Financial thread

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So the US bull market continues. We're having a pretty good Santa rally that has continued into the end of this week. However, it should be stressed that this rally is on pretty mediocre volume due to the majority of desks being vacant during the holiday season. The interesting thing to note is that, during the same period, both Gold and Silver (perceived as safe havens) have broken their 3 month long bull flags on pretty impressive volume. Apart from the Feds general dovish stance, this seems to be the result of some fear entering the market - confidence in the state of the global market is increasingly diminishing, and doubts about the US being able to ride out any serious external event unscathed seems to be starting to gain some traction.

Next Monday could be very interesting indeed, with a good chance of a spike in trading volume as traders return to their desks in force. But which way will the market go? The US/China trade deal still has a way to go, so there may still be more upside in the market. However the US economy is expected to slow, and if fear is starting to take hold, it would not take much to start a domino effect, and make investors panic and start to run for cover.

It seems that there is still a lot of cash on the sidelines waiting to enter the market at the right time. Granted a little has come in a week or two prior to xmas on good volume, but it was also observed that, at the same time, there were some very large trades selling into strength. The Queen lyric "'take good care of what you've got' my father said to me" seems quite sensible advice in this environment.

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Where is gold & silver heading to in terms of $ prices?

I have heard $1700 is within reach this year for Gold.

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Jan 2, 2020 19:55:49 GMT sennockian69 said:

Where is gold & silver heading to in terms of $ prices?

I have heard $1700 is within reach this year for Gold.

Given a favourable environment for the metal, I can easily seeing it reaching that level quite quickly, with a little breather or two on the way (little bull flags). If it stays around that area and consolidates, without selling off, and If the market really does start to get twitchy $1800 is not out of the question. At the moment it has just broken it's three month long bull flag quite aggressively, so it might sell off a little before advancing again, especially if there is some good news over the US/China trade deal within the next few days. It just provides a good entry point if one's perception is that Gold will rise overall.

If Gold does rally (and there still are a lot of unknowns out there), due to market perceptions, and the fear aspect/low interest rates etc., the Gold/Silver ratio (the number of ounces of Silver that will buy 1 ounce of Gold) will start to increase. Investors seem to be starting to take more notice of this ratio of late, as it had, probably due to the unpopularity of precious metals over many years, been perceived as an obsolete ratio. During the last rally in Gold earlier in 2019, traders seemed to rotate from Gold to Silver as Gold took a little breather, pulling Silver up with it. Silver is an interesting metal, it seems to be perceived by the market as both an industrial metal, and something of a safe haven once Gold starts to rise. At the moment the ratio is about 85, that is still quite high if you consider that it was as low as 32 in 2011. goldprice.org/gold-silver-ratio.html Because of this, it would not be surprising to see Silver perform better then Gold, and go to $21 or $22 this year. Personally I love it when a commodity like Silver is unloved.

It is interesting to note that just prior to the credit crunch, when the markets were starting to get a little jittery, Gold miners and physical Gold rallied as fear started to take a firm hold. However, once the market finally collapsed, and all hope was lost, logic went out of the window, and it took everything with it, including the perceived safe haven of Gold, which lost about 40% of it's value. When the panic eased, Gold took off again, and boomed. So, as always, caution is advised, as nothing is ever straightforward.

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All discussion so far has been about traditional markets, stocks and shares, and commodities, but what about crypto currencies? Are they a flash in the pan or are they worth considering as a long term investment?

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Jan 4, 2020 17:52:47 GMT daveu said:

All discussion so far has been about traditional markets, stocks and shares, and commodities, but what about crypto currencies? Are they a flash in the pan or are they worth considering as a long term investment?

I see cryptos as part of the evolution of financial globalisation, so although not exactly a flash in the pan, the players of today may not be around in the future, well at least not in their current form.

I'm quite wary of cryptos. I don't play them very often as I find it very difficult in assessing what the downside risk to an investment would be at any particular point in time, and only trading them when they appear to be carving out a strong topping or bottoming formation, or are starting to rally or collapse. So at the mo I see them as either long/short trades over relatively short time frames with price targets and stop losses in place for insurance.

