Hedging and precious metals.

I have always liked hedging. Why? Because there are very few absolutes in this world. Anything is possible and we can only work on probabilities.  So, plans which do not take into consideration how things might go awry are not sound ones. Even with hedging and contingency plans in place, we might still end up with the shorter end of the stick sometimes. Well, the Chinese has a saying: "Humans plan but the Heavens fulfill."  Sometimes, things do go wrong.  Do what we can to reduce risks but we cannot eliminate risks.

My greatest losses in investments usually resulted from not taking enough precautionary measures to reduce risks. Sometimes, I just threw caution to the wind and went with my heart and, in most such instances, ended up with a broken heart and a thinner wallet. Actually, the pain from such experiences is good in a perverse way because I would then go back to basics and become very cautious again. This is what being human is about, perhaps.

Gold has hit a new record high of US$ 1,258 an ounce.  I have talked about buying physical gold as a hedge against all other forms of investments and against fiat currencies for some time now.  However, with gold's price rising higher and higher, silver is looking more and more attractive.

On 7 February, I blogged about how silver offered more value than gold. I said "Silver is currently trading at the higher end of the Gold:Silver ratio since 1980. Silver is now US$15.15/oz while gold is US$ 1,052.20/oz. This gives us a ratio of 69.45 to 1. This is closer to the historical high of 99.8 to 1. So, there seems to be some truth in the claim that silver is undervalued now and that it is a laggard in the realm of precious metals or it could also mean that gold is simply too expensive. Some hedging might not be a bad idea."

At that time, a reader mentioned that it might be better to wait for US$12 to US$13 an ounce before accumulating silver and my reply was "Yes, I saw the head and shoulders pattern and the neckline broken. There is support at US$15. This, however, was violated recently as price dipped below US$15 for a while but recovered. I see support at US$14 as well. US$12-13? Possible, of course.

 "But with limited downside compared to the potential upside, I prefer to average in slowly. After all, TA shows where the supports are but it does not mean that the supports will be hit. I will buy some at current price level and if it weakens, I will accumulate. I believe in hedging."
 
Anyone who went ahead and started a Silver Savings Account with UOB back in February then would be in the money today. 

Now, with gold at US$ 1,258 an ounce and silver at US$ 19.17 an ounce, one ounce of gold would buy you 65.62 ounces of silver.  Compared to 7 February when one ounce of gold could have bought you 69.45 ounces of silver, the rate at which the price of silver is rising since then is faster than gold's.  If we believe in charting, silver's longer term trend is still up and I would buy more on weakness.

Related post:
Gold at US$1,210 an ounce.

Golden Agriculture: Resistance remains at 55c.

55c is still the resistance to watch.  Volume is drying up as price might have peaked for now. We see a negative divergence between price and volume. Immediate support is at 51.5c, as provided by the gently rising 200dMA. 

The declining 50dMA seems set to form a dead cross with the flat 100dMA in the next session. This might exert some bearish pressure on the share price. The MACD is rising but is still in negative territory and the recent recovery in price might turn out to be just a rebound. 

The MFI has declined but it remains to be seen if it could bounce off its own uptrend support.  If it could, it would suggest that positive buying momentum is still alive which provides hope for bulls here.

Personally, I would wait for a test of support at 51.5c if I really want to have a long position in this counter as its technicals are not particularly strong at the moment. With CPO price firmly in a downtrend, neither are its fundamentals.

Asian plantation stocks, including those in Singapore, lack catalysts to head higher over next 12 months as industry fundamentals not supportive, says Macquarie, according to Dow Jones.

 Macquarie says CPO prices may face pressure given record soybean inventories (palm oil is substitute for soybean oil), narrow price discount between CPO and soy oil, increased CPO inventories due to seasonal recovery in production.

Asian plantation stocks lack catalysts, says Macquarie
Friday, 18 June 2010

© 2010 - The Edge Singapore

Golden Agri down 0.9%; China buy may be priced in
Friday, 18 June 2010

© 2010 - The Edge Singapore

SPH: Another pleasant surprise.

SPH has delivered another pleasant surprise today. Volume expanded and its share price closed at $3.88.  My overnight sell queues at $3.82 and $3.88 were both done today and made me some pocket money.

617 lots were bought up at $3.88 at 5.05pm, up 4c from $3.84 when the market closed at 5pm.  Some people were really keen to lay their hands on some SPH shares today.

We have two white candles in a row and they are without any top wicks.  Bullish.  Volume, however, is not too impressive. MFI rose and has peeked above 50%.  OBV is rising gently.  The MACD is pulling away upwards from the signal line and if the price continues rising, it would cross into positive territory soon.

I suggested yesterday that "It is interesting to note that we might have seen the formation of a mini double bottom for SPH. Using $3.68 as the trough and $3.79 as the neckline does give us $3.88 as a target."  In such a case, after meeting the target, what happens next?  Using Fibo lines, we see $3.94 (123.6%) as the next resistance to watch.  If that goes, it would be $3.97 (138.2%).

However, the rather weak volume still bugs me and in the event of a correction, it remains to be seen if the 100dMA, now at $3.82, would serve as support. The upturning 20dMA has merged with the rising 200dMA and should provide a stronger support if tested.  This is at $3.74 now.

Related post:
SPH: A pleasant surprise.

FSL Trust: Verona I.

Initially, the news that FSL Trust secured the release of Verona I was met with much bullishness and price was pushed to a high of 40.5c on the back of heavy volume.  By the end of the day, it closed where it started the day at 38c, forming an inverted cross.  This suggests that there is still much bearish sentiment here.  Once Nika I is released as well, we might see the unit price of FSL Trust bottoming in earnest.

MFI has risen and is testing 50% next.  This suggests some positive buying momentum.  The OBV has turned up quite vigorously which suggests some accumulation activity. The downtrend is still quite obvious and until its unit price moves above the declining 20dMA, the worst is not over for FSL Trust.

Major resistance at 42c, as provided by the declining 20dMA.  Immediate support is at 37.5c.  The waters are still murky for FSL Trust but it might be clearing up.

First Ship Lease Trust secures release of Verona I
Friday, 18 June 2010

© 2010 - The Edge Singapore