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Fed Balance Sheet/Pair Trades/Gold

So I was just randomly scrolling through some charts and thinking when I came across this. 

The blue is long Industrials (XLI) / short financials (XLF). Both of those seem like they are a part of the whole reflation thesis. Financials are connected to interest rates and XLI is connected with manufacturing and commodity prices. But then I thought about how the whole FED balance sheet expansion is going to hurt financials. If that happens then they will be a great short in a pair trade. Then I overlayed the price of gold and it tracks it almost perfectly. I was really surprised at the pattern. 

I have been thinking about trades that will do well regardless of the reflation thesis breaking down or not. Perhaps this was one of them. But as you think about the whole expansion of the FED balance sheet and different trades, maybe overlay gold here and there to see if there is a similar pattern. 

Be curious and ask questions!

Would love any thoughts or feedback!

The Sp500 and Gold had their own little drama, and here comes Bitcoin.

The Macro Cafe. Episode #9

An updated overall technical view of the major asset classes Bitcoin, Oil, Gold, Sp500, Yields, Dollar Index, Asset Rotations .

https://youtu.be/v60rLDyKvvw


 

I am 100% allocated to gold, silver and bitcoin.  

I was completely allocated to gold, silver, and precious metals equities from 2010 to 2020.  

The precious metals equities slowly whittled away from one third to nothing over the decade.  In fall 2018, I was 67% gold, 33% silver.  In fall of 2019 I rebalanced to 50% gold, 50% silver.  (The gold silver ratio was out of whack, still is). In the summer/fall of 2020, I rebalanced to 20% bitcoin, 35% gold, 45% silver.  I've let that allocation run, and its evolved into 45% bitcoin, 35% silver, 20% gold.

I've run concentrated portfolios since a few years after I began investing.  I try to identify a bull market in a sector and ride them for years.  A few very high conviction positions.

Technology in the late nineties.  Natural gas in the early naughts.  Oil in the late naughts.  Commodities through the naughts.  Gold and silver since the early naughts becoming a greater and greater proportion of my portfolio over time till it ate it all.   

Bitcoin was the first thing I felt like diversifying into in a long time.

Warning:  The path dependence of holding gold and silver is painful if you price your gold and silver in dollars instead of ounces.  When I have no better ideas, I allocate to gold.