It is interesting to observe what happens to Bitcoin when major events happen in the world's economy, as it does provide a little understanding of the psychology underlying the movement of the currency. When the US stock market rotated down a couple of times during 2019, many traders not only piled into the traditional safe havens like the US dollar, Yen, precious metals etc., but some bought Bitcoin, which, probably because i'm a dinosaur, took me by surprise. I can only assume that this behaviour is partly a reflection of the age demographic that is comfortable with cryptos, and that this ease of mind will only grow stronger as the years pass. On the other side of the coin, as it were, the boom in Cryptos have largely grown up during this long 10+ year bull market that is still chugging away as I write this, and so the majority of those that feel secure trading in cryptos have not experienced a bear market with their money invested when the market collapses. How these currencies will react to that event will be interesting to observe, and learn from. If they collapse, it could result in more regulation, and a single global currency eventually rising from the ashes.

It still looks like the wild west out there, and I can't see all the players surviving, but I can see that a single global currency is probably inevitable regardless of whether there is a bear market or not, and it is almost certainly going to be crypto derived. Looking at the crypto market today, the obvious candidates for that single currency are in full view for everyone to see, however I suspect that the currency that will eventually be used by everyone on the planet may not yet be known. The guys in power want control, so keeping an eye on what the likes of Elon Musk (he is not the guy in power) is interested in, invested in, and who he is in negotiation with within political and business circles, might provide some clues to influences on future developments. Musk is heavily involved with Blockchains LLC blokt.com/news/are-elon-musk-and-blockchains-llc-cooperating-to-build-a-blockchain-smart-city, and a lot is going on with this company, and this could be where the future lies, as what underlies currency transactions might be where the money is going to be made long term. It is not something I am particularly interested in, but for those that are, I do know that Blockchain ETFs like LEGR are starting to come on to the market. Caveat Emptor as always.

update - 6/1/20 - Seeing some strength in Bitcoin since the Middle East event - it does seem to have some attraction as a safe haven, it will be interesting to see what happens if fear accelerates.

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So, if the Corona virus develops into a pandemic, will it be the trigger to send global stock markets tumbling? Fear is definitely entering the market. If it does become a trigger for panic selling, then some protection could be the order of the day for those with SIPPs and/or ISAs. Possible areas of protection to help to hedge against a drop in value would be Cash, Treasuries/gilts, US dollar, Yen, Swiss Franc, physical Gold, Utilities.

On a not entirely separate issue, gold miners are developing a very strong bull flag at the mo, pressure is building, and they look like they might be about to explode to the upside. For some reason they have been lagging the recent rise in the physical metal, maybe that is down to attention being focused on the continued rise in the S&P 500 and Nasdaq. ETFs like Vaneck Vectors Gold miners/juniors (GDX / GDXJ) and Direxion Daily Gold Miners Bull 3x Shares (NUGT) have developed very interesting patterns, the latter being a three times leveraged product, so care should always be taken when using these type of instruments.

A word of caution. Putting aside the bullish price structure currently developing within Gold Miners, a concern with taking a bullish position would be how a realized pandemic would affect market perceptions going forward. Developing price structures can easily break down as market sentiments change.

Caveat Emptor as always.

Update 11/2/20 - Despite the very real threat of a possible pandemic that would affect world trade, the US markets, apart from smallcaps, have continued their vigorous rise after a big one day pullback, due to foreign money flooding the market, buying the US dollar, and access to easy Fed money via the repo market. Despite this, the Gold Miners price structure has not broken down, and is still valid, and one would assume that if the S&P 500 does sell off to at least explore a much lower support level*, then Gold Miners should trend strongly to the upside. Time will tell.

*The only reason I am only looking at a lower support level for US indices, rather then a potential stock market collapse, and imminent recession, is because many other regions of the global economy don't seem to be in the greatest shape. Because of this, there is a vast amount of foreign money looking for a place of safety, and/or somewhere to make a profit. The standout place for that is the US. It just feels like some major non US economic disaster is just around the corner. If that happens, there will be even more foreign money flowing into the US stock markets and the dollar, but only certain sectors of the US economy will thrive while others that have strong foreign economic connections will suffer. I hope I am wrong.

