the rising dollar, and now comes another burden: the sharp rise in interest rates on ten-year US bonds .

Worries about US inflation are booming

Many experts are convinced that this is mainly due to the tightening of monetary policy of the US Federal Reserve . For many investors, it is a foregone conclusion that the Fed will raise interest rates at the next meeting on September 26, the next step will follow on December 19th. The US Federal Reserve would raise interest rates four times this year. In addition, the Fed has announced three further increases for 2019. However, this prospect has been known to investors for a long time and could have been priced into the market for a long time.

In my opinion, the sharp rise in 10-year US bond yields is mainly due to concerns about a return to US inflation . This is mainly due to the trade war between the US and China . With the US imposing punitive tariffs on more and more Chinese products, and eventually punitive tariffs on Chinese exports to the US of more than $ 500 billion annually, Chinese products in the US suddenly become significantly more expensive, fueling US inflation . The situation is exacerbated by the oil price of the US variety WTI, which has climbed by almost 20 percent since the beginning of the year and is thus close to the multi-year highs. That fuels inflation in addition.

Real interest is low

Image result for goldIn the environment , investors sell US bonds , which is why the interest rates for two-year securities have climbed to 2.8 percent – this is the highest level since July 2008. Those for ten-year securities have risen to 3.05 percent, so they are listed nearby the highest price since July 2011. Although this weighs on the gold price, but the headwind is not as large as it looks at first glance, as the real interest clearly shows. If it is calculated on the basis of interest rates on ten-year US bonds and subtracts US inflation from the previous 2.7 percent, the real interest rate is only 0.35 percent . Nevertheless, nominally higher US interest rates are a headwind for the price of gold, because the precious metal does not pay interest.

US interest rates could continue to climb significantly in the coming months, especially as the trade war is likely to escalate. In the environment will show how the gold price will develop, especially as he has headwind from the rising dollar.

Gold: Ten years after the Lehman bankruptcy

Last Saturday was the tenth anniversary of the bankruptcy of US investment bank Lehman Brothers. Reason enough for a review of the past decade, an appraisal of global financial systems and a look into the future.

Financial Crisis 2008/2009: How the Debacle Began

Image result for goldThe trigger for the financial crisis of the time is usually called the bankruptcy of Lehman Brothers , but basically it acted as a catalyst for the subsequent global financial crisis. Even before the largest bank failure in US history, large financial institutions were facing the end. As early as 2007, two banks had to be rescued by the taxpayer due to the billions in losses caused by the US housing crisis. These were the US investment bank Bear Stearns and the German Mittelstandsbank IKB .

The “root of all evil” was the practice of lending real estate in the US to borrowers with a low credit rating. Because US interest rates were gradually raised to more than five percent in mid-2006, many Americans were unable to pay their installments, which led to a slump in real estate prices.

But because all these loans were packaged into derivatives and sold all over the world, the crisis was not limited to the US, but mutated into the global financial crisis . Even credit default swaps – so-called credit default swaps – could not function because of the sheer size of the insured loss incurred.

After the US government refused to rescue Lehman Brothers in September 2008, all the dams on international money markets collapsed. No financial institution wanted to lend another because of the enormously increased risk money, after all, no one knew who next met with insolvency. Central banks had to provide liquidity at zero cost and billions in order to avoid a collapse of financial systems.

At the height of the crisis, Chancellor Angela Merkel was even forced on October 5, 2008, to guarantee the security of all German savings deposits together with then-Finance Minister Peer Steinbrück. Less than four years later, ECB chief Mario Draghi had to use equally strong words in his July 2012 “Whatever-it-takes” speech to prevent a collapse of the euro. Although it has calmed down in recent years, as no similarly large rescue measures were on the agenda – but the rest is currently making a relatively deceptive impression.

Mountains of debt as far as the eye can see

However, avoiding a meltdown of global financial systems has had a high price, which has multiplied the balance sheets of the two main central banks, the Fed ($ 4.2 trillion) and the ECB ($ 4.6 trillion), within a decade (see table). As investors have become accustomed to ultra-expansive monetary policy and cheap money has driven up asset classes such as bonds, equities and real estate, the weaning of extremely low interest rates is likely to be a very difficult undertaking and a tightrope walk or balancing act in adverse weather conditions ,

Balance sheet totals of the central banks
United States 4.21 trillion dollars
euro zone 4.61 trillion euros
Japan 550.9 trillion yen
Great Britain 592 billion pounds
China 36.26 trillion yuan

 

Should global economic growth weaken significantly or even become negative or interest rates rise sharply as a result of international trade conflicts, heavily indebted households, companies and governments are likely to face massive problems with debt-fund re-financing – we do not even want to talk about amortization in this context ,

Outlook for the current week

The US economy, despite all prophecies of doom, continues to outstrip its relative strength. The belief in the dollar seems to be firmly anchored among investors, despite unpredictable US policies and the unresolved trade dispute between the US and China. As a “safe haven”, it exerts a strong appeal in the face of latent risks. Much capital is flowing thanks to the prospect of further rising US yields in the US. Ten-year US government bonds yield almost three percent, which German investors can only dream of. Less inflation but nothing left net.

