Search Results
32 results found.
Gold Gets Physical
by Ade Odunsi of AdvisorShares,
Its happening again the gold cost of carry as defined by the one month gold forward rate has swung sharply into negative territory. This means that an investor is able to earn a positive carry from owning gold. This is unusual for gold markets and a relatively rare occurrence the more common scenario is that because of the storage costs associated with gold, an investor would expect to have to pay a cost of carry to hold gold. Prior to the instance in July 2013, the last time that gold forward rates went negative was in November of 2008.
Portfolio Effects of Holding Gold in Yen Terms
by Ade Odunsi of AdvisorShares,
Last week in Gold in Yen Calm in the Eye if the Storm we focused on the factors behind the significant outperformance of gold priced in yen versus gold priced in dollars, identifying the strength of the dollar as the primary factor pushing down the price of gold in dollars. While on the currency side, the strength of dollar resulted in significant weakness in the YEN/USD FX rate.
Gold in Yen Calm in the Eye of a Storm
by Ade Odunsi of AdvisorShares,
Since the beginning of August there has been a striking divergence in the relative performance of gold priced in US dollars versus gold priced in yen. Gold in yen has outperformed its dollar cousin by just over 10% over a period of three months. In fact year-to-date gold priced in yen has returned +5.3% with a 10.7% annualized standard deviation while gold in dollars has returned -2.6% with a 12.5% annualized standard deviation.
How Exchange-Traded Futures Can Improve the Efficiency of Gold & Currency Linked ETFs
by Ade Odunsi of AdvisorShares,
With a number of gold and currency linked ETFs now using exchange traded futures to gain their gold and currency exposure versus the alternative of holding physical gold/hard foreign currency, we discuss below some of the key features of these futures markets which, in our view, mitigate most if not all of the concerns investor may have about these futures based ETPs.
Risk Aversion on the Rise Gold Back in Vogue
by Ade Odunsi of AdvisorShares,
In this weeks commentary we present a simple methodology for measuring the amount of risk aversion in gold markets. This measure of risk aversion (which we define below) compares the variability of observed gold prices versus the variability that can be implied from gold option prices.
Optimizing a Portfolio Allocation to Gold
by Ade Odunsi of AdvisorShares,
Gold continues to be an attractive asset class that many investors wish to hold in their portfolios primarily for its diversification benefits and defensive characteristics during periods of high risk aversion in global markets. And notably many investors gain their gold exposure via exchange traded products given the ease of access, liquidity and the transparency they offer, particularly to retail investors who historically faced numerous barriers to holding gold in their portfolios.
Bullish on Gold Priced in Euro Gold Priced in Dollars, Not So Much
by Ade Odunsi of AdvisorShares,
In this weeks discussion we revisit our earlier analysis looking at the relationship between the gold price and real interest rates. Over the last three months the gold price in dollar terms has fallen 9% moving briefly below $1,200 and naturally raising concerns amongst investors that this pull-back may extend as the dollar continues to strengthen against a broad basket of currencies.
Gold and US Monetary Policy
by Ade Odunsi of AdvisorShares,
In this weeks Gold Report we conduct a historical analysis of the impact of US monetary policy announcements on the price of gold in US dollars. Beginning with the Federal Reserves extra-ordinary 75 basis point Fed Funds rate cut in January 2008 and the most significant central bank policy announcements since, the analysis looks at the resulting reaction of the gold market and the US 10 year real yield over a three month period.
Gold for the Long Run
by Ade Odunsi of AdvisorShares,
We continue on the theme gold and the dollar but this week take a short look at their long-term relationship and relative movement over the last 40 years. In particular we focus on the period post the ending of the Bretton-Woods agreement by the Nixon administration in 1971 (the so-called Nixon Shock) which terminated dollar convertibility to gold and thus established the dollar as a fiat currency.
Conditions are right for the dollar to weigh on gold
by Ade Odunsi of AdvisorShares,
In last weeks Gold Report we looked at the historical relationship between the gold price in dollars and the value of the dollar, as measured by the Intercontinental Exchange US dollar trade weighted index (USDX) and found a strong inverse relationship between the two a strong dollar has historically tended to be associated with a weak gold price.
