For those not clear/new follows: I made the 2013 analogy in terms of PA in $GDX 1st alchemyfinancials.blogspot.com/2021/06/gold-a…
& . We sold producers & only held royalty & JRs. Since, $GDX dropped 40%, so it was the right call.
We've been hedging ever since. Here's specifics/
Reason for royalty $FNV, $RGLD, $WPM its performed significantly better than producers & are immune to many of their problems. Only producer we hold is $NEM.
JRs because lightening strikes anytime. If you had 20 jr's & 19 are -50% last 2 yrs but 1 was snowline, you're breakeven/
Our cash position in our #gold portfolio is typically 10-20%. We use this to add puts when there is risk, then roll profits over to LT positions & avg costs down.
We also use it for calls on $GDX when miners are leading/outperforming. This leverages upside of our LT holdings./
So when I talk about 1/3 position in puts being bought, on a 100k portfolio w/10% cash position that's 3300. Then another 1/3 is 3300. Etc.
If we get a retest of $GDX 25 by June, 90k in miners lose ~17%=75k. 10k in puts gain ~2x=20k. We mitigated -15% to -5% & have 20k cash/
Same long. 90k rode up ~50% from that Sept low is ~135k. GDX calls we bought in Oct that made 150% on 10k is now 25k total 160k.
Outperformed GDX by 20% & a 20% cash position feels good when things drop.
IF we get the cues, we use this to buy puts then to add to LT holdings/
This is an EXAMPLE of what we do with our #gold portfolio, although amounts, cash, & position sizes fluctuate based on many factors, like conviction. But this idea can be used as a model for your own portfolio & positions based on YOUR OWN risk tolerance.
Hope this helps!
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Meantime, I'll let the gold bugs gloat at my expense. Lord knows they don't get to do it often. Have a few days of fun amidst last 2yrs of losses.
Some context, $GDX/ $GLD couldn't make a close above where it was just 2 days ago. 1 day is not a trend, zoom out & look at the avg/
What I see is panic buying in #gold, the safe haven. #silver & $GDX feels like all short covering B4 weekend. Short covering is great ST, but will it carry over to new longs buying at these levels, fade quickly?
Have fun over ydays ST pennies. I'm thinking medium term dollars/
Going to outline EXACTLY what we're doing, why & some details on the models, their signals & how I interpret them here.
A bit of a free preview of what we're going to be doing on the Patreon.com/alchemyfinanci… site & discord chat when it officially launches (now likely February)/
1st, buying 1/3 position in $GDX Mar 28 puts here ~1.60. 3mos is enough time. 1/3 position cause might be dull 4 a bit. Gives time to buy another 1/3 if signals strengthen w/minimal risk if we're wrong. May get stuck with only 2/3 position if GDX tanks fast, but that's ok/
The model I use for hedging entries is the same I use for profit taking on longs, just backwards. Here's how it works:
Multiple factors I've spoken about B4 are weighted according to what I believe is their level of importance. The model then gives a value, not a flashing "buy"/
Getting a big bounce out of $Euro here right after hitting parity, thus putting a pause on the $DXY rally for now.
A backtest of the major support it broke in the 105 area seems logical & about the area where RSI would hit 60, which it has failed at on every rally for 1 yr now/
$Copper bouncing off 50% Fib retrace ('08 low to '22 high) ~ 3.15. Down 38% now just since March & RSI has been <30 for 1 month.
Seems about time for a pause here. If Dr. Copper is pausing it's collapse w/Euro & DXY paring off, feels like time for "risk on" bear market rally/
Makes sense, as we're seeing $SPX break out above this downtrend line here. Too many bears becoming complacent. RSI has failed at 60 on every rally since Dec (typical of bear markets). Currently at 55, I'd watch that level for another failure & initial resistance ~4100)/
Gap fill on $GDXJ & $SILJ last week, but no such luck with $GDX. Stopped dead at the gap now may be rolling over. (Upside, GDX held lows while GDXJ & SILJ broke them & recovered)
There are a few things concerning me here with miners that seem a bit reminiscent of last summer/
$Euro has been a perfect example recently of something I've illustrated before in articles. Bull markets, RSI>40, MACD above 0. Bear markets RSI<60 MACD<0. Euro has been declining for a whole yr now. RSI never printed above 60, MACD has stayed below 0 line the whole time/
Notice $GDX chart. Decline phases red, incline green. Inclines=corrections to near MAs, then resume higher RSI> 40, MACD>0. Declines=price peaks just above MAs, RSI<60, MACD<0 line.
Price rolling over testing orange MA w/ RSI ~52 & MACD<0. Feeling like summer 2021 again/
I have some friends coming to visit so I have a lot to do today. Im not panicking over rising #rates.
Here's why. Some charts of what happened to #gold miners during the biggest rate rise in the last 50yrs.
Banner Resources. 34c in 1978 to $16 in 1980. A 4,600% gain in 2 yrs.
Carolin Mines. From a low of 2.20 in 1978, to a high of 56.5 in 1980. This occured while 10 yr rates nearly doubled from 7% to 13% in the same time frame.
Silver Stack Mines. A low of 1.30 in 1978, to a high of $36 by 1980.