USD looks too strong

[sgbuyer]

America's withdrawal from the middle east is actually very positive for USD. Strong USD is bad for pm. Will gold hold? I might offload some investment gold soon. Afraid of 2008 style stock bust. What are your thoughts?

Gold in AUD is a different matter altogether, though.

 

[hardyakkagold]

America's withdrawal from the middle east is actually very positive for USD. Strong USD is bad for pm. Will gold hold? I might offload some investment gold soon. Afraid of 2008 style stock bust. What are your thoughts?

Gold in AUD is a different matter altogether, though.

Not sure I understand your post @sgbuyer, is the globalist-controlled USSA withdrawing from the whole middle east? I don't think so.

Also, not sure what you mean by 'investment gold', do you mean paper gold?

If you are worried about a market crash then yes sell all paper assets including gold derivatives.

But keep some of the hard physical 'insurance gold' on hand for the hard times to come you will be glad you did.

I personally am not too worried about the impact of any stock market crash on the physical gold price as any downturn will be short-lived
and as long as you don't need to sell when prices are depressed, then you have nothing to worry about.

 

[sgbuyer]

Investment gold referring to allocated gold. I follow michael burry, the big short so I'm worried about stock market crash. This will bring down spot gold. The other thing is the pandemic dampens physical gold demand. Yes, a gold crash might be temporary but the opportunities presented by gold/silver miners will be huge in the rebound as we've seen last March. AG and PAAS tripled in just 2-3 months.

I'm still undecided because I won't buy anything else even if I sell the gold. Of course, if the market rallies, gold will rise a bit more so selling now will make me look stupid again.

Not sure I understand your post @sgbuyer, is the globalist-controlled USSA withdrawing from the whole middle east? I don't think so.

The US and Canada has sufficient oil so I don't think the ME matters to the USSA. The ME wars cost a fortune and is a bottomless pit. To pull out of this bottomless pit changes the dynamics completely. It's Trump's achievement to ink out a "my word is my honor" deal with the Taliban. I don't think any other person can make that kind of deal with these people. Not even Putin and not even Winnie. A withdrawal in which the enemy is not shooting you in the back when you flee is very rare. It's a man to man honour deal.

 

[Holdfast]

Can't see any problem having some cash in the bank to buy the dip.

If your profits from trading, are such that, they are at your "targets", there is no reson, not to take profits.
There will always be times to make and lose on a trade / move in and out of a trade.

Some folk look at Bitcoin, they swim after it but the boat has left; some folk think gold and silver will take off
just like bitcoin (precious metal "might").

A profit is a good profit; sure you might like to think you have a crystal ball; you might say, "if only" I had kept this or that
but no one is privy to the future.

In the year 2000, everyone was saying gold was dead and a relic, even gold stocks were trying to get in on the tech boom and we know what happened.
Folk were selling $200 gold coins back to the bank for face value, now that they sell for 780 - 1000 AUD +

Sure, if you have the skill, balls, life span to trade, you might do ok, but many folk may have a life plan that doesn't commit to long time frames.
So, I suppose, a person just has to nut-out (think) what do they want to achieve, what time frame they have, and to read through all the fluff (Bullshit).

A lump of gold and silver in your hand and a bit of cash in the bank never hurt anyone. "perhaps"

PS:
If you listen to Schiff, Faber, Dent, Merino (Greg), Jim, Maloney etc, my suggestion would be to stop viewing those folk.

 

[mmm....shiney!]

I follow michael burry, the big short so I'm worried about stock market crash.

Correct me if I'm wrong, his two arguments are that (1) index funds are artificially inflating the price of stocks listed in the indices, whilst those that are not are under-valued, and (2) that the rise in passive investing has seen a loss of price discovery in the market for those stocks held in index funds?

He argues therefore that there are a pile of companies not held in the S+P 500 etc that are significantly undervalued. Which he then says presents a buying opportunity even under the current market conditions?

If you follow Michael Burry's advice wouldn't you buy shares? There's a positive correlation between USD and stocks, so if you're seeing a rising USD, then there is a likelihood the share market will also rise. Which should mean the price of gold will move in the opposite direction. So if you want to hedge your share portfolio, you probably could use gold to do it I suppose, though if there's a flight to liquidity then the value of everything (except USD) falls. I don't think it's an "either - or" decision that needs to be made.

Dow to gold ratio from 1970 (the price of gold before 1970 is irrelevant so we don't need to look back any further)



Alternatively if you don't want to hold shares and you want to sell gold then you could hold USD in the form of a stablecoin and stake it on an exchange to get passive income. But what are you using to hedge against your US stablecoins?

Good luck, there's no easy solution. Maybe trim your holdings but remain diversified? Shares, gold, cash and property (both real and virtual).

And a short read looking at the share bears v the share bulls: https://bestinterest.blog/index-fund-bubble/, Burry gets a mention.

 

[leo25]

For me hedging yourself is more important now than ever. Sure you can't make as much, but you also can't lose. Make a big soup with some of everything.

