Gold analysis

Today I’m going to analyze the gold futures. Apart from investment purposes, the Gold is used to hedge a portfolio versus unexpected situations. This is based on the negative correlation between this commodity and the stock market, as I will show later. It’s recommended to have at least a small percentage of your portfolio invested in gold. Ray Dalio advised to buy gold and increase the weight of this commodity in your portfolio to 5-10%. Another Hedge Fund managers, such as George Soros and John Paulson, invest in gold through Exchange Traded Funds. Let me recap the ways to invest in this commodity:

1. Gold Bullion, buy physical gold
2. Gold ETFs (Exchange traded funds), the most traded ones are SPDR Gold Shares, iShares Comex Gold Trust and ETFS Gold Trust
3. Gold ETNs, exchange-traded notes, debt instruments that track an index. It´s like to make a deposit in a savings account in which the return is based on the performance of the underlying product is based on. This is like buying the Comex future contract, it’s riskier than the first two options, there is no principal protection and you can lose all of your money.
4. Gold miner stocks, this strategy is risky because you should consider the price of the gold and study the company in order to know if it’s worth to invest or not.

    Source: TradingView, Comparison between Comex Gold Futures and S&P 500 Index

Please bear in mind that with the quantitative easing programs, the correlation between gold and the stock market is not like in the past.

Comex Gold Futures

    Source: TradingView, Comex Gold Futures, Daily

As you can see the gold contracts have been raising since the beginning of the year. The max of the year was driven by the growing tensions with North Korea. It has retraced since the maximums of the year in September. The area between 1300 and 1200 is the most important and I think that it will be trading between this levels in the short term. I think we will see significant moves as soon as the central banks start to reduce the stimulus. These are the levels I consider important:

Resistance 2	1338.0
Resistance 1	1298.1
Support 1	1261.1
Support 2	1217.2

Gold offers protection, insurance against inflation, currency debasement, and global uncertainty. In my opinion, everyone should invest part of the portfolio in gold.

Have a good trading!

Disclaimer

I wrote this article myself, and it expresses my own opinions that shouldn't be used as a trading advice. Trading carries considerable risk due to the high leverages involved