Normally such low (USA) or negative real interest rates (Germany) are used as an argument for the purchase of gold. But obviously the ten years after Lehman Brothers are still far from normal.

 

Gold: Ten years after the Lehman bankruptcy

Last Saturday was the tenth anniversary of the bankruptcy of US investment bank Lehman Brothers. Reason enough for a review of the past decade, an appraisal of global financial systems and a look into the future.

Financial Crisis 2008/2009: How the Debacle Began

Image result for goldThe trigger for the financial crisis of the time is usually called the bankruptcy of Lehman Brothers , but basically it acted as a catalyst for the subsequent global financial crisis. Even before the largest bank failure in US history, large financial institutions were facing the end. As early as 2007, two banks had to be rescued by the taxpayer due to the billions in losses caused by the US housing crisis. These were the US investment bank Bear Stearns and the German Mittelstandsbank IKB .

The “root of all evil” was the practice of lending real estate in the US to borrowers with a low credit rating. Because US interest rates were gradually raised to more than five percent in mid-2006, many Americans were unable to pay their installments, which led to a slump in real estate prices.

But because all these loans were packaged into derivatives and sold all over the world, the crisis was not limited to the US, but mutated into the global financial crisis . Even credit default swaps – so-called credit default swaps – could not function because of the sheer size of the insured loss incurred.

After the US government refused to rescue Lehman Brothers in September 2008, all the dams on international money markets collapsed. No financial institution wanted to lend another because of the enormously increased risk money, after all, no one knew who next met with insolvency. Central banks had to provide liquidity at zero cost and billions in order to avoid a collapse of financial systems.

At the height of the crisis, Chancellor Angela Merkel was even forced on October 5, 2008, to guarantee the security of all German savings deposits together with then-Finance Minister Peer Steinbrück. Less than four years later, ECB chief Mario Draghi had to use equally strong words in his July 2012 “Whatever-it-takes” speech to prevent a collapse of the euro. Although it has calmed down in recent years, as no similarly large rescue measures were on the agenda – but the rest is currently making a relatively deceptive impression.

Mountains of debt as far as the eye can see

However, avoiding a meltdown of global financial systems has had a high price, which has multiplied the balance sheets of the two main central banks, the Fed ($ 4.2 trillion) and the ECB ($ 4.6 trillion), within a decade (see table). As investors have become accustomed to ultra-expansive monetary policy and cheap money has driven up asset classes such as bonds, equities and real estate, the weaning of extremely low interest rates is likely to be a very difficult undertaking and a tightrope walk or balancing act in adverse weather conditions ,

Balance sheet totals of the central banks
United States 4.21 trillion dollars
euro zone 4.61 trillion euros
Japan 550.9 trillion yen
Great Britain 592 billion pounds
China 36.26 trillion yuan

 

Should global economic growth weaken significantly or even become negative or interest rates rise sharply as a result of international trade conflicts, heavily indebted households, companies and governments are likely to face massive problems with debt-fund re-financing – we do not even want to talk about amortization in this context ,

Outlook for the current week

The US economy, despite all prophecies of doom, continues to outstrip its relative strength. The belief in the dollar seems to be firmly anchored among investors, despite unpredictable US policies and the unresolved trade dispute between the US and China. As a “safe haven”, it exerts a strong appeal in the face of latent risks. Much capital is flowing thanks to the prospect of further rising US yields in the US. Ten-year US government bonds yield almost three percent, which German investors can only dream of. Less inflation but nothing left net.

Normally such low (USA) or negative real interest rates (Germany) are used as an argument for the purchase of gold. But obviously the ten years after Lehman Brothers are still far from normal.

 

Gold and silver in the endurance test

The nerves of gold and silver investors were strained this year. Despite several hotspots on various fronts, gold and silver have lost 8.4 percent and 16.6 percent, respectively, since the turn of the year (see table below).

As a crisis currency in the background

Image result for goldThe reasons why the two hard currencies, gold and silver, are currently unable to reap their benefits, are as follows: Confidence in the world’s most important currencies of major industrial nations and the belief in a sustained bull run in equities and real estate are currently too strong. However, in countries such as Argentina, Brazil, South Africa and Turkey, traditional crisis protection has brought joy to its owners. The local currency weakness has made gold massively expensive and has even led to new record highs in some crisis countries.

Investors in the field of wealth protection should therefore not be alarmed by the bad mood and consider investing in gold and silver as a strategic long-term position.

Both precious metals suffered in recent months from a massive sell-off of large-term speculators (non-commercials) on the futures markets. Week after week, the US Commodity Futures Trading Commission (CFTC) publishes important data on the transactions of various market players. This indicates who has become more optimistic, who has become more skeptical and who has become more pessimistic. For example, for mid-June large long-term speculators (non-commercials), the net long position (turned optimistic) has moved from nearly 50,000 contracts to a net short position (pessimistic on balance) of nearly 30,000 futures ,

In the case of gold, the big speculators have also switched sides and made a net short position of around 13,500 futures out of a net long position of over 120,000 contracts within two and a half months. Judging by this, one may almost interpret the associated price falls of both precious metals as relative strength.

