Gold will outperform Equity

For the perfect storm

Target

✔ hedge against inflation
✔ Gold benefit in the market correction environment
✔ Gold has proven its role to be a hedge against inflation
✔ Sharp move expected in the market risk off environment

Descriptive

Gold performance can be tracked over ages, to have evidence of an asset class acting as protection against risks and uncertainties in world history. Over the last 30 years the world economy was favorable towards equities, despite crises having taken place. Even though gold does not generate any cash or dividend return, it is deemed as conservative asset and acknowledged by investors as a valuable asset with price appreciation. In higher inflation times, gold is one of the most desired assets in an investor’s portfolio. In any crisis, gold is expected to perform better than equities, as the latter are impacted by economy tied risks (e.g. bankruptcies, demand, recession environment).
In the graph we can see the move from 2.5 equity/gold ratio to levels below 0.25 in 1980. It indicates that an index unit of S&P 500 equities lost -10x in value in the last cycle of high inflation. In 2021 we saw the ratio of 2.5 for equity/gold again. May we see certain similarities to 1970−80 or even a repetition of history?

Technical composition

Long: Gold Futures
Gold futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, of a specific quantity of gold at a predetermined price on a future delivery date. Gold futures give companies involved in the precious metals industry a way to hedge their gold price risk on an expected future purchase or sale of gold.

Short: Short: S&P 500 (e-mini Futures)
The S&P 500, is a stock market index tracking the performance of 500 largest companies listed on stock exchanges in the United States.

Targeting of the strategy
The ratio GC/SPX (typically measured in opposite, SPX/GC) delivers strong performance in the risk off environment. It is one of the most volatile strategies and will sharply react to the sell-off in equity markets. It is an essential part to the inflation hedging portfolio and to perform best in the most critical environment.

GCSPX
Risk
High
Target return
50-100%
Issue date:
07.12.2021
Strategy
Hedging
Issuer
Leonteq
ISIN
CH0588514965
Lot
1,000 USD
Currency
USD
Redemption
Daily
Current status
open for new investors

Important! Profitability in the past does not guarantee profitability in the future. Targeted yield helps define investment objectives and is not a limit or guarantee for an investor

Key Figures

Historical graph of Certificate price

Figures for the last monthFor 6 monthsSince launch
-3.22%+51.56%+32.16%

Factsheet

Issue date
07.12.2021
Currency
USD
Issuer, Market maker
Leonteq
Subscription fee
2-5%
Redemption fee
0%

Documents

FAQ

What is a Mini-Future and how does the leverage factor work?

A Mini-Future is a derivatives structured product, tracking performance of an underlying set of assets with the applied leverage effect. The leverage factor is identified at the launch of the product and changes accordingly to the price performance of the product. If the price of the product is indicated at $ 50, the product has a leverage factor of 2 (strike price always $ 100 / current price $ 50).

What is a Stop Loss?

In order to control the downside risks, the strategy has implemented a stop loss in the core attributes of the product itself. On an average loss of -50%, the stop-loss is triggered to limit the downside loss. In a stop-loss event, the product is to self-terminate and repay the investor the residual amount.

Why might I be asked to relaunch the strategy?

A strategy is advised to be relaunched in two cases. In case of a stop loss event or in case the price of the structured product reaches $ 100 (the target strike price). The strategy applies a leverage effect calculated as $ 100 divided by the market price. Once the market price is over $ 100, the product is advised to be relaunched as the positive effect of the leverage is to exceed the 1:1 level, and may have a less favorable effect going forward. Example: at a trading price of $ 150, the product would result in a leverage factor of 0.66. That implies that with every $ 1 move of the underlying, the strategy would benefit only by an increase of $ 0.66.

Liquidity and secondary market?

The product has a secondary market allowed to enter at any time if the size conditions are met. Secondary tranche is being sold at the agreed price based on the underlying performance and entry commission. The product has daily liquidity and can be liquidated at fair value at any time.

Why shall I use the product and not enter the pair directly?

The product is a leveraged strategy, including ETFs and Futures. It allows access to each or all strategies with any capital allocation. The strategy developer and sponsor, Grossmeister Capital, is also offering the support in the rebalancing of the strategies. It might be considerable to enter in several tranches, and considering the market condition and strategies development/s to realize profits if the market conditions may indicate a corrective phase.

What are the risks?

The product has the risk of negative performance, up to the extent of an automatic stop-loss event (approximately being triggered on a -50% performance). Further, there is the issuer risk with potential default of its operational service. Each structured product falls into the category of «high risk» products and is designed for qualified investors.

Contacts

To purchase an actively managed certificate Gold will outperform Equity or to ask a question contact us by phone, e-mail, Instagram, Telegram or WhatsApp.