Uncle Bill

Gold Stocks Poised to Shine Again

Now that's good alpha, Boris. Strong information, nicely presented, resulting in a clear conclusion. Thanks.

Gold Has More To Run, Whatever The Benchmark

Hey Thomas. The XAU hit two standard deviations above its 90-day mean price -- based on option market expectations -- last Thursday with the index around 172. The index ran from 120, where it was two standard deviations below its 90-day mean price, to 170 in a month. It's pulled back a little since, which indicates to me this is a technical, speculator-supported market rather than a fundamental event. Furthermore, the option implied volatility for XAU is 38 -- one of the highest among sector indexes. This past run equated to a year's worth of performance by the index based on the option implied volatility estimates. And finally, the correlation between the major market indexes and XAU has to be the highest in history. This is a trader's market, and traders should be selling XAU.
http/impliedrisk.blogs...

Bernanke Just Lost A Lot Of My Respect

Gold/Silver (XAU) has gone from around 120 to around 170 -- an all-time high -- in about a month. Right now, option implied volatility is at 40, another all-time high. Implied volatility usually drops when issues move higher, but not this time. That's because there are more speculators in the gold arena than anywhere else. Finally, correlation between the stock market and gold is incredibly high. I like gold stocks, too, but not at these levels. This is a trader's market, not the place you flee to avoid risk.

Remaining A True Believer in Gold and Precious Metals Stocks

You're trying to buy-and-hold in the most volatile sector of the market. The option implied volatility on the gold indexes indicates the market wouldn't be surprised to see the indexes up or down by one third over a year's period. More volatile than biotechs, oil service, internets, you name it. To invest in this area without hedging your risk is insane. Hedgeing means selling a large portion of your investment when it rises 30%. Buy when the index is more than one standard deviation below its mean price on a 90-day basis, and sell when it gets more than two standard deviations above its 90-day mean. You'll make a lot more money than you will waiting for than big move. And you'll be taking a lot less risk. http:/impliedrisk.blog...

Momentum in Precious Metals, While Homebuilders and Retail Lag

Thanks for the info, Nick. I was sleeping under a rock all week and didn't know what happened. You're the best.

Gold: A Safe Place to Hide?

Kicker, you gotta keep up with the news. "de-couple from the US consumer"? That's not a factor that moves markets. Check out hf-implode, they have a great current news section. The one you'll want to look at today: "Is China Quietly Dumping US Treasuries?" from the UK Telegraph. That is news that moves markets. Why do you think XAU made such great runs earlier this week? It isn't selling off today either. Another standard deviation or so, we've profited from 130 to 160, and we're out. We've done this round trip twice this year. Lots of other sectors act the same way, not just gold. The option market does a great job of estimating trading ranges -- it's called implied volatility.

Gold: A Safe Place to Hide?

Lower dollar, higher gold. The obverse of inflation is a weak dollar; both limit the purchasing power of the dollar. The Fed and the treasury secretary say they support a strong dollar, but they don't support it. Finally, they love gold in China. As the Chinese sell US treasuries, they'll buy gold. The XAU hit the 120s on intraday trading last month, which placed it more than two standard deviations below its mean price on a 90-day basis. That was the buy. Today, XAU is one standard deviation above its 90-day mean price. Last time the index reached two standard deviations above its mean on a 90-day basis, at around 150, it plunged along with the market. Very high correlation recently, and now it's rallying with the market again. Not much of a hedge against the stock market, really. Lots of hedge-fund speculators, we conclude. Ride it, then sell it. impliedrisk.blogspot.c....