Gold: Risk, Cycles, and Investment Opportunities

This month’s Cockpit Newsletter is all about gold. The first part is what I call risk monitoring. While traditional charting is always a part of my investment process, I also think about the fundamentals, volatility environment, intermarket analysis, and market participants' investments. This broader view on influencing factors gives me a risk perception. This is just my style. It is not wrong to have a different analytical process. Ultimately, it all comes down to understanding why you combine your analytical tools.

Gold in Local Currencies

Gold is the only asset many people follow in their currency. The conversion of your home currency could be done with every instrument, but it only makes sense for gold as it is considered the ultimate money. If you don’t follow gold in the major currencies, you might miss that it has a different trend than in your local currency.

The following chart shows gold in different currencies. The orange line shows the price of gold in YEN. A Japanese gold owner is happy to be invested in the precious metal because their currency has been weaker than the other main currencies. This positive sentiment can lead to additional purchases and drive the price of gold higher. A Swiss investor is less enthusiastic because the price of gold in CHF is still below the all-time high due to the strong currency.

Some of the other analyzed aspects conflict with this optimistic view. The Cockpit discusses the charts so that you get my reasoning, and the published charts allow you to interpret it yourself.

The second part is about the cycles. I show the seasonality, short-term and long-term cycles, and the projections of two neural networks.

The following chart shows the seasonality. The seasonality is shown detrended that we only see the turning points but not how the trend behaves over the year. You will often see that analysts show the seasonality with the trend. Many practitioners do this. I use both charts as they both give you valuable insight into seasonality. If you discuss seasonality from a scientific perspective, it has to be detrended, but we need to think about what other investors do, whether it is “correct” or not.

The lower panel shows the seasonality of all the available price data. The gray line is sometimes green and thicker. These are the periods when the move is statistically significant. The red line is my calculation. Many factors can be adjusted to calculate cycles. The lower panel is the quick and dirty way, and the red line is the result of a thorough analysis.

Cycles are complex, and I rarely see an analyst in the banking and asset management industry showing a cycle analysis. I will always show the cycles analysis in the Cockpit and discuss them in the Pilot if and how I would use them in the current environment. I’m convinced that this part alone is worth more than what you pay for the whole Cockpit.

Multiple Investment Opportunities

This month’s Pilot Newsletter discusses which options we have to invest in gold. Should we buy the physical metal, gold miners, or are there other opportunities to increase our profit potential? I show charts for all the possible investments and present the trading decision.

No Data? Innovate!

The Crypto Newsletter introduces my first innovation. I created a cryptocurrency index called Biber Analytics Top 50 Crypto Index (BATOP50). I show how I use the information the underlying coins give me to get a better picture of the health of the whole space. This can only be done if you have an index and it is built correctly.

The following chart shows the index color-coded. Depending on the indicator's behavior below, the index is either in a bullish (green) or bearish (red) regime. I often use indicator and breadth data to color-code an index. It lets me quickly interpret how the indicators work and where we are now.

The index and the data generated from it give you much information condensed in a chart you won’t find anywhere else. For this reason, I will add them each month. I don’t show a cycle analysis this month, but it will be a crucial part of the newsletter. Those two tools will give you a unique insight into the crypto space.

Suppose you are interested in learning more about this topic. In that case, you should subscribe to the Crypto Newsletter, where I also go deeper and explain what the indicator of the lower panel measures.

Summary: Gold is at an exciting inflection point. As always, there are also some headwinds. Choosing a suitable investment could be crucial. The BATOP50 will give us some valuable information in the volatile crypto space.

Outlook: I’m currently programming a seasonality chart to give us exciting insights into how the next year could unfold. I expect it will be ready next month. So, stay tuned!

Thank you for taking the time to read this newsletter. I highly appreciate it!

Happy New Year to everyone!

Disclaimer: The information in all Biber Analytics newsletters is not and should not be construed as investment advice. This is my investing journey, and I share what I do and why for educational and entertainment purposes.