Tag Archives: Gold

OUR 2020 RESULTS

Our net weighted average return in 2020 was +18.23%. Since 2015, we have generated a net weighted average return of +54.39%.

2020 was a challenging year. We were forced to navigate an all-out panic in financial markets while weighing the staggering human costs of the Covid-19 pandemic. Shortly after what turned out to be the market lows of the year in March we wrote the following:

“The most significant reasons as to why markets have rebounded are 1) the massive rescue package passed by the US Congress, and 2) the massive balance sheet expansion by the Federal Reserve. The amount of money with which the richest country in the world is ready to attack this crisis is without comparison in the history of the world. And what you learn in capital markets is that you don’t fight against the guys that make the bullets.”

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Strategy 2025

The best way to predict your future is to create it.

  • Abraham Lincoln

Our mission is to safeguard the future financial prosperity of our clients. While many find comfort in what may have worked in the past, we know that our goals can only be achieved by boldly looking into the future. As such, we are completely focused on finding investment opportunities that offer compelling upside convexity, while managing downside risk. Our purpose is not to time markets, but to identify ascendant industries and best-of-class companies and have the patience to reap substantial rewards.   

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Gold as a Part of Portfolio

From time to time we get a request from our clients and potential clients regarding investments in gold.

In our view gold isn’t the best investment as it isn’t generating any return. Yes, it’s been able to sustain it’s purchasing power though in very long time periods, we’re talking about decades and centuries.

Furthermore, gold is quite volatile and thus investor may lose some part of their investment. Gold’s performance has varied year by year. Picture below shows that gold had a real drawdown that lasted 32 years. Are you willing to hold an asset that is underperforming other asset classes and losing money by itself?

Source: Know Thy Investing Self 

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Watch Out Below – Gold Edition (#3)

If you have been following our blog, then you will have no doubt noticed that we have not been big fans of investing in gold and gold related securities.

On August 31st, we issued our first warning salvo:

LINK: Watch Out Below – Gold Edition

GOLD UP UNTIL AUGUST 31st, 2016
gold-1

We followed up our initial commentary a couple of months later:

Watch Out Below – Gold Edition #2

GOLD UP UNTIL OCTOBER 4th, 2016
gold-4oct-2

Our thesis remains in tact.

Here is a chart of the price of gold. Gold if off over 10% from its highs, and from a technical perspective it stands on a precipice. The 50-day moving average is about to cross the 200-day moving average. This is a damning, bearish event for something that trades purely on sentiment:

GOLD UP UNTIL NOVEMBER 17th, 2016
gdx-nov17

Here is a chart of the Market Vectors Gold Miners ETF (GDX US):

gdx-miners-nov-17

They are off over 30% from their highs.

Where is gold headed from here? Lets just say that $1100/oz is far more likely than $1300/oz.

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Watch Out Below – Gold Edition (Update)

Here is how the price of gold looks after yesterday’s sell off based on what is perceived to be a more hawkish stance (more likely to raise rates) by the Fed:

gold-4oct

I was recently asked by the Latvian finance magazine ‘Kapitals’ what I thought of gold.

My response was as follows:
“The market is waiting for the Fed to act. If inflation continues to grow, the Fed will increase rates. In turn, if rates increase, the price of gold will decrease. The previous period was successful for investment in gold. Nevertheless, the gains could be lost quickly. Gold does not produce anything; it does not bring an extra return and requires you to cover storage costs. Besides, assets that may decrease in price by up to 40% cannot be classified as either risk-free or reliable,”

At the end of August I posted a similar warning:
Watch Out Below – Gold Edition

Here is how the price of gold looks after yesterday’s sell off based on what is perceived to be a more hawkish stance (more likely to raise rates) by the Fed:

gold-4oct

Here is damage done to the Gold Miner ETF (GDX US):

gdx-oct4

Here’s a chart showing the generic yield of the generic 10 year Treasury note versus the inverse price of gold:

usgg-gold-4oct

The correlation still holds. Rates up, Gold down. Because gold is traded on sentiment, you can expect it to experience wider swings in either direction, once again evidencing the fact that gold should not be seen as a ‘safe haven’.
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Watch Out Below – Gold Edition

The increased likelihood of interest rate hikes this year by the US Fed has been damaging to gold. I would expect this to continue.

Here’s a one year chart of the price of gold. As you can see, gold has traded off over 4% from its recent highs and has traded through its 50-day moving average. Moreover, it looks like it will be testing its 100-day moving average at around $1300 – another important psychological level:

gold

Silver is faring even worse. It has lost almost 10% from its recent highs:

silv

Here’s a chart of the popular VanEck Vectors Gold Miners ETF. It’s off almost 20% from its recent highs:

gdx

Gold and Gold Miners have had a good run, but it looks like the fast money is making a run for it…

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