Here’s an easy reference for readers re Bespoke Investing feature #13 because of the rapid fire pace updates. Apologies too are the order of the day for Post Settings and specific content details oversights.
Bespoke Investing feature #13
We bought 1 gm@MYR180.10 of gold on 22/3/17 (cimb sell MYR180.10/gm; buy MYR174.90). Thus our new cost of gold balance holdings =MYR518.68 and the new average cost= MYR172.89/gm. Bespoke gold investing norm is to watch for the next cash out price to be above MYR$178 or MYR5.00 above the new average cost of gold balance.
On our world gold prices tracking record, Monday 20/3/17 precious gold was hovering at USD$1234/oz as well as on Tuesday morning. The 21/3 gold price then dipped to $1228/oz but turned upwards to $1233/oz and $1245/oz. U.S. stocks ended more than 1% down with the S&P sharpest pullback from the near 10% increase since Trump election on 8 /11/16.
At the time of the 22/3/17 purchase world gold price was USD1245/oz which was 9.5% higher than USD1137/oz on 15/12/16 when we transacted our last purchase. We decided to average up our gold holding cost because the prevailing cash out price of MYR174.90 was 3.3% or MYR5.61 higher than our average cost of gold balance of MYR169.29. [This is a good illustration of what we mean as prudent bespoke averaging up in “Bespoke gold investing feature #6”].
Let’s back track our thoughts at this juncture. On 15/12/16 we had increased our gold holdings by 1 gram@MYR165.60 which brought our cost of balance gold to MYR338.58; our net outlay totaled MYR371.79 (because we realized a loss of MYR33.21 when we sold at MYR170.20 on 22/11/16) meaning we had 81% of our MYR2000 hold money to invest when prudent to do so. Multiply MYR1628 hold money balance by 10 times and you had MYR16,280 of hold money to invest in a gold price rally. Why 10 times and having an equivalent investment exposure of MYR3720? This matter in regard to quantum of investment was covered in Bespoke Investing feature #9. Read more at https://www.linkedin.com/pulse/bespoke-investing-feature-9-adam-mowe
There comes a time.
Last year we mentioned in Bespoke investing feature #5 that China heaped up on gold while the manipulated low price persisted. The amount of gold withdrawn from Shanghai Gold Exchange was a good indicator of physical gold demand but was no longer published. Read more at https://www.linkedin.com/pulse/all-noise-real-impactable-headways-adam-mowe
The Shanghai Gold Exchange 1:1 physical gold backed trading transactions ratio will eliminate gold price manipulation by fiat money. In the past China could be “lowballing” their gold holdings to protect their substantial USD holdings. Nonetheless they know their future lies in gold and they’ve created the great equalizer in market prices by launching a competing exchange to set the price of gold.
China is now ready to reform the world order and gold will become the world currency once again.
Before Richard Nixon eliminated the gold standard in 1971 the USD was backed by gold, meaning one dollar represented a certain quantity of gold. Some pundits say that without price manipulations gold should have steadily climbed to USD5,000/oz from the 2011 peak levels above USD1890/oz and ready to break $2,000 an ounce. The price of gold ought to directly correlate with the size of the Fed’s balance sheet thereby protecting against rampant spending and huge government debt. To make America great again the Trump presidency need to support the end to crash injections by major financial institutions of buying in gold futures on the basis of 1 oz physical gold to 100 oz buy/sell paper calls (now more than 1:250 ratios).
Gold reserves held by China rose to US$74.376 billion at the end of February this year with the volume of official gold holdings remaining steady at 59.24 million ounces. Its foreign reserves are slightly above USD3 trillion. A billion has 9 zeroes, a trillion has 12, thus at prevailing gold prices the ratio of foreign reserves and their gold holdings is about 1:40.
If the price of gold is allowed to reflect its true value there will be a massive rally in gold price to even reach USD10,000/oz or higher. At USD10,000/oz it represents about 10,000/1255=7.96 times China’s recognized book gold price. Will that offset the loss in value of their foreign reserves? China had already begun to hold other major currencies in greater percentages and their real gold holdings could be double the official 59.24 million ounces. For sure it’s in China’s best interest for higher prices as they want all gold business to go through them.
