(Kitco Commentary) – I generally receive negative comments whenever I suggest gold looks heavy or that engaging on the buy side should await a break of certain levels. But to set the record straight, I have no issues with investors holding gold as a percentage of their portfolios.
As an investor or trader, you need to ask yourself, why you are buying gold. Is it for protection, insurance, or Capital gains? The answer determines what percentage you hold and what vehicle is the best mechanism for achieving your desired goals: physical, futures, mining shares, ETF’s or maybe a digital platform (which Kitco is now offering).
If you are looking for protection/insurance against whatever risks you perceive may develop, then don’t fret the interim moves. Just re-balance the investment frequently to maintain your desired percentage allocation. If you decided on 10% and if gold drops, re-balance. If the protection is now only 8%, buy an additional 2%. If gold rises and your allocation is now 12%, sell 2%. This helps you to buy the dips and sell strength while maintaining your desired portfolio balance.
If you are in it for capital gains, then you need to treat gold like you do equities or bonds. Set your goal, but do not be married to “hope.” Trade it like any other investment. You don’t always have to be “in” the market. You may also be short the market. It becomes an active, not a passive investment.
That said, my commentaries are for the latter group not for investors who are comfortable with a long-term allocation to gold for portfolio protection.
Finally, let’s look at some other metals. We continue to like the short gold/long silver spread, which we initiated at 82:1 silver to gold. Currently, the ratio around 78.6:1. We were aggressive buyers of rhodium in 2016 at $700 with a published price target of $2,200. This morning we are north of $2,100 on the offer side. We would exit the position here, with a re-entry point at $2,350, which may suggest a break to the $3,500 level.
We liked ruthenium at $50, and today the market is printing $250. This metal remains a hold, with a target of $325. Palladium has softened back from its high of $1,080, but we initiated a buy at $650 and suggested at $1,050 taking out the position.
We have been wrong many times along the way, but the key to managing your position is to set a stop. Your damage is defined, and if you catch the draft, you ride the profit.
Gold prices are at $1,286.30, as I write. We were aggressive bulls at $1,250 in December, after the fed rate increase and we suggested a move to flat at $1,355, in March, risking a re-entry only after a break above $1,365. Recently we were bearish unless gold broke above $1,322, which it was not able to do. Currently, we are long at $1,287, with a tight stop at $1,282.
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