Thursday, October 30, 2014

Yes, I'm a Crazy Gold Person

Flame me, I don't care. Gold has been performing like crap, but that is exactly why I love it so much. If it didn't look like shit, I wouldn't be looking at it.


Looking at the 5 year chart of Gold in SGD, doesn't that look quite tasty to you? But now look at silver, heck isn't that even more ridiculous?


This is the 10 year chart of Silver in SGD. Silver was trading at this prices back in 2006 and 2007! I wonder how much inflation has been since then...

Anyway, I suppose your brain has to be wired up wrongly and be in the contrarian setting for you to get excited about it. But for me, looking at these fugly charts, boy does it turn me on.

Throwing away the longer-term factors for now, short-term precious metals have been weighed down and kept in check by the ridiculous ascent of the US dollar along with QE expectations. Tonight though, I am expecting the GDP print to disappoint and start the retrace of the USD and perhaps all the inflated expectations of the US markets as well. But hey, I'm no fortune teller, just vomitting out my train of thought and a probable outcome.

I'm no market guru or financial wizard. Heck, I've barely crossed the 1 year mark of investing and I must admit that my overall portfolio is negative. But what I do know is to buy low and sell high.

Can it get lower? Yeah. I'll probably buy more then. As long as I do not compromise on my own financial needs, I will never be forced to liquidate and realize any losses. I'd just hold until kingdom come. Isn't that how most people in the market made money? Be it gold, bonds, Keppel, APPL or the STI? Buy low, sell high.

7 comments:

  1. Hi GMGH

    Is there any particular reason that you are bullish on gold other than the price is at low? Hedges against inflation, running to safety instruments?

    ReplyDelete
    Replies
    1. Hi B,

      One of the metrics that I use when looking at asset classes are rolling returns. The 3 year rolling returns of gold have been horrible and have reached levels of -1SD which usually produced reversals in the past, either a relief rally or a bull market. However, I gotta acknowledge that the previous bull was a massive and long one, so perhaps gold still have deeper and further to drop? This time is different, I suppose!

      With developed countries worrying about deflation, I think this is probably about the best time to shop around and look for the traditional inflation protected assets, since they ought to be selling at discounts. I don't really see gold as a great inflation hedge, because it doesn't adjust as precisely as one might like. It is still seen as one though, which helps with discounts with all the negative sentiment.

      Fundamentally, I've tried wrapping my brains over the price of gold itself, through understanding money, currencies, debt, derivatives and everything in-between that the usual conspiracy theorists and "fringe" economists talk about. It kind of scares me because logically their base argument checks out. So I guess it's also a kind of personal financial insurance for me, but that would be only for a small amount of the physical that I will keep on hand. The rest is of course intended for sale and profit!

      Delete
    2. Hi GMGH

      Thanks for your response.

      If I may share, the thing I dislike about gold is it does not provide any cashflow. In fact, they are used as a substitute for currency and they tend to be speculative in nature and go up during uncertainties (war, end of the world) or inflation. As they are speculative in nature, it really all depends on the overall demand and supply. Having said that, I would still like to hold gold in my portfolio a little bit to diversify against the natural hedge of inflation.

      Delete
  2. Mate I applaud you for being transparent about your calls and having no ego about admitting that your P&L is negative. This is a very process driven game, and we are less primarily focused on outcome. Also, you have a great mentality for trading spreads--do you do this?Trade value, and not just price, and there will be a big difference.

    ReplyDelete
    Replies
    1. Thanks for the encouragement ladykiller! I think I haven't been in the game long enough yet for my strategy to show good results, especially since I'm following contrarian strategies instead of momentum ones. Nope, I don't trade spreads, but I might consider in the future. "Price is what you pay, Value is what you get", good quote from Buffet!

      Delete
    2. How come trader quoting Buffet?

      Buffet dislikes Gold!

      LOL

      Delete
    3. Haha yes, Buffet dislikes gold, but he still has good quotes!

      Delete

Observe the house rules.