Hedging gold and silver downside risk

[Martlet]

I think its quite possible to overthink these things.  Hedging against a medium term dip, when expecting a short term rise and long term bullish seems  to fall into this category.  ? Then again prehaps its just perception of hedging being complicated and access to the methods not readily available?

[Wonger]

For those interested silver hit a major support line at 13.11 hrs bst today at $16.15 this support line is going back to the december lows, its rallied to $16.325 this could have legs and indeed be the low for silver for a while, we shall soon see

[Wonger]

The corresponding major support line for gold golng back to the december lows is at $1235, it looks like this will be tested, if that doesnt hold up then there is no support and the december lows will be breached with $1000 providing only temporary relief before much lower prices  

[FoolzGold]

Sounds like you've got the future all mapped out there. While you're at it, would you mind sharing the winning numbers for next week's Euromillions draw?

[Wonger]

 FoolzGold, stack underwater is it? ?

[Sherabnamdhak]

So when would you buy Gold at $950 per oz. personally if you are discussing bullion that’s about the mark perhaps $900. If you are discussing numismatics then you have to judge the collectible value, that’s a whole different ball game.

[Wonger]

As already posted my longer term view is gold is going down to $600-700, silver $4-5, so i would not invest in physical of either above those levels unless fully hedged, shorter term view is that gold will drop to $1235-25 area and then rally to $1400, currently short but im a buyer at $1235-25 area

[Sherabnamdhak]

Interesting point. Are you still active in the market. 

[KDave]

Interesting perspective very refreshing. I am with you that metals are going to go down with the ship and I remember the tales of physical shortage of yesteryear. This is why I am still buying small amounts, I am not as sophisticated as you but instead keeping some dry to attempt to buy at lower prices.

My questions what time frame are you looking at in regard to the expected low in the metals. Do you have an approximate upside target from there or is it too early for that. Thanks. 

[Wonger]

Quick heads up, closed shorts at 1246 and now long as possible pattern completed, if so i expect we will rally quickly back above $1310 with target of $1400+, if we stay above $1246 fill your boots stackers ?     

[Sherabnamdhak]

Sorry was my last question stupid lol. 

[Wonger]

Silver shorts will get very nervous above $16.154 and gold shorts are already nervous that $1246 is holding up ?

[Wonger]

$1246 low being tested here, looking for it to hold up otherwise it will be a trip to $1225-35 area, silver broke slightly back above its longer term trendline Friday, but couldnt hold it, looking for a second attempt soon to get back above that will hold, buying when there crying springs to mind here   

[sleepyshpeey]

You hedge when you think the market is going down again. In order to hedge at the right time you need to know what the market will do, you need to earn back the fees. I have no clue what the silver market will do since its completely manipulated by paper silver. I don't that anyone knows what the silver price will do this year or next year. Prediction I saw in the past were more often wrong than right. In my view it's not wise to hedge if you have no clue what the price will do because you pay fees to hedge and risk that your paper claim is worth nothing (you don't have it you don't own it). I don't think I can outsmart the silver market so I just stack and see what my silver and gold is worth 40 years from now. 

[Wonger]

I should of corrected earlier posts, the major trendline for gold is at $1239, not $1235, its breached it this morning by touching $1238 buts its quickly regained above and rallied $11, im staying long down here still expecting the $1400+ for gold rally to appear, Thursdays FOMC minutes and Fridays Non Farm Payrolls will decide its fate

[Wonger]

Yes hedging does involve a small cost, im merely pointing out that it can be done quite easily and cheaply and reduces risk, not incresaes it, there are many stackers who now wish they were hedged with losses on their stacks for years providing no income and i fear it will become alot worse for them unless they hedge at $1400+ soon and just to remind everyone, the commercials are still holding huge long positions in 5, 10 and 30 year us treasuries and gold silver shorts are now getting smoked?

[sleepyshpeey]

1 hour ago, Wonger said:

Yes hedging does involve a small cost, im merely pointing out that it can be done quite easily and cheaply and reduces risk, not incresaes it, there are many stackers who now wish they were hedged with losses on their stacks for years providing no income and i fear it will become alot worse for them unless they hedge at $1400+ soon?

It's important to know your options, and making hedges can be a good thing. 

When you hedge with a low margin like 2% you lose in most cases and if you win the reward is small. I would recommend bigger marges if you really want to hedge and accept you won't profit from any price increase (say 15% to 20% to cover big losses). I wouldn't hedge on gold or silver because I fear there will come a time eventually that crashes the paper gold/silver market. 

Say you go long on silver with a 2% margin:

1. If silver goes down a lot you walk away and pay your margin of 2%  (you are not going to pay 10% over spot, you take your margin as loss)

2. If silver goes down between 0 and 2% you lose a part of your margin. (in your case between 0 and 980 pounds + 90 pounds)

3. If silver goes up more than 2% your trade partner walks away, you payed 90 pound fee and have to buy silver just like the rest of us. (you lose 90 pounds)

4. If silver goes up less than 2%  You win, you saved 0-980 pounds minus your 90 pound fee)

5. Possible alternative scenario: The paper gold/silver market crashes and you lose your margin. 

[Wonger]

sleepyshpee, im a little confused about your post as if you own £49250 of physical silver and you fear a fall in price you can hedge the entire risk on that stack until December for £90, your maximum loss cannot exceed £90 (in normal market conditions) and hence your insurance has cost just 0.20% of your stack value 

I apology if ive missed something in your post as the mother in law is round bashing my ear ? i think your getting margin and interest carry cost mixed up maybe?

[sleepyshpeey]

17 hours ago, Wonger said:

sleepyshpee, im a little confused about your post as if you own £49250 of physical silver and you fear a fall in price you can hedge the entire risk on that stack until December for £90, your maximum loss cannot exceed £90 (in normal market conditions) and hence your insurance has cost just 0.20% of your stack value 

I apology if ive missed something in your post as the mother in law is round bashing my ear ? i think your getting margin and interest carry cost mixed up maybe?

Yeah I was mixing a few things up. I'm very busy with work this week, and can't spare time to try to understand how it works and reply to you, sorry for this. I will in a few weeks maybe:)

[vand]

Good luck.. don't forget to set aside a few bucks for a new shirt when you're caught on the wrong side of the market and it rips you a new one.

[StackerCollector]

The one thing I can recommend, which I have done for a few years, is to buy silver at bargain prices. Quite often I got pre1964 US silver coins at and even below spot price from Ebay and coin dealers who maybe where in a tight spot and had to make some sales to cover their expenses. These were not single coins but packages/ a few dozen.

And for me it's: cost average effect! I never made a large order of thousands of euros. But I kept buying on a monthly basis and when silver went down I just purchased more.

When the silver ounce goes down to $12, which can happen, then I'll start to massively increase my stack. Because one fine day, silver spot will be in the hundreds?

[Wonger]

What if you massively increase your stack at $12 and it goes down to $4? 

[StackerCollector]

? Then I'll have to figure out a way to make more money and will keep buying at lower prices. Plus, I have set up a savings account years ago just for this scenario which I never touch!

[Wonger]

Have you any Bitcoin? I havent and may regret it, infact im leaning towards buying some, i can see it going way above £20k, but hmmm ?

[StackerCollector]

I only have some Ripple and I am holding on to those. But I am more into real tangible goods - precious metals and, in the future, land.