Today we’re going to revisit gold. I’m going to explain what’s going on in the gold (GLD) market and what trades we put on last week in the Macro Ops portfolio to take advantage.
Earlier this month I released a video explaining why our team was bullish on this precious metal. But at the end of that video I explained that even though we were bullish, we were still waiting for price to confirm. About a week after we released that video it looked like we finally got our breakout. But we didn’t immediately put on a trade because we wanted to wait for the close to make sure it was real. And that ended up being the right move because as you can see we got a huge breakout failure. It was a bull trap.
At this year's annual Robin Hood conference, which was held virtually, the founder of the world's largest hedge fund, Ray Dalio, talked about asset bubbles and how investors could detect as well as deal with bubbles in the marketplace. Q1 2021 hedge fund letters, conferences and more Dalio believes that by studying past market cycles Read More
This failure was an inflection point. Over the last year gold had everything going for it to rally, but it still failed. The dollar was down almost 15%, we had political drama everywhere, geopolitical tensions were rising from trade wars to potential nuclear strikes, and to top it off we had the rise of inflation narrative coming back front and center.
But gold still failed to breakout higher. And now conditions are actually shifting to become bearish for gold.
Last monday we saw gold break below its triangle pattern. We put on a starter position of just 25 bps to test the waters because we knew there was potential of another fake out. We were also putting on 75 bps of long dollar (UUP) positions at the same time. And going long the dollar is very closely correlated to going short gold, so we needed to size smaller when considering our total portfolio construction. By Thursday we saw the follow through in gold that we wanted and put on another 25 bips on, doubling our position. Again we sized a bit smaller because we also doubled our dollar position. And now we’re going to sit and wait for the trend to play out.
For more be sure to check out the video above!
And as always, stay Fallible investors!
Article by Alex