Gold in the Time of the US Dollar
by Ade Odunsi of AdvisorShares,
Continuing on the theme of the impact that strength in the US dollar might have on the price of gold in dollars, in this weeks discussion we investigate the close historical relationship between the price of gold expressed in dollars and the value of the dollar.
Gold: Keeping Calm And Carrying On
by Ade Odunsi of AdvisorShares,
We continue from last weeks discussion on the role of interest rates in the gold market by looking at trends in the cost of carry of gold as priced in dollars, euro, yen and pounds. By way of a brief primer we define the cost of carry of gold in dollars as the London Bullion Markets Association 3 month Gold Forward Offered Rate (GOFO). GOFO is published every day by the LBMA and is calculated as US dollar Libor minus the gold lease rate.
Gold – Keeping it Real
by Ade Odunsi of AdvisorShares,
One of our favorite measures to monitor in relation to the gold market has been the relationship between the gold price expressed in US dollars and the US 10 year real yield with the real yield being the nominal yield on a government bond adjusted for inflation expectations. Over the long term studies have shown that gold has a much stronger relationship with real interest rates versus nominal interest rates.
How to Hold Gold Financed in Euro
by Ade Odunsi of AdvisorShares,
We are often asked how US based investors can construct a long position in gold that is financed in a foreign. In the discussion below we show the components of trade that gives an investor long exposure to gold that is financed with European euro. A useful way to understand how the portfolio would be constructed is to look at the cash flows associated with a gold transaction. Looking first at a gold transaction that is funded in dollars we show a diagram of the associated cash flows.
Which Denomination of Gold is Your Parachute?
by Ade Odunsi of AdvisorShares,
We continue on the theme of gold as a defensive asset in this weeks discussion by examining the performance of gold priced in dollars (USD), European euro, British pound and Japanese yen through a number of different periods which were characterized by a sudden rise in investor risk aversion.
What Are Gold Option Markets Telling Us?
by Ade Odunsi of AdvisorShares,
It is often a valuable exercise for investors to monitor the option market associated with the cash market as option markets may carry useful information about how the balance of supply and demand in the cash market is evolving over time. In this weeks note we review the history since January 2006 from when we have available data, of the markets relative preference to own gold calls (seeking to profit from rising gold prices) versus owning gold puts (seeking to profit from falling gold prices) and how this has related to the price action in the gold cash market.
Why We Favor Owning Gold in Euro Terms
by Ade Odunsi of AdvisorShares,
In this discussion piece we discuss the rationale for why investors looking to buy gold as a defensive asset during these uncertain times should consider buying gold in euro terms. When an investor buys gold in dollars they are expressing the view that they expect the price of gold to increase relative to the dollar. Similarly when an investor buys gold in euro, they express the view that they expect the value of gold to increase relative to the euro.
A Brief Note on Gold as a Defensive Asset
by Ade Odunsi of AdvisorShares,
In previous notes we have written about the defensive nature of gold relative to the broad equity market. Much of the discussion has focused on the low correlation and beta of gold versus equity markets. In fact, the ten year monthly returns of gold (priced in US dollar terms) and the S&P 500 show a correlation of zero with the beta of monthly gold returns versus S&P 500 returns also being essentially zero (0.1).
Some Gold Indicators to Watch
by Ade Odunsi of AdvisorShares,
With recent sharp falls in the price volatility of a wide range of assets including gold and the markets apparent insensitivity to macroeconomic news, many gold investors have shifted focus to some of the more widely watched gold technical indicators to see if they provide insight into the future direction of the gold price. In this weeks short discussion piece we look at the Gold Forward Offered Rate (GOFO), the US inflation adjusted (real) interest rate and the Gold/S&P500 ratio.
Trends in Gold Option Volatility
by Ade Odunsi of AdvisorShares,
Liquidity in gold option trading has risen significantly over the last five years. Using the COMEX 100 ounce gold option contract as a proxy for the market, Year-to-Date Average Daily Volume has risen from approximately 30,000 contracts in May 2009 to 70,000 contracts (~ 217 metric tonnes) in May 2014. This period of growth in option use has coincided with the rapid rise in the gold price after the 2008 credit crisis and perhaps reflected a need from the growing number of gold investors for derivative contracts with which they could manage the risks inherent in their gold exposure.
