Gold investment: rely on gold to soar to earn a 103% hedge fund to reduce storehouse! Wait for a 10% correction before buying?

Spot gold continued to hover around $1,950 in Asian trading on Friday, having earlier surged as high as $1,955, while silver held its gains above $27.

The return of US jobless claims to the million-dollar mark sparked a safe-haven yesterday as gold continued to climb above $1,950, up nearly $20 a day.

On Thursday, the Labor Department released a report on unemployment benefits that showed initial claims for benefits totaled 1.106 million on a seasonally adjusted basis in the week ended Aug. 15, beating economists’ expectations of 925,000. The previous week’s figure was also slightly higher, rising from 963,000 to 971,000. It shows that the pace of employment recovery remains slow.

The fed minutes also added to gold’s appeal by reiterating concerns about the economic recovery.

Minutes from the Fed’s last policy meeting showed policymakers worried that the economy faced high uncertainty and might need more monetary policy support, although they played down the need for yield caps and targets.

But it is worth noting that the gold price crashing through twice in two weeks, gold prices tumbling last week above $110, the biggest one-day drop in seven years repeat selloff of gold on Wednesday, down over $70, it also highlights the volatility of gold, as gold prices rising, make more deal more crowded, the greater the profits space.

Delbrook Capital Advisors Inc., a hedge fund specializing in metals and mining, has more than doubled its returns this year, largely because of rising precious metals prices. Now it is trimming its positions.

The Delbrook Resource Opportunities Master Fund, based in Vancouver, is up about 22% in July and 103% in the year ended last month, according to Bloomberg. Its benchmark SPDR S&P Metals & Mining ETF was up 8.1 per cent in July and down about 22 per cent in the seven months to 2020.

Matthew Zabloski, a fund manager, wrote that the fund benefited from “tactical decisions to overweight precious metals stocks, particularly midsize production and development stocks, while adding portfolio hedging through section-focused etfs.”

Gold has surged to record levels this year amid a flight to safety by investors on the back of massive central bank stimulus measures and falling real interest rates. Gold hit an all-time high on August 7, followed by its first weekly decline in more than two months.

Mr. Zabloski had forecast further gains in the precious metals sector in June, but has now put that on hold as gold stock valuations have strengthened.

Of course, he still thinks that “the uncorrelated returns provided by hard assets are very compelling”. However, he believes it is “prudent to selectively reduce exposure to specific sectors of precious metals, including small and medium-sized stocks”.

He also warned that if economic data surprises and the dollar reverses its decline, “it could trigger a withdrawal of generalists from the gold market at a pace that would be quite painful.” That was somewhat evident on Wednesday as the dollar rose and gold fell after the Fed minutes fell short of expectations of dovishness.

Billionaire investor Mark Mobius, founder of Mobius Capital Partners, also expressed concern about gold’s direction.

Investors should wait for gold prices to adjust before entering the market, Mobius said on Thursday. “The safest investments are stocks and precious metals such as gold. But until there is a correction, I would not recommend buying gold or precious metals now.” A pullback is usually defined as a price drop of 10 percent or more.

Mobius said he would focus on companies with “strong balance sheets and growing earnings” rather than gold.

Technical analysis:

The dollar

On the daily chart, the DOLLAR index.DXY was trading around 92.60 after falling below 93 yesterday. The red kinetic energy column of the daily chart MACD was basically stable, while the KDJ random index held steady below the 50 level, indicating that consolidation is likely to follow.

On the 4-hour chart, the DOLLAR index quickly fell back after breaking the 100-period moving average and is currently hovering around the 20-period moving average. The MACD red momentum column gradually weakened, and the KDJ random indicator fell sharply from near the overbought level, indicating that the bullish momentum of the DOLLAR deteriorated, and the short term or further decline.

gold

On daily charts, gold rallied after Wednesday’s tumble and is now trading around $1,950. The daily chart MACD green momentum column was largely stable, with the KDJ random index trading around 50, indicating gold bearish momentum remains, and a consolidation may follow.

In the four-hour chart, gold continues to rally after hitting a low of $1,924 and is now close to its 50-date average of $1,957. MACD green momentum column gradually weakened, KDJ random indicator from oversold level up, indicating gold bearish momentum weakened, short term or further rebound.

silver

On the daily chart, silver is now above the 20-day average to maintain a narrow range of shocks, focus on whether the complete foothold of the 27 mark. A small expansion in the green momentum column on the daily MACD chart, with the KDJ random index hovering above the 50 level, indicates that bearish momentum is strengthening in silver or further consolidation.

On the 4-hour chart, silver appears to be forming moving highs and lows, with an eye on whether resistance at 28.45 can be broken through. MACD green momentum column continued to weaken nearly disappeared, KDJ random indicator above the 50 level, indicating silver bearish momentum weakened, short term or further shocks to the upside.

Fundamentals positive factors:

1.Labor Department data showed 1.106,000 people filed new claims for unemployment benefits last week, unexpectedly returning to the 1 million mark against market expectations of 920,000, indicating the recovery in jobs remains slow.

  1. The European Union and the United States have said that they will not recognize the election results of August 9 in Belarus and continue to put pressure on the President of Belarus.
  2. The US State Department said it had formally informed Hong Kong on Wednesday that Washington had suspended or terminated three bilateral agreements with Hong Kong following China’s implementation of the territory’s version of the national Security law.
  3. U.S. President Donald Trump said on Tuesday that he canceled a weekend trade negotiation with China and called China’s treatment of Novel Coronavirus “inconceivable.”

Fundamentals negative factors:

  1. White House Economic adviser Scott Kudlow expects the U.S. economy to grow 20 percent or more in the third and fourth quarters.
  2. The Minutes of the Fed’s meeting showed policymakers are considering a change in monetary policy that could keep the central bank’s massive stimulus program in place for longer than expected in previous statements. More dovish monetary policy measures such as yield curve control have been ruled out for now. The dollar strengthened as a result.
  3. White House economic adviser Scott Kudlow says the economy is rebounding “very, very strongly” and that additional unemployment benefits will be paid out in two weeks.
  1. The S&P 500 closed at a record high on Tuesday, fully recovering from the February crash triggered by the Novel Coronavirus crisis.

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