If the new Trump Administration enables the return to the gold standard it is a major step to making America great again as well representing a distancing from the “losing jobs to China” rhetoric. Low paying jobs in textiles and shoes in the past decades left the US for South Korea, Hong Kong, Taiwan and elsewhere. Now these industries are leaving China for Bangladesh, Vietnam and Cambodia.
There comes a time when we make exceptional decisions. We did not increase our gold holdings even when world gold price reached $1257/oz on 28/2/17 because we were looking for a clear breakaway from the USD1200/oz price area. In view of the Trump factor and developments in China re “China to reform world order, not create new one” [Read more at http://www.atimes.com/article/china-reform-world-order-not-create-new-one/%5D, as well as the dampening of the Trump euphoria we could be plunging our balance of 75% of hold money to wait out the timing of gold price gush, perhaps just leaving 15% to average down on any interlude steep price declines in the next 9 months.
Update: 27/3/17: Start taking the plunge.
It’s not our crystal balling for a Nov/Dec gold price surge – it’s just a teaser. Simply put, what happened from mid-week 22/3/17 (publishing of Bespoke investing feature #13) through to 24/3 was the initial world gold price drifted to USD1252/oz and slipped to USD1245/oz, It went up again to USD1252/oz and then down to USD1242/oz. It was prudent to merely observe daily price movement through each day – especially Friday night 24 March since gold trading already ended for the week in Malaysia because there could be a weak Friday New York COMEX close price.
COMEX gold closed just above USD1248/oz on Friday. Our day and month charts below show a propitious / promising sign.
When the day’s chart is symmetrical to the month’s chart in a Draco celestial formation it is easy to be smitten that the inkling of developments in China (including capital controls) will spur greater world prosperity and physical demand for precious gold. Precious gold being at the ecliptic center of a reformed world order will soon realize an inimitable price surge.
Although the Bespoke gold investing norm is to watch for the next cash out price to be above MYR5.00 of our average cost of gold balance, we decided to invest in an additional 1 gram (somewhat prudent too) on 27/3/17 based on cimb sell MYR180.10/gm; buy MYR174.90 quotes and to add more to our gold holdings before the year is up. This is because no one can predict the timing of the impending gold price gush.
Some analysts suggested that gold prices are likely to rise to USD1300 an ounce by the end of 2017. Possibly ruffling comfort feathers along the way we are starting to take the plunge to increase our gold holdings because local gold prices will far outpace the equivalent USD1300/oz . The Malaysian Ringgit has strengthened further to 4.4840 to the greenback thus we piggy back on the notion that it is better to buy when the local currency is comparatively stronger.
Update: 1/4/17: No holding back when gold trading is done with physical gold
World gold price was already up about USD10 when we transacted our last buy on 27/3/17 and the day ended at same slightly below USD1253/oz level after reaching USD1260/oz at one point. After GMT 14 the prices dipped lower from USD1260 to USD1253 in a two hour spiral spree downwards.
The idea behind having a hold money sum of merely MYR2000 in our Bespoke investing features is to illustrate how even a low income earner could dabble in gold investing the bespoke way. Losing it all won’t mean the end of the world for the MYR24000 annual gross income earner. For retirees it’s the same difference. An additional one gram of gold investment would mean about 10% or lesser of our hold money. Significantly, it forces us to think through the noise and assessments of pundits whenever we want to take any position, averaging up or down our holding cost per gram. [Gaining a 30% on hold money could mean a modest family local holiday fully paid for.]
At the end of 2017 we could decide to revert to our hold money sum of MYR9000 (as stated in Bespoke investing feature #9) or even MYR10000. Additional marginal investments could then be about 4% of hold money; that is around MYR400 for 2 grams of gold. Following the Bespoke gold investing norm to average up when the next local cash out price per gram is above MYR5.00 of our average cost of gold balance certainly is the Bespoke gold investing prudent manner to manage our investment portfolio in 2018 in anticipation of gold price to reach USD5,000/oz and beyond when a reformed world order occurs.
There will be occasions when we will average down with any interlude steep price declines typical of seasonal low consumer physical gold demand. That is why we shall not commit 80% of total hold money in hope of making a killer R.O.I. on gold investment. That’s mere gung-ho speculation and rightly not in the mechanics of Bespoke gold investing supposition or trajectory. Let’s repeat here that if you are one of those who do not blink with daily MYR100 pittance on family meals alone multiply that hold money sum by 5 or 10 times for your gold holdings portfolio. Remember this is in context of “Losing it all should not disrupt your lifestyle or family responsibilities”.
