Upload
abdulrahman-ghalayini
View
145
Download
0
Tags:
Embed Size (px)
Citation preview
Episode IIIITechniques of Investing
inGold
Friday, the 15th of May 2015
Commodity?
• Commodity is a marketable item (goods or services) produced to satisfy wants / needs
• Commodities can be:
• basic resources
• agricultural products
• Commodities classification
• soft commodities (grown): tea, coffee beans, soybeans , rice and wheat.
• hard commodities (mined): iron ore, crude oil, coal, salt, sugar, aluminium, copper, gold, silver, palladium, and platinum.
Physical Gold
Production Cycle
Production CyclePhase I
• Miners dig silver and gold ore from the ground and sell mix ore and dore metal bars to refiners below spot/current price.
Production CyclePhase II
• Refiners melt and purify the ore/dore bars into fine bullion, which are then sold to mints at a price very close to spot/current price
Production CyclePhase III
• Mints strike bullion bars/rounds/coins and sell them to wholesale/retail dealers at prices just above spot/current price.
• Dealers sell them to public at their price discretion.
Precious MetalsMarkets
Gold Markets
Gold Markets
• Japan - Tokyo gold market (00:00 GMT - 6:30 GMT) then (8:00 GMT - 14:00 GMT)
• China - Shanghai gold market (1:00 GMT - 3:30 GMT) then (5:30 GMT - 7:00 GMT)
• Hong Kong gold market (1:00 GMT - 4:30 GMT) then (6:30 GMT - 9:00 GMT)
• UK - London gold market (8:00 GMT - 17:00 GMT)
• Indonesia - Jakarta gold market (2:30 GMT - 10:30 GMT)
• United Arab Emirates - Dubai gold market (4:30 GMT - 7:30 GMT)
• India - Mumbai gold market (4:30 GMT - 18:00 GMT)
Gold Markets
• Pakistan - Islamabad gold market (5:00 GMT - 13:00 GMT)
• Turkey - Istanbul gold market (7:45 GMT - 15:30 GMT) then (15:45 GMT - 7:40 GMT)
• UK - London gold market (8:00 GMT - 17:00 GMT)
• Brazil - Sao Paulo gold market (13:00 GMT - 20:00 GMT) then (20:45 GMT - 22:00 GMT)
• US-New York gold market (13:20 GMT - 18:30 GMT)
Gold Prices• Driven by supply and demand, and speculation.
• Influenced by:
• central banks announcements and actions,
• reaction to results of economic indicators,
• hedging and stop-loss/take-profit orders,
• industrial demand,
• short selling by speculators,
• gold recycling,
• political instability, and
• national emergency.
Pricing inOther Currencies
USD Indicator EUR Price inEUR
Indicator JPY Price inJPY
Indicator
4/17/15 $1,198.60
$1.0807 €1,109.10
¥118.920
¥142,538
4/20/15 $1,204.40
0.484% $1.0737 €1,121.73
1.139% ¥119.200
¥143,564
0.720%
4/21/15 $1,195.80
(0.714%) $1.0736 €1,113.82
(0.705%) ¥119.670
¥143,101
(0.323%)
4/22/15 $1,202.20
0.535% $1.0727 €1,120.72
0.620% ¥119.920
¥144,168
0.745%
4/23/15 $1,186.90
(1.273%) $1.0826 €1,096.34
(2.175%) ¥119.580
¥141,930
(1.553%)
4/24/15 $1,193.00
0.514% $1.0874 €1,097.11
0.070% ¥118.980
¥141,943
0.010%
Pricing inOther Currencies
USD Indicator EUR Price inEUR
Indicator JPY Price inJPY
Indicator
5/8/15 $1,188.90
$1.1204 €1,061.14
¥119.810
¥142,442
5/11/15 $1,183.00
(0.496%) $1.1155 €1,060.51
(0.059%) ¥120.080
¥142,055
(0.272%)
5/12/15 $1,192.40
0.795% $1.1214 €1,063.31
0.264% ¥119.860
¥142,921
0.610%
5/13/15 $1,218.20
2.164% $1.1358 €1,072.55
0.868% ¥119.160
¥145,161
1.567%
5/14/15 $1,225.20
0.575% $1.1402 €1,074.55
0.187% ¥119.170
¥146,007
0.583%
5/15/15 $1,214.70
(0.857%) $1.1362 €1,069.09
(0.508%) ¥119.860
¥145,594
(0.283%)
Investor?
• to deploy money, by purchase or expenditure, in something that can offer economical benefit as income or appreciation in value.
• to use money in accumulating assets.
• to devote time and talent in order to achieve economical goal.