Examining the Relationship between Gold and the Commodity Currencies
by Ade Odunsi of AdvisorShares,
In this weeks commentary we examine the performance of the price of gold expressed in the currencies of the worlds largest gold producing countries. In a number of previous commentaries we have investigated the currency like nature of gold investing.
Gold and Portfolio Efficiency
by Ade Odunsi of AdvisorShares,
In previous commentaries we have discussed the benefits of using a diversified financing currency approach for investing in gold by which we mean using two or more currencies (rather than just the US dollar) to make gold purchases. The example we have used to demonstrate the approach was to construct a time series of the price of gold purchased with an equal weighted basket of dollars, euro, yen and pound.
Does Negative GOFO Signal Higher Prices for Gold Financed in Currencies?
by Ade Odunsi of AdvisorShares,
In recent weeks a number of gold commentators have once again highlighted the strong inverse relationship over the last year between the price of gold in dollar terms and the London Bullion Market Association Gold Forward Offered Rate "GOFO". Since the first week of July 2013 when the price of gold bounced decisively, the GOFO rate has fairly reliably predicted the future direction of the gold price.
Gold as a Defensive Asset
by Ade Odunsi of AdvisorShares,
In our previous commentary ?Gold and the US dollar ? a love hate relationship? we used a normalized time series of the price of gold expressed in US dollars and an index representative of the value of the US dollar on currency markets to show the inherent relationship between the price of gold and the financing currency. As the financing currency strengthens on currency markets, one would expect the price of gold expressed in that currency to fall.
Gold - Managing the Downside
by Ade Odunsi of AdvisorShares,
We get a lot of questions regarding the impact on portfolio risk of having an allocation to gold. In particular given the status of gold as a safe haven asset, focus has centered on its performance during periods of extreme market stress ? what is the downside to gold during periods of high risk aversion? The high level answer to this question is that the financing currency used to make the gold purchase matters and as is often the case when discussing portfolio construction, ?you ask a simple question, you get a complex answer?.
Understanding Gold Cost of Carry in Various Currencies
by Ade Odunsi of AdvisorShares,
Under normal market conditions, the term structure for the price of gold for delivery at increasing maturities (the term structure) exhibits an upward sloping curve. In futures market terminology the term structure is said to be in contango and implies that the price of gold for spot delivery is lower than the price of gold for future delivery.
Assessing the Liquidity of Futures Backed Gold ETFs
by Ade Odunsi of AdvisorShares,
Most gold ETFs that use futures to gain gold exposure will use the COMEX 100 ounce gold futures contract which is generally regarded as the most liquid gold futures contract in the world. The Commodity Exchange (COMEX) is a commodity exchange owned by the Chicago Mercantile Exchange (CME). As part of its gold exchange the COMEX offers warehousing for its members.
Assessing the Impact of Financing Currency on Gold Price Performance
by Ade Odunsi of AdvisorShares,
In our weekly commentary we follow up our discussion from last week with a brief overview of the impact on performance of diversifying the financing currencies used to make gold purchases. We also compare "Gold/Basket" performance versus gold financed with a number of different, single currencies. For the purposes of this analysis we define the Gold Basket as a gold financed with an equally weighted basket of four currencies, the dollar, euro, yen and pound; the portfolio is also assumed to be rebalanced weekly.
"Purer" Gold Exposure for the Long Term Investor
by Ade Odunsi of AdvisorShares,
This week we dive into a discussion on the impact of diversifying the financing currencies used to purchase gold. At a high level the primary objective of wanting to diversify financing currencies is to gain a ?purer? form of exposure to gold by using a number of different currencies (rather than a single currency) to make gold purchases. For example an investor could decide to use a combination of euro, yen, pounds and dollars to make a purchase.
The Differences Between Gold Financed vs Gold Hedged Transaction
by Ade Odunsi of AdvisorShares,
Following on from our previous discussion piece on commodity fund taxation, this week we discuss the differences between a gold position financed in a (given) currency versus a gold position hedged into a currency. Broadly speaking the objective of a "currency financed" transaction is to give an investor the flexibility to choose the currency with which gold purchases are made.
Commodity Fund Taxation
by Ade Odunsi of AdvisorShares,
As markets, investment products and the manner in which clients access information have all evolved, advisors are answering more and more questions about how to invest in commodities which means advisors have to learn about the various taxation structures of the many different types of commodity exchange traded products.
32 results found.
