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Aaron Burden Nxt5Prob 7U Unsplash
10.08.2022
Integrating systematic signals into
a discretionary process - Gold
On one level Qi is a simple productivity tool.

Portfolio managers have multiple distractions competing for their time. Qi can quickly signal when a security is in a macro regime, when there is a valuation story.

It’s US CPI day & analysis around the inflation outlook will flow thick-&-fast. Qi has a few simple observations.
Gold
Gold is back being a macro play. Model confidence is now 65%, our threshold for a new regime.

The new regime is diverse but gold’s role as an inflation hedge is evident with rising positive sensitivity to global inflation expectations.

Model fair value has stopped falling but is yet to display any new highs consistent with trend reversal. But spot has rallied of late & that has created a 0.7 standard deviation (2.8%) valuation gap.

API users can back-test the efficacy of Qi FVGs as a signal. From here to +1.25 sigma looks like a coin toss – hit rates of around 50%. For potential bears, history suggests waiting for valuation gaps of +1.5 sigma where the hit rate rises to 60%.

Three quick steps – check model confidence, identify FVG, back-test the efficacy of that signal.

In short, from a macro perspective, another upside inflation surprise & this doesn’t look the optimal entry level to buy gold as an inflation hedge.

It’s not the optimal sell level either but, at these valuations, risk-reward suggests a downside surprise hurts more.
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Quant Insight’s Macro Analytics
on Goldman Sachs Marquee
Goldman Sachs is embedding Qi’s data-science-driven
macro factor risk data into Marquee to offer risk
management capabilities that help provide clarity to your
investment analysis as you navigate your portfolio exposures,
asset by asset, through dynamic market conditions.
Goldman Sachs is embedding Qi’s data-science-driven macro factor risk data into Marquee to offer risk management capabilities that help provide clarity to your investment analysis as you navigate your portfolio exposures, asset by asset, through dynamic market conditions.