Hi all,
I'm having problems trying to figure out a trading strategy for my outlook concerning metals/currencies and would really appreciate some input from anybody willing to have a go at cracking it!
I'm EUR-based and want to play on a long-term basis the continued uptrend in gold and silver against paper currencies that I see playing out. I am particularly worried about US$ devaluation occurring faster than concurrent EUR debasement i.e. I think the US$ falls faster than the EUR going forward.
Now, I can trade XAU/USD and XAG/USD and take my (expected) profits in USD but am worried that the USD value of those profits will be falling vs the EUR over time. So how can I hedge against this?
Possibilities I can think of are:
1. Take out a simultaneous trade in EUR/USD to protect the value of my USD profits in EUR terms. But how? In what size? And isn't this a potentially non-correlated play that could actually work against me?
2. Avoid the USD totally and trade XAU or XAG/EUR (either directly or via a synthetic) so profits would be in EUR. What sort of synthetic would I use since XAU & XAG/EUR is either not available or not very liquid? And also, this may not trade similarly to XAU & XAG/USD due to other currency-related factors.
My biggest fear is for a USD devaluation which is quite possible. And sure, whilst the metals would soar against the USD in that eventuality and an XAU or XAG/USD trade would return larger profits in USD, those profits would be devalued in EUR terms!
So somehow I need to hedge my trading to do well in the event the above scenarios play out. But I haven't figured out a way to do it yet which is most frustrating!!
Anybody kind enough to suggest ways of doing this?
Thanks for your replies!
Drew
I'm having problems trying to figure out a trading strategy for my outlook concerning metals/currencies and would really appreciate some input from anybody willing to have a go at cracking it!
I'm EUR-based and want to play on a long-term basis the continued uptrend in gold and silver against paper currencies that I see playing out. I am particularly worried about US$ devaluation occurring faster than concurrent EUR debasement i.e. I think the US$ falls faster than the EUR going forward.
Now, I can trade XAU/USD and XAG/USD and take my (expected) profits in USD but am worried that the USD value of those profits will be falling vs the EUR over time. So how can I hedge against this?
Possibilities I can think of are:
1. Take out a simultaneous trade in EUR/USD to protect the value of my USD profits in EUR terms. But how? In what size? And isn't this a potentially non-correlated play that could actually work against me?
2. Avoid the USD totally and trade XAU or XAG/EUR (either directly or via a synthetic) so profits would be in EUR. What sort of synthetic would I use since XAU & XAG/EUR is either not available or not very liquid? And also, this may not trade similarly to XAU & XAG/USD due to other currency-related factors.
My biggest fear is for a USD devaluation which is quite possible. And sure, whilst the metals would soar against the USD in that eventuality and an XAU or XAG/USD trade would return larger profits in USD, those profits would be devalued in EUR terms!
So somehow I need to hedge my trading to do well in the event the above scenarios play out. But I haven't figured out a way to do it yet which is most frustrating!!
Anybody kind enough to suggest ways of doing this?
Thanks for your replies!
Drew