The China factor
Gold prices again dipped and rallied back above $1250 per ounce in Asian and early London trade on 30/3/17. Thus precious gold’s 200-day moving average at $1260 appeared to be a strong resistance level to the first quarter’s 8.6% gain. One analyst noted that Chinese gold prices in Shanghai were at a $12 per ounce premium to comparable London quotes. This is a strong incentive to new imports into the world’s number one gold consumer nation.
China is also the number one mining nation since 2007. The People’s Bank of China is the biggest buyer of gold. The two-month period January and February 2017 saw industrial revenue reached 17.4 trillion yuan (US$2.53 trillion) enabling the nation’s industrial sector profits to surge 31.5%. China’s overall prosperity is quite dazzling.
The China factor most certainly deflected the dip in the price of gold to USD1240/oz late 30/3/17 and early 31/3/17 due to improved U.S. GDP data and higher consumer confidence pushing stocks higher. The week also witnessed the appointment of Ivanka Trump as Assistant to the President. A hash tag with the title “the US president’s new China charmer-in-chief” went viral. China state media have also been quick to heap praise on Ivanka hence stronger ties between the two nations is the sure upshot.
We can look forward to a reformed world order along the China agenda and tie up with Trump bearing fruit only after a year or two. OPEC members increased oil production to protect market share and attempt to drive U.S. shale producers out of business has crumpled, signaling the end of the once thought impregnable energy costs hold on world prosperity. The cartel’s late 2014 maneuvering took two years to unfold. The U.S. led “quantitative easing” (since 2010) meant to stimulate economic growth has run its course. The Fed starting to shrink its USD4.5-trillion balance sheet will be in the pipeline. The pre-crisis level was around USD900 billion when gold prices were lower than USD1200/oz. Multiplied by 5, the price of gold would be USD6000/oz when gold becomes the world currency and there no longer are massive price manipulations.
The prevailing price range pivoting on the USD1250/oz remained intact. The normally Friday weak close price surprisingly settled at USD1249/oz from a low of USD1240/oz. It was slightly above USD1253 when we last transacted a buy. Be patient, the winds of change will need time to crystallize and you would not want to be like some heavy weight gold hoarders already watching five years go by.
Update: 12/4/17: Post Trump-Xi summit vindication
After venturing to say on 1/4/17 that the U.S. Fed starting to shrink its USD4.5-trillion balance sheet will be in the pipeline, it was reported on 5/4/17 that the Fed meeting minutes showed the U.S. central bank should take steps to begin trimming its balance sheet . Action plans for normalization of the Fed’s balance sheet by the end of 2017 argues well for our present 37% hold money exposure in gold holdings.
The Trump-Xi two-day summit Friday 8/4/17 outcome was a planned blue print for trade cooperation to be ready in 100 days. That’s a colossal step transcending the “losing jobs to China” rhetoric. China had ramp up imports US coking coal in late February. Latest development on 11/4/17 China ordered its trading companies to stop accepting coal from North Korea as part of its isolation policy on the rouge nation because of its repeated missile tests.
Gold trading in the morn of 12/4/17 saw world price reaching USD1277/oz. By coincident local gold price based on cimb sell MYR184.40 and buy MYR$179.20 quotes vindicated our decision to add to our gold holdings although the cash out gold price was not MYR5.00 above our then average cost of gold balance of MYR172.89 (Our last buy was at MYR181.10/gm). Our current average cost of gold balance is now MYR174.95/gm; thus we could consider purchasing when cimb buy quote reaches MYR180.00/gm. By the way, MYR5.00 is the spread between the sell and buy quotes.
All in all we have expended only 37% of our hold money for bespoke gold investing. The current USD1=MYR4.4860 is slightly weaker than the 4.4840 to the greenback on 27/3/17 when we last bought gold. Just happy that world gold price is up because of recent geopolitical tensions, albeit still in the USD1200 area.
There’s a pundit wanting to see a closing world price above USD1260/oz. We want to see a steady price pickup not purely based on safe haven demand.
