Email of the day (2)
Comment of the Day

April 18 2013

Commentary by David Fuller

Email of the day (2)

On gold hedges
"When a market corrects deeply it's not unusual for it to bounce off the lows and then retest the lows during the consolidation period. In the context of gold you had mentioned recently that people might be watching for lows between 1350 and 1000, and in that the other precious metals will likely test their range lows, eg that platinum would likely not hold its recent support level at 1400. In the short term, precious metals have stabilised; do you still think that recent lows will be retested in the next weeks?

"My own interest is in deciding whether to remove some hedges (now turning red) I had placed against my significant PM investments. In retrospect it would have made sense to buy PMs in Yen terms rather than in US$. Looking ahead I am wondering whether it still makes sense to make the conversion and, if so, what the timing of that might be. Japan is now saying that they will hit their 2% inflation target earlier than estimated, possibly by 2014.

"Thank you kindly for yours and Eoin's well thought commentary,"

David Fuller's view Thanks for an interesting email.

I described the precious metal's latest sell off as climactic, but that was mainly over two days. Therefore, we should see some steadying near Monday's lows, as is occurring, but my guess is that there is at least a 50/50 chance of some additional weakness. In other words, the longer the period of freefall selling, the closer the market must be to a sustainable low. The counter argument is that everyone who wants to buy precious metals, especially gold and silver, can now do so at levels they have not seen for over two years.

As for gold in yen, I think that continues to make sense for so long as USD/JPY remains in an overall uptrend.

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