As we move at crawling speed towards the end of the current consolidation pattern, I am considering 3 main ideas:
The first is calculating when the pattern will end.
The second is recognising the signs which will confirm it's end via realtime observation.
Third is the killer trade to exploit the answers to 1 and 2 above.
I suspect that since metal swaps are at the base of price supression, an early diagnosis can be made from looking at the swap structure.
This for bullion banks or their colleagues to sell the future and buy the spot.
In so doing they exploit zero interest rates. That's because the ZIRP provided capital at xero cost to fund a carry trade over time.
That is to say that state sponsored free money enables the price supression mechanism, and the end of extremely low cost carry trade capital will cause the end of precious metal price supression.
Now I expect that interest rates will go negative before TPTB throw the towel into the PM ring. But that time is relatively close.
It seems clear that the beginning of the next PM bull will be simultaneous with a rise in interest rates. Now if the Japanese screw with the JGB, (Kyle Bass post xmas interview) and manage to torpedo world bond markets, this will set a few big dominoes crashing against each other, and when it comes home to the dollar bonds they will start falling. But it doesn't have to be the Japanese that set it off.
I do think however that bond yields are the key to the lock of our PM treasure box.
So the 3rd question still stands.
How to create the ultimate, non counterparty backed, non margined asymmetrical bet?
Something like 1000:1 would be nice!
Buying future deliveries of PMs for a small present day fee comes close. The streaming companies have it, but surely something else, or structure of other things, can be made to embody the same characteristics at a lower valuation?
Ideas for THE BIG TRADE would be welcome, and also critiques of the reasoning above.
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Here is a glimpse into the next 5 days in the PMs.
Comments for "The setup for the big trade"
(IMHO) It appears we are within the reversal/continuation pattern for the precious metals, and several other markets.
I suspect the silver low has been put in at end December, and the final low for Gold, which could have been early January, will come on the cyclical reversal of mid February.
Now every inflection point reflects the market has become finely balanced for an instant, so in a realistic analysis of the situation it must be accepted that MANY actors for TPTB are highly likely to initiate their diversionary tactics at that point, and whether they succeed for fail, the oncoming market reversal can change instead into a breakout. Either way there will be a big geopolitical mess and the market perceptions of that, whatever they be, is all that matters.
Last 3 days - Visible geopolitical footprints of TPTB's actors:
Israel jets attack Syria, Suicide bombing of US Embassy Ankara, North Korea declares state of Martial Law, 4th largest Dutch bank SNS Reaal NV collapses - first TBTF bank nationalization in 5 years
and the visible financial footprints of TPTB's actors in the markets:
We should be able to watch the usually invisible "grey men" and their paid stooges step out to do their stuff over the next couple of weeks.
Here is a little chart of what I have in mind:
You will notice this is the Euro cross, which is neutral, compared to the bullish dollar version at the moment, and the more bullish Sterling and Yen crosses.
The trendline out of the Feb inflection into 2013 can be at any angle, up, sideways, or even down, to be measured by the success or not of the interventions to come. The angle presented in the chart is my best guess based on events to date. I will quantify rallies and falls in March and adjust the chart based on the metal's performance.
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argentus maximus