Talk me out of my long gold position (sorry long post)

Discussion in 'Commodity Futures' started by taojaxx, Mar 17, 2020.

  1. taojaxx


    So here’s the thing: sometime in early 2020, I figured that the low level of interest rates and the extended growth period that we had experienced meant that the Fed would have to resort to extraordinary means to fight any kind of slowdown.

    Basically that the Fed would have to replay the 2008 scenario except that it would be from an already bloated balance sheet position.

    This clearly favored gold. No reference to any virus at that time: holding horizon was several months at least.

    There’s nothing particularly smart in that line of reasoning and I was pretty late to the party as quite a few hedgies have incepted long gold position for that exact reason way back mid-2019, at much better prices.

    Plan was to use a trend following process, so basically buy more as prices went up (positive feedback kind of story).

    Enter Coronavirus and Fed rate cuts. Scenario played out well as Gold prices move up. Position builds up as prices move up.

    Everything looks fine and dandy until-you guess it-major dash for cash. Gold retreats big time (back to new year’s level, so not as bad as S&P). Position gets waaay underwater. I believe two reasons: Some hedgies get “executed” out of all positions (Bridgewater told us) and I’m suspecting some central banks might also need cash (Turkey at war, Iran Covid19).

    Now the question is, what next?

    I’m thinking to tough it out as, if what I believe is true (that’s a big if lol) said hedgies and Mid East central banks are forced sellers, so this does not invalidate the original thesis.

    Last crash, gold got crushed in the dash for cash as well. The Fed’s job in such dire circumstances is to make cash less attractive, which I expect them to do again, benefiting gold.

    Also, leverage is low so I have staying power. But I don’t want to persist in a dead end. Ready to admit I got it wrong if counter arguments are sound.

    So, what y’all think? Should I stay or should I go?
    Last edited: Mar 17, 2020
  2. Gold for the long haul...inflationary monetary policy is gonna continue at an increased rate...
    kmiklas and Tsing Tao like this.
  3. RedDuke


    If you had the exit planned before you got it, make sure to follow the plan.
  4. clacy


    Long term, gold is a good hold, IMO
    kmiklas likes this.
  5. Here4money


  6. Nobert


    Hey tao,

    when the last time i was in the trade, prior to opening it, i was 100% sure about the success of it. The equity went up 40% in few weeks, still, eventually i took 5% loss on that position
    and 5 lessons for each %.

    What do i mean by that, - didn't needed anyone, to ,,talk me out of that idea'', there was no second thoughts about it.

    Thus, what's the point of staying in the trade, that you don't like - in the first place... o_O ?

    Close it, find something that you're comfortable with, or, even enjoy being in.
    (if one can say so)
    Or reduce the size dramatically.

    Nothing attractive ? - not a problem, stay flat, until opportunities shows up.
    Last edited: Mar 17, 2020
    murray t turtle likes this.
  7. taojaxx


    I see.
    I'm a bit different as I am never ever 100% sure of anything market-wise. That's the thing that kept me alive and trading: remain humble. So I'm always eager to listen to contrary opinions. Hence my post.
    kmiklas and Nobert like this.
  8. Sorry, I can't think of any reason to talk you out of your gold position right now.
    taojaxx likes this.
  9. Arnie


    Just hope you don't get a margin call like this guy...
    donnap, Nobert and Ayn Rand like this.
  10. taojaxx


    Can happen to anybody. I size up my positions to avoid this.
    #10     Mar 17, 2020
    murray t turtle likes this.