The risk-off day in the market place prompted some fresh safe-haven demand for the golden metal.
The risk-off sentiment manifest in the pits in metals was also notable in crude oil, copper, and stock futures.
During risk-off periods, global investors flock into the perceived safety of Treasury securities.
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As the sovereign debt crisis moves back to the front pages, there will be increased volatility with periods of risk-on and risk-off.
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That is not to say that risk-off trading will not continue to dominate foreign exchange, but can the EUR fully recover from here?
Risk-off investing strategies have definitely taken hold, but the possibility of easing, either from the Federal Reserve, the ECB, or both, has now risen exponentially.
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The other metals-market-bearish part of the risk-off day Wednesday is that the U.S. dollar index is trading higher and hit a fresh seven-week high overnight.
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With the number of commentators out there forecasting a recession increasing by the day, markets appeared scared on Thursday, as the risk-off trade caught on.
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"A general risk-off mode predominates, the Fed meeting yesterday having been viewed as a crushing disappointment by equity markets, " said Chris Beauchamp, market analyst at IG.
As the risk-on, risk-off atmosphere begins to abate this year (assuming that it does), the selection of particular stocks within sectors will begin to figure more-importantly for investors and fund managers.
The one difference is that this week, a greater percentage of outflows were attributed to local currency funds mainly because emerging market currencies (Brazil, in particular) have suffered in the recent risk-off period.
So, despite the improvement in the Japan situation on Friday and the declaration of a no-fly zone over Libya, traders decided to avoid the potential headline risk and went back to risk-off mode into the close.
It is also worth noting that in order for mean-reversion-based strategies to work, it is not required that the mean be realized for long periods of time, but that markets continue to behave as they always have, swinging pendulum like between the depths of despair and irrational exuberance , or, from risk-on to risk-off.
If excessive risk pays-off, states keeps the upside.
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This is a murky area and it is difficult to figure out the appropriate risk-reward trade off since proper disclosure requirements are not yet in place.
The genetically best-off will choose not to pool their risk with others, the worst-off will find that they have become uninsurable, and the insurance market will shrink.
The risk increases as off-shore pollution increases and as more people eat more fish including shark.
They commit capital only when an investment has a favorable risk and return trade-off after costs.
Large in magnitude, it challenges the basic notion of a risk-reward trade-off.
Now, certainly this disaster did not do the shareholders of BP much good, but the point is that, in financial terms, there is an optimal risk-return trade-off to be made.
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Individual investors select shares with the highest return and track record, consumers select the bank with the best rates, your pension fund invests your savings in companies with the highest risk-return trade-off, and so on.
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Ocean Energy brings a whole portfolio of high-risk, high-return projects, from deepwater blocks off the coast of West Africa to one promising field that lies 9, 300 feet below the Gulf of Mexico.
Accepting a somewhat lower IRR may be a small trade-off to make for a lower-risk investment.
But partnerships with grubby firms risk turning off its million-odd individual donors.
The result is that maturity-transformation risk has paid off handsomely: banks have snaffled up deposits and lent the money on at much higher rates.
"The main issue to assess is whether the Algerian event represents a new ongoing threat and a general associated elevation in the risk environment or a one-off occurrence which may now result actually in tighter security in the region, " says Nick Robson, the head of Jardine Lloyd Thompson's credit, political and security risk business.
What will happen instead is that the higher-risk segment will be cut off entirely, including the unbanked and underbanked population.
But keeping these debts on their books, and so continuing to favour existing long-term but often poor-risk customers, is choking off bank credit to those firms which could actually make good use of it.
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