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Here is a great article that explains what the current situation is with the repo market. The Fed hole is getting deeper and deeper, and their room for maneuver is getting tight. This is not scare mongering, and what is going on is crazy. Luckily the UK is a dominant world superpower, so any potential fallout will probably not effect jobs etc. here. Only joking, the Bank of England will just print more money, that will solve it, just like last time. Happy days

www.counterpunch.org/2020/01/14/the-fed-protects-gamblers-at-the-expense-of-the-economy/

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Despite the continued rise in the US markets, and the strong US dollar, Gold is looking very resilient, forming another bullish flag. Should the you-know-what hit the fan, the yellow metal should break out of the pattern strongly to the upside.

Not sure what the UK government is up to but it looks like they might be forced to eventually go down the US line regardless, and apply quantitative easing to try to stimulate the economy, and that is despite the changes at no.11 where a more monetary tightening stance looks to be the intention, probably under the assumption that the UK economy will get a boost, and be stronger after brexit. This might initially be the case, however, with the momentum of the global economic slowdown strengthening, will any initial UK economic boost be relatively short lived. Globally, central banks love QE, it's an automatic go to.

The UK has got room to cut, should growth stall, but in the long term it is debatable if has worked as intended for Japan or the US, despite the rise in their Stock Markets.

In global terms, I think the environment does potentially look good for some precious metals going forward, although from a UK investor point of view, if Sterling rises, which it looks like it will, and if the price of Gold also rises, the rise in  Gold held in Sterling will be muted somewhat, even if the price of the US dollar falls. So some form of Sterling hedge might be appropriate going forward, at least initially.

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Further to my Feb 11th update to my original Jan 30th post regarding Gold Miners, the bull flag price structure that developed in Gold Miners finally broke out of the pattern to the upside.

Depending on how market sentiment pans out over the next couple of days, the upward momentum might continue, however, prices have generally started to reach potential resistance levels set down by the previous highs formed in early and late January, so there might be some pullback in prices. So, depending on one's level of risk, some profit taking could be a wise tactic for insurance purposes, especially for leveraged instruments like the Exchange Traded Fund NUGT, which has risen by 15% in the last two days.

Looking forward, should Physical Gold continue to remain resilient, any pullback in Gold Miners should result in a new consolidation level for a time before another pump up to a higher level if more fear, and doubt enters the stock market.

While Physical Gold has been rising of late, so to has the US$. As Physical Gold is priced in US$, under normal circumstances when the US$ rises, the price of Physical Gold falls. The fact that the US$ has risen very strongly over the last 2 to 3 weeks (largely due to foreign money looking for somewhere to make a profit and/or for defensive reasons), and Physical Gold has also risen in tandem (for the same reasons), is testament to the strength of the yellow metal. One has to wonder what will happen to the price of Physical Gold if the US$ falls. The US$ is rapidly reaching a potentially strong resistance level. Should it fail to break that resistance, it should reverse somewhat, and the value of Physical Gold should rise as additional foreign money rotates from the US$, and pours into the metal.

Caveat Emptor.

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We had big gaps down on most of the major indicies yesterday, with money rotating out of the markets and into the safe havens. To me, this looks like it could be the start of a big rotation down as fear of the potential effects of the coronavirus on global production, and possible increasing uncertainty with regard to the upcoming presidential election take hold.

However, initially it would not be unusual to see a short term rise in the markets, as often gaps up or down are filled in, to a degree, in the opposite direction, only to see it reverse, and continue it's original course. If it happens in the current market it is called a 'Bull Trap' where investors get caught out thinking that the bull market will continue, only to find sellers entering the market again en masse. Of course anything is possible, but in my opinion it looks to be getting very jittery.

