Commodities (Precious Metals) Flashcards
Has gold been a good predictor of the bottom of other commodity cycles?
Yes. In 6 commodity upturns since 1976, gold consistently led copper out of all 6 cycle lows.
4 Key forces that drive people into gold?
- War or the threat of war (geopolitical risk)
- Risk to the stability of the monetary system
- They believe that the dollar is going to fall/continue
- They are convinced that inflation is going to appear.
Why is the value of the dollar important for gold?
because we look at the price of gold in dollars.
what are 3 key attributes of gold?
- Scarcity
- timelessness
- Represents money
What are the two important demand centres for gold?
China and India
Underlying strength in gold can be seen when it is trading well in XXXX currencies….
XXXX=Many
Historical rolling 30d correlations to the Dollar are approximately
-0.85 ton -0.9
Why is gold less attractive when yields are high?
Because it does not pay interest.
So as yields rise and fall, the price of gold often does the opposite.
What is historically the best month for gold?
September - 50 year historic return 2%
What is the best 3 month return for gold on a seasonal basis?
Buy end of June for July Aug and Sept.
Next best is buy end of Oct for Nov, Dec and Jan.
Alternatively buy second half of the year.
What are the two best periods for gold?
1) Rising Inflationary environment like the 70’s - have to think of the real return
2) During periods of negative real interest rates - when inflation is higher than current bond yields.
What has the historical growth rate of gold supply been?
Less than 2%
Differentiate the last decade trends in gold total supply vs mine supply?
Total supply has been flat for almost a decade at 4.5ktpa
Mine supply has been rising <2%pa but gold recycling has fallen due to the lower gold price.
What is the estimate amountof gold in the world
6 billion ounces x $1300 = $7.8Trn ~ 30% of the S&P500 Market cap
