6. Market Update – US Election
sources: HiddenLevers, Bloomberg, Bloomberg 2
- 2016 US election: establishment vs outsider
- October: highest volatility month in election years
- Less volatility in 2016 = market pricing in gridlock
- Fed: Now a politicized body
8. NATURE: Gold as Commodity
sources: HiddenLevers
Gold – Oil Correlation?
• Trended together to bottom
and in 2016 rebound
• Short-term correlation still
negative
Oil-Gold Ratio
• Historical average in teens
• Set new record in Q1 2016
• Are recent levels setting a
new trend?
9. NATURE: Gold as Currency
USD is inverse to Gold
source: HiddenLevers, CNA Finance, Bloomberg
China diversifying reserves from USD
Yuan will be in IMF special fund – 01 Oct
China has doubled Gold reserves since 2009
Shanghai Exchange = physical delivery
10. NATURE: Gold as Inflation Hedge
sources: HiddenLevers
CPI
GOLD
No Gold Rise with CPI Gold Rises with CPI
11. NATURE: Gold + Interest Rates
sources: HiddenLevers, Bullion Vault,
Interest Rates tend to be inverse to Gold
YATZEE!
Dec 2016
rate hike
13. 2y T
10y T
USD
GOLD
SAFE HARBOR: Gold Pulse Check
sources: HiddenLevers, World Gold Council
FUNDAMENTALS TECHNICALS
Gold Demand (Q2 YoY)
Central Banks -40%
Jewelry/Industry -12%
Investment +141%
Total +15%
14. SAFE HARBOR: Gold + Geopolitics
sources: HiddenLevers, HiddenLevers 2
Financial Crisis
S&P + Gold had similar
volatility
Bonds true safe-haven
Brexit
Aug 2015
Volatility
Commodity
Crash
Gold tends to provide
some protection in average
market corrections.
18. GOOD: 1550 Uptrend
source: HiddenLevers
Commodities Uptrend with Fiscal Spending
Indian jewelry
demand recovers
China
underlying bid
US
infrastructure
spending
19. BAD: 1400 Market Panic
source: HiddenLevers
European banks spook global markets
Gold spiked in
2016 Brexit
Gold spiked in
2012 Greek Crisis
Short term spike
due to EU banks
20. UGLY: Crash to 1K
source: HiddenLevers
Fed becomes more aggressive after US Election
Gold
underperforms
S&P
more rapid
rate hikes
double bottom
at 1k
21. Scenario: Gold Outlook
Good:
Uptrend
Bad:
Market Panic
Ugly:
Crash to 1k
Gold
-25%
S&P
-20%
Gold
+6%
S&P
-5%
Gold
+15%
A further slide in the dollar,
Chinese buying, and a
recovery of (Indian) jewelry
demand could all be
catalysts causing gold to
outpace stocks in a calm
market.
Similar to Brexit, an event
causing a short term equity
markets drop and VIX spike
could showcase gold’s role as
a safe haven.
If the Fed or other Central
Banks cut easing programs
or are forced to let rates rise
faster than expected, both
gold and equity markets
could contract rapidly.
S&P
+5%
22. Gold’s Uptick – Take Aways
Rate hike postponed = Gold Uptick
Gold currently more currency
than commodity
Don’t use Gold as a hedge for
non-existent inflation
Gold Volatility = S&P Volatility