Behaviour ofAccount Holders
• Margin Account holders:
• They are Trend Followers
• They increase buying as market goes up and increase selling with the down trend
• Cash Account holders:
• They go opposite of market trend
• They increase selling as market goes up and increase buying as it falls
Infinity and Zero
• Infinity does not exist
• Zero does not exist
Spot Price• Spot Price / Current Price is the benchmark price at which
physical gold/silver can be sold or bought at specified time and place.
• This Benchmark Price is calculated according to the most recent average bid/ask prices by traders
• Factors that affect the Benchmark Price:
• bid/ask prices
• fixing prices
• trades volume
• political instability
• Central Banks actions and announcements
• supply and demand of physical stock
Spread
• The difference between the bid and ask price
• bid price is the current highest price at which you could sell
• ask price is the current lowest price at which you could buy
• Spread is affected by:
• supply
• demand
• trading volume
Pricing Equation
• Each product is priced according to below equation:
• Spot/Current Price x Fineness of the Product x Gross Weight of the Product
• On physical redemption, the buyer will pay the premium
Overnight SWAPInterest
• In the world of CFD (Contract For Difference) the overnight swap interest rate is the interest rate (charge) at which a depository institution lends quantity of a particular commodity to another depository institution.
Unrealised / RealisedLoss/Profit
• Unrealised Loss is the loss that results from holding onto a position after the price has dropped from the open price.
• Unrealised Profit/Gain is the gain that results from a profitable position that has yet to be cashed in.
• Realised Loss is when a losing position is closed for loss.
• Realised Profit/Gain is when a losing position is closed for profit.
Investing
Techniques of
Pivot Point• Three prices of previous day: Highest Price, Lowest Price and
Closing Price
• Pivot Point:
• Technical Analysis Indicator used to determine the overall trend of the market.
• Simply the average of the high, low and closing prices from the previous trading day.
Pivot Point
• Pivot Point Formulas: Classic, Fibonacci, Camarilla, and Woodie’s
• Fibonacci Formula:
• Pivot Point = (Highest Price + Lowest Price + Closing Price) / 3
• Support 1 = Pivot - 0.382 x (Highest Price - Lowest Price)
• Support II = Pivot - 0.618 x (Highest Price - Lowest Price)
• Support III = Pivot - 1 x (Highest Price - Lowest Price)
Support / ResistanceLevels
• Resistance is an upper limit of price movement in which metal’s price tends to stay.
• The price at which buyers jump in to purchase metals, establishing a floor beneath which it's difficult for the price to fall.
Tips
• Follow a standardised Trade Size.
• Maintain an acceptable profit margin.
• Keep a price gap between two consecutive orders of 0.80% of profit margin.
AcceptableProfit Margin
• Acceptable profit margin for each open trade:
• Gold Ounce: TP (Take Profit) to be 0.40% of the open price.
• Silver Kilo: TP (Take Profit) to be 1.20% of the open price.
Distribution of OrdersPlace orders on or around the daily three support prices
Go Fishing
• Determine the 3 Price Support-Levels for each Product
• Place buy orders around each Price Support-Level
First Year Objectives• Calculate acceptable Profit Margin that covers commission of
open trades.
• Cover Average Unrealised Loss of open trades with Realised Profit.
• Build up capital from Realised Profit that covers the value of all open trades.
RealisedProfit
AverageUnrealised Loss
Average Value ofOpen Trades
Free Stock
RedemptionPhysical Products
• Rule of thumb says to have 8 to 10% of total wealth in precious metals
• Accumulate gradually your free stock in physical form
Real Case
Example
Pivot Open High S1 S2 S3 Low Closing
04/17/15 $1,198.60
$1,207.80
$1,197.00
$1,203.10
04/20/15 $1,202.63
$1,204.40
$1,209.00
$1,198.51
$1,195.96
$1,191.83
$1,190.80
$1,193.70
04/21/15 $1,197.83
$1,195.80
$1,203.70
$1,190.88