Gold and silver in comparison

  year low year high current Perf (2018) Volatility Index (CBOE)
Gold (USD) 1,170.13 1,359.88 1,193.18 -8.40% 11.30%
Silver (USD) 14.12 17.70 14.12 -16.60% 19.20%

(As of 10.09.2018)

Mood is also in the ETF sector

Image result for goldPhysically backed ETFs on gold and silver also had to cope with significant outflows in recent months. This picture fits the outflows of global gold ETFs released for the month of August last week by the World Gold Council. Here are the following expressed: Especially North American investors are currently parting on a large scale of gold ETFs . In August, the outflows from this region amounted to 44 tonnes. In the three months before, there were already bleeds of 30, 44 and 25 tons for the months of May to July.

Overall, discharges of more than 64 tonnes have occurred since the turn of the year, while in Europe over the same period, inflows of almost 48 tonnes have been registered. Obviously, investors on this side of the Atlantic are much more risk-averse than those on the other side of the Atlantic.

In other words, perhaps on the continent marked by crises and wars, carelessness is less pronounced than on the other side of the Atlantic. However, anyone wishing to invest in gold and silver despite the undoubtedly adverse market environment should nevertheless be aware of the key features of the two crisis currencies.

Be sure to consider volatility

Silver is much cheaper than gold and is often disrespectfully referred to as the “poor man’s gold”. At the same time, its price fluctuation intensity (new German: volatility) is significantly higher than that of gold. This mathematical index is considered a recognized risk barometer.

The higher the volatility, the more attractive the potential yield opportunity on the one hand, but at the same time the risk of loss increases accordingly. If you want to use both alternative currencies for asset protection, gold should weight more heavily than silver. A ratio of 80 percent gold to 20 percent silver in this context seems to be a sensible mixture.

 

Gold and silver in the endurance test

The nerves of gold and silver investors were strained this year. Despite several hotspots on various fronts, gold and silver have lost 8.4 percent and 16.6 percent, respectively, since the turn of the year (see table below).

As a crisis currency in the background

Image result for goldThe reasons why the two hard currencies, gold and silver, are currently unable to reap their benefits, are as follows: Confidence in the world’s most important currencies of major industrial nations and the belief in a sustained bull run in equities and real estate are currently too strong. However, in countries such as Argentina, Brazil, South Africa and Turkey, traditional crisis protection has brought joy to its owners. The local currency weakness has made gold massively expensive and has even led to new record highs in some crisis countries.

Investors in the field of wealth protection should therefore not be alarmed by the bad mood and consider investing in gold and silver as a strategic long-term position.

Both precious metals suffered in recent months from a massive sell-off of large-term speculators (non-commercials) on the futures markets. Week after week, the US Commodity Futures Trading Commission (CFTC) publishes important data on the transactions of various market players. This indicates who has become more optimistic, who has become more skeptical and who has become more pessimistic. For example, for mid-June large long-term speculators (non-commercials), the net long position (turned optimistic) has moved from nearly 50,000 contracts to a net short position (pessimistic on balance) of nearly 30,000 futures ,

In the case of gold, the big speculators have also switched sides and made a net short position of around 13,500 futures out of a net long position of over 120,000 contracts within two and a half months. Judging by this, one may almost interpret the associated price falls of both precious metals as relative strength.

Gold and silver in comparison

  year low year high current Perf (2018) Volatility Index (CBOE)
Gold (USD) 1,170.13 1,359.88 1,193.18 -8.40% 11.30%
Silver (USD) 14.12 17.70 14.12 -16.60% 19.20%

(As of 10.09.2018)

Mood is also in the ETF sector

Image result for goldPhysically backed ETFs on gold and silver also had to cope with significant outflows in recent months. This picture fits the outflows of global gold ETFs released for the month of August last week by the World Gold Council. Here are the following expressed: Especially North American investors are currently parting on a large scale of gold ETFs . In August, the outflows from this region amounted to 44 tonnes. In the three months before, there were already bleeds of 30, 44 and 25 tons for the months of May to July.

Overall, discharges of more than 64 tonnes have occurred since the turn of the year, while in Europe over the same period, inflows of almost 48 tonnes have been registered. Obviously, investors on this side of the Atlantic are much more risk-averse than those on the other side of the Atlantic.

In other words, perhaps on the continent marked by crises and wars, carelessness is less pronounced than on the other side of the Atlantic. However, anyone wishing to invest in gold and silver despite the undoubtedly adverse market environment should nevertheless be aware of the key features of the two crisis currencies.

Be sure to consider volatility

Silver is much cheaper than gold and is often disrespectfully referred to as the “poor man’s gold”. At the same time, its price fluctuation intensity (new German: volatility) is significantly higher than that of gold. This mathematical index is considered a recognized risk barometer.

The higher the volatility, the more attractive the potential yield opportunity on the one hand, but at the same time the risk of loss increases accordingly. If you want to use both alternative currencies for asset protection, gold should weight more heavily than silver. A ratio of 80 percent gold to 20 percent silver in this context seems to be a sensible mixture.