 

[JohnnyBravo300]

Just cuz Burry got lucky once doesnt mean much. Hes been calling for a crash for months and the markets keep going up. Eventually he will be right but it could be years. Same as Schiff and the rest.

 

[sgbuyer]

Correct me if I'm wrong, his two arguments are that (1) index funds are artificially inflating the price of stocks listed in the indices, whilst those that are not are under-valued, and (2) that the rise in passive investing has seen a loss of price discovery in the market for those stocks held in index funds?

He argues therefore that there are a pile of companies not held in the S+P 500 etc that are significantly undervalued. Which he then says presents a buying opportunity even under the current market conditions?

Yes, but his shares will drop if the market collapses.

https://dataroma.com/m/holdings.php?m=SAM

If you follow Michael Burry's advice wouldn't you buy shares? There's a positive correlation between USD and stocks, so if you're seeing a rising USD, then there is a likelihood the share market will also rise.

Yes, you're right in this respect, US stocks won't fall much if the USD holds or appreciates but it's not a guarantee that stocks won't fall as we have seen in 2020.

Which should mean the price of gold will move in the opposite direction. So if you want to hedge your share portfolio, you probably could use gold to do it I suppose, though if there's a flight to liquidity then the value of everything (except USD) falls. I don't think it's an "either - or" decision that needs to be made.

Dow to gold ratio from 1970 (the price of gold before 1970 is irrelevant so we don't need to look back any further)

View attachment 60096

Alternatively if you don't want to hold shares and you want to sell gold then you could hold USD in the form of a stablecoin and stake it on an exchange to get passive income. But what are you using to hedge against your US stablecoins?

Good luck, there's no easy solution. Maybe trim your holdings but remain diversified? Shares, gold, cash and property (both real and virtual).

And a short read looking at the share bears v the share bulls: https://bestinterest.blog/index-fund-bubble/, Burry gets a mention.

Yes, I've been steadily selling off my stock holdings bought in Oct last year since June. That's why I'm looking at my gold "hedge". As you say, it's an allocation issue.

I just read Soros' new warning about Chinese stocks and real estate market. If China's stock and real estate market implodes, this will bring down gold as Chinese sell gold (and their real estate, if there are still buyers) to buy digital dollars (or bitcoin if they can buy that). It will be a replay of the 1997 AFC but at a scale 100 times. So this is another possibility to explore.

As you and I know, the prognosis for the Chinese economy is not good (personal politically opinions aside) so this possibility is now very real.

Last, gold in AUD is much more tricky as a slump in Chinese demand will hit AUD so it's only a matter of AUD drops more or gold drops more.

 

[mmm....shiney!]

Yes, but his shares will drop if the market collapses.

But he's still buying and selling.

 

[Aelfred]

AUD will probably take another leg down after dividend season and that USD -> AUD pipeline dries up. USD was looking strong but Jackson Hole will have rattled a few people. The people who believe the US economy is booming don't understand why the Fed isn't raising rates, and might reassess their assumptions/models. You'd be safer in the USD than the AUD though - the recent commodity correction, particularly iron ore, seems to have rattled AUD-bullish forex traders. China's real estate industry is cratering and they consume 60% of all iron ore/steel production globally.

Like you say sgbuyer, there is also a real factor of economic weakness providing sell pressure on gold. The arrival of the delta variant resulted in huge private gold sales from India as families who were struggling offloaded their gold to stay afloat. That put a lot of pressure on gold over the last year. India and China have a lot of personal gold holdings. If China suffers an economic downturn, and it looks like they will, there will be a lot more gold on the market.

Within a year or two, if Xi does not start nationalizing banks and companies wholesale and assuming their liabilities, there will be a Chinese credit crisis fuelled by the repudiation of junk bonds. Evergrande, the general Chinese real estate market, and troubles at Huarong are only exacerbating this. Stock crackdowns have been bad too, as what was once collateral for loans is now worthless. I expect iron ore to go down more than gold, and therefore the AUD to struggle for the next 6 months. So long as you are out of your most risky stocks and have a hedged allocation to gold/miners, rather than a large position in gold/miners, I don't think it would be prudent to sell. China just looks too wobbly, and Australia is so economically tied to China that we would take a serious hit if they had an economic crisis.



Re: stock market crash - in a high volatility scenario, gold will outperform stocks and the AUD. It might go down against the USD, but just in case it doesn't, it would be good to have your hedge position. Remember that the dollar went up in March 2020, but bonds went down. That has huge ramifications. If the USD fails to rally against gold in a high volatility scenario (the next crash) it is a sign of lost confidence in the dollar and you should buy more gold. Otherwise just keep a hedge.

 

[sgbuyer]

Remember that the dollar went up in March 2020, but bonds went down. That has huge ramifications.

Bonds meaning T bills or commercial bonds? 10 year yield fell in 2020 march. Interesting to see that yield had been falling since April.

https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx

If the USD fails to rally against gold in a high volatility scenario (the next crash) it is a sign of lost confidence in the dollar and you should buy more gold. Otherwise just keep a hedge.

