Daily Notes: Gold, Aussie Dollar, Equity Exposure
Tiho Brkan | Apr 24, 2013 04:02AM ET
Gold has corrected for a prolonged period of time. Interestingly, diehard Gold bugs viewed Gold sell offs in December 2011 and in June 2012 as bottoms. However, rarely did anyone link the current sell off in Gold to the 1975 correction. Endless comments were made about how various technical indicators, price cycles and sunspots say this and that, while none of it worked.
Back in late 2011 and early parts of 2012, the majority of diehard Gold bugs believed that Gold wouldn't correct for as long as it did in 1975/76, because those days were "different" to current conditions. Well, today, we surpassed the 1975/76 correction in time. However, take note that corrections can be measured in both price and time, with the market price only correcting about 30% from the peak in September 2011.
Many have blamed the slide in prices to manipulation, price fixing, naked shorting by investment banks and all sort of other conspiracy theories. The fact is Gold rose for 12 years in the row without any major corrections (apart from a swift several month 30% decline in 2008).
The current correction still looks like a walk in the park compared to the 1975/76 crash. If Gold is truly about to shake out weak hands (not my view) the correction could go on for awhile longer and decline as far as 40% to 50%. Regardless, it is going to be extremely difficult to shake me out, because I am not selling until this bull market ends in a bubble.
[updated...]
Topic: Aussie Dollar is at a major inflection point
The Australian dollar has gone absolutely nowhere for almost two years now. When we consider the powerful move out of the March 2009 lows, at around 60 cents US all the way to $1.10 US (a gain of more than 80%), the Aussie dollar was definitely overdue for a consolidation and a correction.
Interestingly, from a technical perspective, the Aussie finds itself in a very tight trading range. These ranges with low volatility do not last for a prolonged period of time. Moreover, they act as inflection points before the next major move.
Get The News You Want
[updated...]
Topic: Managers still remain heavily exposed to equities...
Recent ML Fund Managers Survey showed that hedge funds continue to hold a relatively high exposure to equities, despite sizing down the weighting from March's extremes. According to the report, a net 47% are overweight global equities (57% in March).
Topic: ...however exposure to GEMs has declined considerably!
The main reasoning behind decreased exposure was due to managers outlook on Emerging Markets and Commodities. Only a couple of months ago, GEMs were the favourite equity region for hedge funds (43% overweight in the February report), but at present the weighting has fallen to only 13% (close to the -1SD for the last decade).
Topic: Commodities remain unloved by global fund managers
Pessimism has also returned on the Chinese economy and with it, extreme underexposure towards commodities. Fund managers are currently 18% underweight the commodity sector. Furthermore, equity sectors like Materials and Energy hold the lowest exposure since at least 2009 lows. The Commodity bull market is definitely a forgotten trade!
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.