Jeffrey Gundlach of Doubleline has been talking about dollar declining, so is Paul Tudor Jones… to everyone. Separately, many countries have accelerated buying Gold, and Silver since US froze Russian assets. Foreign reserve buying of UST are declining and EU investors have taken money out, so is South Korea and Japan.
The dollar index DXY has come down from 110 (jan-05-2025) to 98.37. Many are predicting it could decline by another 10%. So here are some of the trades I am doing on this thesis
Precious Metal, Silver synthetic call Jul $29, Jan 26 $30, Aug $40~$47 spread
Looking at Gold, so far no trade (Still feeling bad on closing my gold trade last year)
FXI July $37 synthetic calls; Looking at additional trades
Silver is slowly moving up, the Gold, silver ratio had declined as gold moved up 50% last year and in general. There is a chance Silver melting up similar to 2011, so Here is a cheap play on Silver…
Buy Aug $40 and Sell Aug $47 for $0.15 debit. For 20 contracts you will pay just $300 + commissions and has potential upside of $14,000. You don’t need silver to get to $47, even a few $$ higher move from here will give outsized return. If not, you are not going to lose more than $325 at the max and you can close the trade much earlier.
As foreigners started reducing their treasury holdings, Gold as reserves went up and Gold prices went up by 50% last year. We may not get similar move but there is a good chance that gold moves up to $400, then $200. Especially in a US recession when US government increases its spending, dollar decline will accelerate and Gold will outperform even more.
Silver had a breakout today… there is an outside chance it continues its rally for the next 2 months, coinciding on Aug expiry… In a long difficult year, you need some luck
Wherever, monetary policy is hijacked from the central bank by the politician, those currencies have performed very poorly, and their economies too.
I am sure many on the republican side understand this. But, it seems half of the country has lost its spine and completely surrendered themselves to the POTUS. So, Trump attacking the Fed and setting the interest rate is very dangerous. The lasting damage is, in future others may not be trusting the USD.
Already, we have seen in the last 2 or 3 crisis, instead of money going to treasuries, the yield actually increased. So, the Gold, silver, and Crypto trade may have more legs than we think.
The initial target of $38 is almost here, looking forward to $40, $47… Can I just get a melt-up and be done with :).. Watching the stock is giving me the pain from the fear that someone is going to pull the rug underneath and it is going to crash… just give me my $40…
Goldman Sachs is predicting Gold to get to $3700 by end of this year, and immediately to $4000, and eventually to $5000 because of sustained central bank buying. We need to see how much central banks will continue to buy… OTOH, some of the major countries with significant treasury holdings, hold gold relatively less as % of their entire reserves. So diversifying from USD continues, will continue is $GS thesis.
So, I bought Jan 27, $405 to $410 call spread for $0.77. It is cheap, but Gold has to move up by 21% to break even, and Gold doesn’t make that kind of move in a year, and has 491 days to play out.
I am not expecting to hold it till maturity, rather close this much earlier depending on how gold moves.
It was initially fun, but last few days were a struggle as I could not decide to close or ride, but I sold most of my long calls and bought back the puts I sold on Friday between $45 to $45.5, and closing the spreads today… Just leaving 10 calls to see how far this melt-up will go…
Druckenmiller’s advocates advocates for making large, concentrated, high-conviction bets rather than diversifying broadly, which he believes only leads to mediocre returns.
While I had pretty high conviction on the SLV/ GLD bull run, I committed a total of 0.28% on SLV (mostly options), while it returned 7x, the net result is about 1.8% gain vs the total portfolio.
Since I am in the mood of confessing my mistakes… Selling $SLV at $45.5 is a mistake. Because, you don’t know how far the rally will continue. So you sell after the rally breaks. Yes, I am aware of that, but the 7x gains, and the fact that I ended up watching $SLV price movements too much, made me to book gains.
The real takeaway is, you sell after the peak, and after the decline starts and not as the rally continues…
Having said that, I am going to be taking profits in the gold next week. Even though, my gold purchases were $GLD stock purchase than options…
In the short-term Gold is pretty stretched… hopefully we get a dip and have the courage to buy