Update: 17/4/17: See no wall but the upside bias horizon
On 14/4/17 USD1=MYR4.4960 meant a comparatively stronger Malaysian currency and was +89 basis points over the 22/11/16 exchange rate (nearly 1% stronger). Ceteris paribus it is better to buy when the local currency is comparatively stronger. Our 15/12/16 buy was based on +9 basis points; 13/4/17 buy was based on +44 basis points over the 22/11/16 exchange rate. The often referenced dates are as per Bespoke Investing feature #11. Read more at https://hopetributemalaysia.wordpress.com/2017/02/08/what-to-watch-in-2017-bespoke-gold-investing/
On 17/4/17 we bought 1 gm@MYR185.80 (cimb sell MYR185.80, sell MYR180.60) although based on our Bespoke investing norm the cash out price ought to be MYR182/gm (MYR5.00 above the average cost of MYR177.08/gm).
Will the impulsive buy be vindicated as the buy decision of Mar 27? It was a nutty wish to have at least 50% hold money in gold holdings in view of the prevailing upside bias due to geopolitical tensions. Circa MST 10am gold drifted down from USD1294.76 (when we purchased 1 gram), and touched USD1287.77 at about 2.30pm. The world gold price started to recover only after 3.15pm.
It was also to leverage on the comparatively stronger USD1=MYR4.4590 rate which was 82 basis points better than the 22/11/16 rate compared with the rate on the 13/4/17 buy transaction when it was only 44 basis points better. The forex on 14/4/17 was 89 basis points better but when world gold price drifted up after GMT 9 the Malaysian gold trading day had closed. Bespoke investing is certainly not an off-the-rack platform or program.
Update: 24/4/17: World gold price still above USD1265 per ounce.
The long and short of the final update to Bespoke Investing feature #13 is that after 12/4/17 world gold prices have not closed below USD1265 per ounce. The mild gold rally which started on that date ought to uphold albeit not a gold gush which will happen only when a new world order materializes.
Gold was about USD1271 on 24/4/17 Monday morning because stocks rallied – hurting safe-haven trades after polls showed Macron will win the final round of the French presidential election against Marine Le Pen in a May 7 runoff. Incidentally not many pundits at first took seriously Macron’s notion of getting to the second round as he was powered by a movement rather than a party, so an end to the anti-establishment phenomenon is still not a reality.
Local forex and gold quotes on line were not available (due to 24/4/17 being a bank holiday in Malaysia) and was some sort quirky for us because of the central focus of this update. Any “Buy” leverage on the comparatively stronger local currency still cannot compensate a world price dip. It’s of course advantageous when it’s Ceteris Paribus and our trajectory of weakening crude oil price since last Wednesday would weaken the Malaysian Ringgit. Crude oil recovered slightly at the material time to USD49.86/barrel.
See below the local gold quotes connected with the forex and world prices of gold. The EP (Equivalent Price per gram in MYR) was 176.65 on 22/11/16
In Bespoke Investing feature #11 we espoused that the EP value above the 22/11/16 base of MYR176.65 can be taken as a reference price upward bias threshold indicator. In addition we embraced the 12/1/17 MYR/USD=4.525 as the lower forex threshold to leverage on. Thus the 17/4/17 MYR/USD=4.4590 was a positive to buy local gold with a world price upward bias view. The recent 19/4 and 20/4 rates do reflect a weakening Malaysian Ringgit.
In this final update we emphasize the long term invocation of a China led reformed new order. On 19/4/17 the premium for gold bullion inside China dropped $6 per ounce above comparable London quotes. It was $3 below the average incentive to new Chinese imports since the state-backed Shanghai Gold Exchange launched its twice-daily benchmark price a year ago.
To gain market share in the fiercely competitive global marketplace for gold trading even the London Metal Exchange will need to bend to gold’s intrinsic value as the great equalizer of economic activity. Any rigging by the banks that set bullion prices will be lesser in significance. London’s daily gold price benchmark fix on 11/4/17 was about $12 under the spot price.
We shall be maintaining our position of 55% expended hold money on our gold holdings in the coming weeks. Till Bespoke Investing feature #14, Que Sera Sera for the running total of the lengths so long as we do not lose our shirts along the way.