Now is the time to go long in gold? We think so. There have been several false dawns for the price of gold, with the usual gold bugs trying to egg on the market and a number of interesting conspiracy theories circulating in the market. Many investors would like to know why gold is constantly in a holding pattern when other assets like Bitcoin appear to be reacting to the higher inflation numbers we are seeing.
Today we are in a long gold trade with the expectation that central banks do not have inflation under control and that investors will now start buying gold and gold mining stocks.
Inflation numbers are now starting to look a bit more worrisome, and there will be plenty of investors buying gold as they see these readings. Bitcoin won’t be a cave big enough for everyone to hide.
Are central banks starting to lose track?
“The release of record US CPI inflation data for October has seriously undermined the Federal Reserve’s long-held argument that high inflation will prove to be ‘transient,’ said Olivier Desbarres, founder of 4X Global Research. “What turned out to be transitory was the rise in yields on short-term government bonds in developed markets, in line with our expectations. Adverse base effects no longer explain the high year-over-year inflation, with US inflation now well above the pre-pandemic trend. “
Desbarres says the Fed has little control over international energy and commodity prices and, coincidentally, seems intent on letting consumer demand (and the economy) heat up for a while.
Let’s look at the technical indicators
There are also technical indicators that seem to show that gold is preparing for something more. On November 5, gold hit a shorter-term intermediate high at $ 1,813 for the first time in a long time. If (when) 1834.15 is withdrawn, then the series of falling highs and downtrend line from the all-time high of 2075 cash (future 2089) in August will also be broken.
Long-term golden image
The double bottom between 1670 and 1675 could change the structural status of the market to become a double bottom and a base for the next bullish round, potentially into a new ATM.
Signals to buy gold have appeared in other currencies and on October 31, gold posted the highest monthly close against the JPY, indicating this strong bullish sentiment, earlier than against the USD. Against the Euro, the breakout of the downtrend line occurred on October 12, and the structural breakout also occurred on November 5.
Short term golden picture
“Combined with the current impressions of inflation in the background, giving the impression that central banks are losing the war on inflation and that the ‘transitional’ situation was only transitory when it came down. This is about the broader confidence in the ability of central banks to control yields, AND if central banks win and continue to be successful in their fight against yields, this will provide strong negative real returns and the best possible fundamental backdrop for the upside. of gold prices historically, ”said Henrik mikkelsen, Vice President at Cloudbreak Discovery and CIO at Iridis in Zug, Switzerland.
Mikkelsen says that for the gold bugs, things seem to be improving. He believes that technically the bullish picture for gold will remain positive as long as the 1834 break point is kept intact on closing prices. If he goes below that, he believes, things will turn badly again.
“A test and rejection of the 1834 level – giving it a margin of $ 5 – would be optimal for a strong outlook for gold and good positioning for gold and gold stocks,” he said. “Both assets need to stay positive, otherwise the credibility of the signals will cloud, and maybe something else is at stake.”
Our gold trade
So on the gold trade. For a short term tactical trade like this, we add the trade to our portfolio of trading ideas which manages a trailing 10% stop loss. We would only use contracts for difference or spread bets on a much shorter term calculation and believe overnight funding rates would be crippling for this one. An Exchange Traded Fund would be a cheaper way to access this trade.
Here are six gold ETFs that are proving popular in the market:
- WisdomTree Physical Gold USD
- SPDR USD Gold Shares
- iShares Gold Trust USD
- ETF ZKB Gold AA CHF
- ETF Aberdeen Standard Physical Swiss Gold Shares
- Swisscanto Precious Metals – Physical gold
We opt for the SPDR Gold Shares ETF (NYSE: GLD) ourselves, as it tracks the LBMA London Gold Market Fixing Price PM index. It offers physical exposure and is listed on several exchanges in various currencies including USD, EUR and HKD (Hong Kong Exchanges & Clearing). It has over $ 58 billion in assets, a tracking error of 0.38%, and a total expense ratio of 0.40%.
It is possible to find more leveraged versions of gold ETFs in the market, at x2 or x3 levels. ETFs have the advantage of being able to trade like normal stocks and some – not all – may qualify for an ISA.
- Long Gold
- Instrument type: ETF
- Instrument: SPDR Gold Shares USD (NYSE: GLD)
- Entrance fee: $ 173
- Target: $ 250
- Stop loss: 10%
- Portfolio: Tactical trading