Hedging gold and silver downside risk

[Wonger]

Yep, cash transaction limits now in euro are germany 5k, spain & france 1k, greece 0.5k and ecb last november proposing to remove deposit insurance, tick tock to cashless society then boom, hmmm now where did i bury my pm's? ?  

[Sherabnamdhak]

Anything from BOE. 

[Wonger]

Nothing as yet, will post any info, as far as i know were under the european deposit scheme euro 100k = fca £85k same scheme, but the banking regs already allow deposit bail inns for a few years now, confiscate your deposit and maybe give you worthless shares in exchange if your lucky, ecb proposed that a competent authority will have to give you access to your savings within 5 working days for day to day living expenses (same as greece) ?  

[vand]

On 04/07/2018 at 10:58, Wonger said:

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

 

I don't know why you think silver is special.

Any asset can fall to a lower price than you bought it. If you're not very comfortable with that then you absolutely shouldn't be buying it.

 

The simple fact is that silver has NOT made a new low since late 2015. Until that happens we are at worst trending sideways, and it is no more appropriate to suggest $4 than it is to suggest $400. The question should be what will you do if you hedge and the price goes up? If and when that happens you are missing out on the very reason why you are buying it in the first place.

[Wonger]

I didnt say silver is special, i agree any asset can rise or fall, but its very appropriate for a qualified technical analysis trader with 20+ years experience to predict a future price by chart analysis and that future price is $4-$6 for silver, if it technically breaks out to the upside, when the hedge is in place, its simply removed, the risk is in buying thinking it cant go much lower, because it certainly can and probably will, but for now it looks like we have a large rally coming, so plenty of time to hedge later before the big plunge

[orion]

On 26/06/2018 at 16:31, BackyardBullion said:

Surely if financial systems start collapsing gold and silver prices will increase as the value of the dollar weakens and inflates. Also - wouldn't investors flock to precious metals as a safe haven rather than cash, stocks and government bonds? Surly this would increase the prices of metals not decrease them!?

This is what I thought would happy in the last financial crisis but the exact opposite occured. Liquidity driven USD rally takes everything down. 

[orion]

On 05/07/2018 at 23:46, Wonger said:

I didnt say silver is special, i agree any asset can rise or fall, but its very appropriate for a qualified technical analysis trader with 20+ years experience to predict a future price by chart analysis and that future price is $4-$6 for silver, if it technically breaks out to the upside, when the hedge is in place, its simply removed, the risk is in buying thinking it cant go much lower, because it certainly can and probably will, but for now it looks like we have a large rally coming, so plenty of time to hedge later before the big plunge

When is this large rally you predict and when is this big plunge? It’s very easy to make these air predictions without a timeline. Define “plenty” of time otherwise it’s pretty useless.

[Wonger]

As ive stated above already, my gold target is $1400+ before the big plunge, if you read the thread you would already be able to answer your own question instead of negatively attacking my view because it doesnt suit you ?

 

[orion]

1400 when? In the next decade? 

[Investack]

On 26/06/2018 at 03:48, vand said:

You are assuming that the USD is the automatic safe-haven of choice, but what happens when the crisis is a loss of confidence in the Dollar itself? Last time I checked America's debt isn't getting any smaller.

All fiat monetary systems are ultimately doomed to failure, and the current system is very long in the tooth. The next crisis will be a systemic failure of the petrodollar system that has underpinned the global financial system for the last 45 years.

 

Agree that we shouldn’t knee jerk to USD being the safe haven, but I would suggest one must look at things in a more global view.   With Brexit, Italy, and Spain.... there’s no shortage of political pressure on the Euro.  The other traditional option, JPY is in an even worse debt position than US but in a double whammy due to demographics.   My argument is not that the US is in great shape, but rather that one must compare it to the other options as well.  

[vand]

On 15/07/2018 at 01:12, Investack said:

 

Agree that we shouldn’t knee jerk to USD being the safe haven, but I would suggest one must look at things in a more global view.   With Brexit, Italy, and Spain.... there’s no shortage of political pressure on the Euro.  The other traditional option, JPY is in an even worse debt position than US but in a double whammy due to demographics.   My argument is not that the US is in great shape, but rather that one must compare it to the other options as well.  

Yes, true. That is why the next crisis will turn established conventions on their head. People who assume that one of the traditional hard currencies will be the go-to places are working under the current petro-dollar paradigm. What happens when there is a paradigm change? When people want a hard asset in their hand, not the promise of one in the future? Those traditionally regarded safe havens will themselves come under scrutiny. Everything people think they know will be turned on its head. 

[*tada*]

If you are asking for a normal hedge for the metals it will be extremely expensive (in the market certainty is always expensive). You could of course do a put spread (on futures options which are very efficient) to reduce the cost and increase leverage. If you believe gold is at/close to its bottom (I don't think so) you probably can do a riskier three way and finance your put spread with option writing. Unlike silver, gold crash is very very rare and a $30-$40 move in one day is considered huge. When you get close to $1000 range it will be much closer to the mining cost so there will be upward convexity.

If you are asking for a crash hedge for the metal with low probability of making a killing if the underlying crashes and high probability of losing a little (still much less than straight puts of course), one exists for gold based on the different option skews of multiple instruments. But then it's a totally different story and I believe you want absolute certainty.

Many people sell options to gain a bit income on gold. Personally I don't like it because you don't want to be picking peanuts in a landmine, for lack of a better analogy.