Friday, 25 November 2011

P&L Repaired, Gold Exposure halved again

As readers should be aware, sentiment this week has been at a post-crunch low.
 
It is one of bizarre uniqueness. Volume is incredibily low yet levels plunge further and further south. Bids are non existent, even offers are scarce, yet market makers are forced to mark their books down to the odd trade or rumour.
 
Gold continues to experience a lot of pain as the correlation with risk assets holds. We believe it may take a fall to 1600 before sizeable buyers begin to build up stocks for the cold winter months. And when we say cold we mean Siberian.
 
At this point Gold may be as futile as a handwarmer. We cut our exposure by another half, limiting total upside to around 3% NAV and further downside to 1%. MTM position is about 0.6% in the red.
 
Fortunately, once again our hedges saved the day. Both EURUSD and EURJPY performed yesterday and allow us to take around 15 points into the lows, repairing virtually all of the Gold profit crater.
 
Overnight we held a naked Gold position. At 8:46 I went short EuroStoxx (rallyed stupidly early morning) and am sitting on another cash-cow-hedge. Will look to exit later today, maybe trimming Gold once more.
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