One of the hardest things to do as investor is knowing whether or not to chase a trade. Ever since gold broke higher in 2024, if you have been waiting for it to get back to its 200 MDA to buy gold, then you would not have bought any. In the move from USD 3,300 to USD 5,080 is has not even touched the 50MDA.
I have owned gold as a reaction to US policy. First was the freezing of Russian reserves - which is my view would lead the Chinese to sell their US Treasuries. This would not be replaced with JGBs or Bunds, and the Chinese government is negative on crypto, leaving gold as the only alternative. So far the Chinese have only sold half their Treasuries, but with a large current account surplus, would need to be large buyers to offset the currency appreciation pressures.
So for me, gold was a reaction trade to something that happened back in 2022. I also thought there was risk that surging treasury yields could hold gold back - so have paired long gold with a short TLT trade. This has been good.
The obvious “reaction” to this trade would be for the US Federal Reserve to raise interest rates, and I am beginning to position for that - but this is how I think about markets. I am now trying to trade the “reaction” to another market action.
