Friday 2 March 2012

Trading Update, Is Gold A Bubble

We remain holders of USDJPY and a March EURUSD Put at 1.31. These two positions alone represent a P&L of 1% on NAV and have performed hansomely post LTRO - but more on this later today in our Monthly Report.

Turning to Gold, our exit from this position at 1778 now looks inspired and is both a product of our averaging-in-and-out strategy and our expectation of a sentiment correction (still yet to fully materialise).

But we remain long term buyers of Gold, predominantly as a hedge against the global central bank balance sheet explosion but also as a good capture of European tail risk. Silver, however, may look better on a risk-return basis as its "fundamental" value (based on real industrial and retail demand) is closer to its price than Gold. We assign a non-zero risk to <1000 Gold but a zero risk to a Silver equivalent  <15.

For the sceptics, click to enlarge:

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