Gold has benefited greatly from the fall in the markets, and a slightly weaker $US, and it now looks like it might have hit a little bit of resistance, not quite reaching the psychologically important $1700 level, with sellers taking over at about $1690. So we might see a little bit of price consolidation before it attempts to break the level. Of course, if market fear continues to increase, it might not be long before $1700 is broken. If this happens in the next few days, the only concern I would have is that the price structure of Gold would look to be a little too parabolic for my liking (price rising fast at a very steep angle with respect to time), so some profit taking might be prudent, depending of course on one's risk appetite.

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As the markets are still selling off strongly, the threat of a possible capitulation must be taken into account, although I would suspect that the more likely scenario is that some kind of support will be found, and a resulting bounce in the market, before another leg downward on renewed fear and/or clarity, to find true support where a new solid base is formed. At this moment, it seems that the sell off has gone largely into cash and Treasuries, and a little into Gold.

I'm personally a little cautious about the situation with Gold at the moment, as although I would expect the metal to eventually push through the $1700 level, the appetite and belief to get it there is absent at the moment, despite the continued stock market sell off. If the market does capitulate, it should be understood that it is not beyond the realms of possibility that Gold will be taken down with the market. I know that is not logical, however that is what did happen during the financial crash in 2008, before sanity was discovered, and Gold eventually rallied to new highs.

Caveat emptor.

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I get the feeling that today could be the start of a further downside rotation for stock markets generally. The recent bounce over the last few days in the S&P 500 has hit a major resistance in the form of an upward trend line that goes back to January 2019, and recent consecutive peaks in price action has generally been tracking this line. I'm personally looking at around the 2590 level for the S&P 500 to possibly form a basing pattern. Although this looks like the most likely outcome to me, there are some speculating that the market will rally to previous highs. Time will tell.

It looks like last week's sharp one day sell off in Gold was mainly the result of large players selling their Gold positions to cover losses incurred when they were stopped out of their various longs in other markets. Since then Gold has recovered, and although a Gold sell off could happen again if the markets drop sharply, the current environment is not identical, so maybe they will not be caught out in the same way. It will be interesting to see if Gold starts to advance as a protective play if the stock markets do sell off again.

Caveat Emptor

update 8th March -  had a bit of a strong sell off during the week, but not enough to take the S&P 500 below the low of 28th Feb, and with buyers coming in during the last hour of trading on Friday, it's looking like next week might start with a bit of bullishness. that may take the index to upward sloping trend line again over a few days. If the trend line is broken aggressively, and the index closes above it, a more bullishness feel could override any Coronavirus negativity.

 On the flipside, if the trendline is not broken, it could be that a rising wedge is starting to form on the daily chart. These are normally regarded as bearish patterns that, more often then not, eventually break to the downside. If this does occur, the 28th Feb low would probably be broken.

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Took a flyer on a vaccine production company, IBIO. This will probably be the make or break week for this stock. If it comes good, it will fund my trip to Maidstone. Then you lot will have to put up with me in person. Just when you thought this Corona virus news couldn't get any worse . . .

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Mar 9, 2020 0:49:13 GMT @rochstone said:

Took a flyer on a vaccine production company, IBIO. This will probably be the make or break week for this stock. If it comes good, it will fund my trip to Maidstone. Then you lot will have to put up with me in person. Just when you thought this Corona virus news couldn't get any worse . . .

Nice one. It's going to be interesting to see what it's price movement will be today. S&P futures down about 5% this morning, so hopefully it's price will rise. 

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The S&P 500 28th Feb low was aggessively broken overnight during the Asian session, as the Saudis intend to increase oil producion. FTSE futures down 6%; S&P 500 down 5%. Panic and fear seems to be taking hold. Margin calls elsewhere might see Gold sell off somewhat, or at least move sideways. Treasuries will probably see another good pop today, although the price structures are very parabolic now, so once the dust starts to settle down on this market sell off, it would not be surprising to see Treasuries take the shine off recent gains very quickly.

I've been watching the movement of Bitcoion over the last few weeks, and was suggesting earlier that it seemed to be performing as something of a safe haven during some market turmoil. That still might be the case during minor market corrections, however at this moment it is being taken down with the rest of the market.