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Golds Uptick29 Sept 2016

War Room

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HiddenLevers War Room

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AccountabilityScenario Updates

Market Update

Nature of Gold

Gold as Safe Harbor

Scenario: Gold OutlookGolds Uptick

UPDATED

HiddenLeversMarket update

Market Updatesources: HiddenLevers, Bloomberg, Financial Times, Bloomberg 2 Mexico Border Wall

Art Market CrashEuropeanBanks

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Market Update US Electionsources: HiddenLevers, Bloomberg, Bloomberg 2

- 2016 US election: establishment vs outsider- October: highest volatility month in election years- Less volatility in 2016 = market pricing in gridlock- Fed: Now a politicized body

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HiddenLeversNature of gold

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NATURE: Gold as Commodity

sources: HiddenLevers

Gold Oil Correlation?Trended together to bottom and in 2016 reboundShort-term correlation still negative

Oil-Gold RatioHistorical average in teensSet new record in Q1 2016Are recent levels setting a new trend?

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NATURE: Gold as Currency

USD is inverse to Goldsource: HiddenLevers, CNA Finance, Bloomberg

China diversifying reserves from USD Yuan will be in IMF special fund 01 OctChina has doubled Gold reserves since 2009Shanghai Exchange = physical delivery

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NATURE: Gold as Inflation Hedge

sources: HiddenLevers CPIGOLDNo Gold Rise with CPI

Gold Rises with CPI

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NATURE: Gold + Interest Rates

sources: HiddenLevers, Bullion Vault,

Interest Rates tend to be inverse to Gold

YATZEE!

Dec 2016 rate hike

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HiddenLeversGold as safe harbor

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2y T10y TUSDGOLD

SAFE HARBOR: Gold Pulse Check

sources: HiddenLevers, World Gold Council

FUNDAMENTALS

TECHNICALS

Gold Demand (Q2 YoY)

Central Banks -40%Jewelry/Industry -12%Investment+141%Total +15%

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SAFE HARBOR: Gold + Geopolitics

sources: HiddenLevers, HiddenLevers 2

Financial Crisis S&P + Gold had similar volatilityBonds true safe-havenBrexitAug 2015 VolatilityCommodity CrashGold tends to provide some protection in average market corrections.

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SAFE HARBOR: Volatility Comparison

sources: HiddenLevers

S&P

18.5

GLDGold ETF

18.25

GDX Miners ETF

38.7

Gold Bullion

15.8

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HiddenLeversScenario: gold Outlook

UPDATED

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baselineuptickSECENARIO UPDATE: Gold Outlook

source: HiddenLevers

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GOOD: 1550 Uptrend

source: HiddenLeversCommodities Uptrend with Fiscal SpendingIndian jewelry demand recovers

China underlying bidUS infrastructure spending

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BAD: 1400 Market Panic

source: HiddenLevers European banks spook global markets

Gold spiked in 2016 BrexitGold spiked in 2012 Greek CrisisShort term spike due to EU banks

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UGLY: Crash to 1K

source: HiddenLevers Fed becomes more aggressive after US Election

Gold underperforms S&Pmore rapid rate hikesdouble bottom at 1k

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Scenario: Gold Outlook

Good:Uptrend

Bad:Market Panic

Ugly:Crash to 1k

Gold-25%S&P-20%Gold+6%S&P-5%Gold+15%A further slide in the dollar, Chinese buying, and a recovery of (Indian) jewelry demand could all be catalysts causing gold to outpace stocks in a calm market.

Similar to Brexit, an event causing a short term equity markets drop and VIX spike could showcase golds role as a safe haven.

If the Fed or other Central Banks cut easing programs or are forced to let rates rise faster than expected, both gold and equity markets could contract rapidly.S&P+5%

Golds Uptick Take Aways

Rate hike postponed = Gold UptickGold currently more currency than commodityDont use Gold as a hedge for non-existent inflationGold Volatility = S&P Volatility

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