Since USD is priced in gold, do you mean if gold doesn't correct in a stock market collapse? I'd expect gold to correct and then rebound like what it did in March 2020.

 

[Aelfred]

Bonds meaning T bills or commercial bonds? 10 year yield fell in 2020 march. Interesting to see that yield had been falling since April.
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
Since USD is priced in gold, do you mean if gold doesn't correct in a stock market collapse? I'd expect gold to correct and then rebound like what it did in March 2020.

T bills. I should have been more specific - for the worst days of the March crash, you had multiple days (especially around 2-9 March) were stocks and bonds traded together. There was a majority of people selling stocks, and the people selling stocks were by and large not buying bonds, because the bonds were also selling off at an incredible rate. This has very interesting implications - most investors believe stocks and bonds are inversely correlated, and they normally are, but if stocks and bonds are or can become correlated, it shows that people are speculating in bonds rather than hedging in them, and in a crisis, bonds are not necessarily a safe haven asset. March was just a taste of course, and when the Fed decided to re-re-announce that they were printing a bunch of money and buying bonds, bonds became a safe haven again, because the market calmed down. But it does show that if shit really hits the fan, and the Fed can't convince/reassure the market, bonds are no safe haven. That's why I think a gold hedge is sensible - if something even worse than March occurs and stocks and bonds trade (down) together and *don't stop* going down together, the financial system has a serious problem on its hands because it evidences that the market has lost faith in the dollar.

But yes, on the March monthly, stocks and bonds traded as they normally would, but this had a lot to do with Powell going on TV every day saying the same thing "we are going to buy treasury bonds no matter the price, so you might as well buy bonds now, because we will buy them off you later and you will not make a loss".

Re: gold correction, yes, that's exactly what I mean. I agree with you - I assume if there's another market collapse, gold will go down. However, if there is a market collapse and gold *doesn't* go down, then we are in for a very wild ride and you may not be able to buy your gold back anywhere near price you sold it. If it's just a hedge, I would say it isn't worth selling, just for that tiny chance of a doomsday scenario where stocks and bonds dump simultaneously. It's a small paper loss if gold sells off during a crash, but a very big real loss if gold goes up during a crash and you can't get your hands on any.

 

[sgbuyer]

There is spot gold and physical gold, which we know is different, but eventually physical can affect spot price as we have seen in the last year or so. Physical gold depends a lot on weddings in Asia, which is affected by the variants. But once the pandemic is over, the demand will come back.

The arrival of the delta variant resulted in huge private gold sales from India as families who were struggling offloaded their gold to stay afloat. That put a lot of pressure on gold over the last year. India and China have a lot of personal gold holdings. If China suffers an economic downturn, and it looks like they will, there will be a lot more gold on the market.

 

[Shaddam IV]

Some great posts here!

 

[sgbuyer]

It was running all over the place after I dumped, now sudden drop and dollar spiked up. Very tricky.

 

[Aelfred]

Bonds meaning T bills or commercial bonds? 10 year yield fell in 2020 march. Interesting to see that yield had been falling since April.

I recently saw something new on this topic. Have a read of this article that popped up today. This guy is way more eloquent than me and does a much better job of explaining. It comes down to leverage and collateral in 60-40 portfolios. If those leveraged trades blow up, bonds and equities go down simultaneously, something which according to modern portfolio theory should not be possible. March proved it was possible, and now it's just a countdown to see when this crowded trade violently unwinds. It might be years away or it might be next week. Compounding returns can't be sustained forever.
https://adventuresincapitalism.com/2021/10/11/will-risk-parity-blow-up/

 

[alor]

when the rates received were much higher 9-12% pa, show off smart investor, for the past few years...then Evergrande stop paying!
what a STUPID company, now
hahaha

 

[mmm....shiney!]

t might be years away or it might be next week. Compounding returns can't be sustained forever.

It seems his thesis relies on rising inflation? Am I correct?

Of course if we don't get inflation, then it won't unwind. Correct?

 

[Aelfred]

It seems his thesis relies on rising inflation? Am I correct?

Of course if we don't get inflation, then it won't unwind. Correct?

No. Inflation would be one of the things which would significantly hurt stocks and bonds, which would force an unwind, but many events could do the job. Look at March 2020 - inflation wasn't there, but the risk parity trade unwound anyway due to net outflows from the markets. A serious crash in the Chinese market, a currency devaluation, a war, etc might be enough. Anything which meant trades had to be taken off en masse could trigger such an event. Inflation is ultimately just the ticking time bomb which will eventually make the explosion even if nothing else pushes the detonator, because it is the best way to send both stocks and bonds down very quickly.

 

[jultorsk]

On one hand market pundits are claiming they're anticipating this index to plummet in October due to softening demand globally and falling shipping costs(!?), on the other hand it's all sorts of holiday season (thx giving, Halloween, Diwali, Xmas, New Years....) so how could it be?