$1,186.59
$1,179.63
$1,192.50
$1,203.10
04/22/15 $1,199.77
$1,202.20
$1,204.40
$1,195.49
$1,192.85
$1,188.57
$1,185.00
$1,186.90
04/23/15 $1,192.10
$1,186.90
$1,197.40
$1,184.69
$1,180.11
$1,172.70
$1,183.60
$1,194.30
04/24/15 $1,191.77
$1,193.00
$1,195.40
$1,186.50
$1,183.24
$1,177.97
$1,174.10
$1,175.00
Gold Prices (Fibonacci)
Pivot Open High S1 S2 S3 Low Closing
04/24/15 $1,191.77
$1,193.00
$1,195.40
$1,186.50
$1,183.24
$1,177.97
$1,174.10
$1,175.00
04/27/15 $1,181.50
$1,179.30
$1,206.70
$1,173.36
$1,168.34
$1,160.20
$1,177.60
$1,203.20
04/28/15 $1,195.83
$1,201.60
$1,214.90
$1,184.72
$1,177.85
$1,166.73
$1,198.60
$1,213.90
04/29/15 $1,209.13
$1,211.40
$1,213.50
$1,202.91
$1,199.06
$1,192.83
$1,200.70
$1,210.00
04/30/15 $1,208.07
$1,204.50
$1,207.40
$1,203.18
$1,200.16
$1,195.27
$1,176.00
$1,182.40
05/01/15 $1,188.60
$1,183.70
$1,184.40
$1,176.61
$1,169.19
$1,157.20
$1,168.40
$1,174.50
Gold Prices (Fibonacci)
Pivot Open High S1 S2 S3 Low Closing
05/01/15 $1,188.60
$1,183.70
$1,184.40
$1,176.61
$1,169.19
$1,157.20
$1,168.40
$1,174.50
05/04/15 $1,175.77
$1,176.60
$1,192.10
$1,169.65
$1,165.88
$1,159.77
$1,176.60
$1,186.80
05/05/15 $1,185.17
$1,187.50
$1,199.30
$1,179.25
$1,175.59
$1,169.67
$1,184.90
$1,193.20
05/06/15 $1,192.47
$1,192.50
$1,196.90
$1,186.97
$1,183.57
$1,178.07
$1,187.40
$1,190.30
05/07/15 $1,191.53
$1,191.30
$1,192.00
$1,187.90
$1,185.66
$1,182.03
$1,177.90
$1,182.20
05/08/15 $1,184.03
$1,183.70
$1,193.00
$1,178.65
$1,175.32
$1,169.93
$1,180.50
$1,188.90
Gold Prices (Fibonacci)
Silver Prices (Fibonacci)
Pivot Open High S1 S2 S3 Low Closing
04/17/15
$524.28 $531.67 $522.02 $523.25
04/20/15
$525.65 $524.44 $526.69 $521.96 $519.68 $516.00 $510.13 $512.19
04/21/15
$516.34 $513.67 $520.90 $510.01 $506.10 $499.78 $511.57 $516.01
04/22/15
$516.16 $514.95 $518.01 $512.60 $510.39 $506.83 $504.50 $509.20
04/23/15
$510.57 $507.39 $513.02 $505.41 $502.22 $497.06 $506.11 $510.32
04/24/15
$509.82 $510.61 $512.06 $507.18 $505.55 $502.91 $501.45 $504.18
Silver Prices (Fibonacci)
Pivot Open High S1 S2 S3 Low Closing
04/24/15
$509.82 $510.61 $512.06 $507.18 $505.55 $502.91 $501.45 $504.18
04/27/15
$505.90 $506.11 $530.22 $501.84 $499.34 $495.29 $505.47 $528.58
04/28/15
$521.42 $527.65 $536.98 $511.97 $506.13 $496.67 $524.92 $534.73
04/29/15
$532.21 $534.40 $537.78 $527.60 $524.76 $520.15 $527.81 $537.04
04/30/15
$534.21 $532.96 $537.94 $530.40 $528.05 $524.24 $508.04 $519.39
05/01/15
$521.79 $519.13 $522.83 $510.37 $503.31 $491.89 $511.10 $518.81
Silver Prices (Fibonacci)
Pivot Open High S1 S2 S3 Low Closing
05/01/15
$521.79 $519.13 $522.83 $510.37 $503.31 $491.89 $511.10 $518.81
05/04/15
$517.58 $518.65 $539.07 $513.10 $510.33 $505.85 $518.49 $528.65
05/05/15
$528.74 $527.33 $537.14 $520.88 $516.02 $508.16 $525.56 $533.09
05/06/15
$531.93 $531.83 $535.37 $527.51 $524.77 $520.35 $526.85 $530.74
05/07/15
$530.99 $531.67 $532.32 $527.73 $525.72 $522.47 $519.61 $524.02
05/08/15
$525.32 $524.28 $532.32 $520.46 $517.46 $512.61 $522.83 $529.42
Recommendations
Liquidation Level• Calculate the Equity = Account Balance - Unrealised Loss + Unrealised Profit
• Determine the Quantity of Each Product with Open Trades
• Find out the Net Value of Each Product with Open Trades: Current Price of the Product x Quantity of Each Product with Open Trades
• Make summation of all Net Values to come to Total Net Value of all Open Trades
• Calculate the Share of Each Net Value of Total Net Value: Each Net Value / Total Net Value
• Liquidation Price of Each Product will be: Current Price - (Share of Each Net Value x Equity / Quantity of All Open Trades)
• Investor NOT a Speculator
• Medium to Long Term Investor
• The focus is on Overall Return of a portfolio
• Holding time is from several months to several years
• Physical Market not Financial Market
Stop-Loss Orders
Falling Knife
• Precious Metal experiencing a rapid drop.
• Do not try to catch a price while dropping.
• Those precious metals are safe to pick up after they hit the ground.
• Find the following Price Support Level.
Things to remember!