April twentieth, two thousand twenty-five (250414-250420)
It's the weekend; let's talk about three things, 1) The gold we've been discussing this week, 2) our core India trade position, 3) our FX position
Quite a few new people joined the community this week, so let me say again: everything in the community is intended to serve actual market trading. Rather than prioritizing the accuracy of a narrative, we prefer to validate results through actual market performance; compared with being storytellers, we would rather be people who really make money in the market (and successfully closing out profits and withdrawing cash/unrealized gains that have not been closed out are a risk!) people.
When reading, don't treat it merely as a storybook. Take the ideas discussed one step further for yourself and ask, “So what?”
The main text begins.
This week's strategy notes add to what we've shared two pricing and trading dynamics in gold trading that few people discuss:The scramble for physical gold and the substitution of paper gold (the credit cycle is essentially also a cycle of substitution between physical and paper gold; at the tail end of the credit cycle, the final form of money is a real asset) + the clearing cycle of Eastern debt deflation (another angle on the relative-value benchmarks in the FX market)The question.
Coincidentally, around 17, CITI also published an article about physical gold:
“We expect gold investment demand in the second quarter of 2025 to exceed mine supply by 110% (previously forecast at 95%), as tariff-related concerns about U.S. and global growth continue to build, alongside strong buying from central banks and other institutions (including Chinese insurance funds). This level will be the highest since the global financial crisis and the second-highest in the past 25 years.
Against this backdrop, we expect gold prices to rise to 3,500 dollars per ounce over the next three months(previously forecast at 3,200 dollars), and average around 3,250 dollars in the second quarter of 2025. These forecasts are based on our fundamental pricing model for physical gold investment.
We believe The gold market may currently be in an exceptionally rare state of physical supply deficit. This means prices must rise to induce gold holders (whose supply is relatively price-inelastic) to sell, thereby clearing the market.。”
The physical supply gap is key to this gold trade. In other words, this time the rise in gold is driven by physical demand, not by traditional speculation in paper gold (derivatives such as futures and swaps)., their target price 3500 also falls within the target-price range we calculated based on gold priced in renminbi and the requirements of debt clearing:
Notes250417 How to emerge from deflation once and for all: Reflections on this cycle’s Chinese government bonds and renminbi-priced gold, the PBOC’s real operational strategy, and another possible explanation for gold’s rise (including a forecast target price)
The issue revealed by the chart on the left was actually discussed a few months ago, in our piece early this year on the U.S. Treasury market’s “game within a game”,Segmenting prices by time period is also a useful approach to macro analysis that everyone can build up through practice, so I won't go into more detail here.
Notes250116 The U.S. Treasury game within a game: It’s about neither inflation nor debt
After the community’s “game within a game” article was published on the 1.16,
Gold finally broke out of its range-bound consolidation, which had lasted 5 months, and has risen steadily ever since; our trading position captured the entire advance:
Chart: The green arrow marks the date the community article was published; the breakout ended a consolidation lasting nearly five months and began a new uptrend trade
We entered before the breakout; the low from the day before the breakout was the stop-loss level
A strong breakout will not retest the prior stop-loss level
Second, let's talk about our core India position.
Gold is a breakout trade, while India is a range trade (entered at the lower boundary). These are the two main ways to put macro trading views into practice. Breakout trades require strong macro structure and are about “1”; range trades require that nothing major happens (or a safe-haven dynamic in which major events have relatively little impact, as with this India trade) and are about “0”.
One is shock-based thinking, the other is floor-based thinking.
You can use these two trades of ours as examples and review them yourselves.
In hindsight, it all looks clear, but the hard part is judging, at every moment in the market, “where we are” and “what will happen,” and what we (like other macro traders) have to do is precisely this truly difficult thing.
Of course, we also make mistakes.
This is where risk management in expressing a trade comes in.
For India, we have recently made two fundamental updates:
1) Notes250313 The India trade can look
2) Notes250414 India: A relatively safe haven
If you haven't read these two articles, take some time over the weekend to do so. Both were published at the shock low of this bottoming cycle (and were also where we accumulated units in our core India position).The community doesn't publish content randomly. For macro traders, capturing the major moves in the major markets is enough.
We publish certain content at specific times, and there is always a reason each Note is published...
And we are always “one step ahead” of the market...
Chart: The two green arrows mark the dates when the two community articles were published
Chart: The two core-position trades are clearer from a longer time frame, aren't they?
We will continue to hold this core position.
Third, the FX position, This involves a trading mode that shifts from a range to a breakout.
Gold is a breakout trade, India is a range trade (entered at the lower boundary), and this FX trade marks the key transition from a range to a breakout.
In the FX market, our community mainly made two trades in the first quarter. Search for the Notes and review them yourselves: one was in USD/CHF and the other in USD/JPY. When we entered early in the year, USD/JPY offered greater certainty, so we discussed it more.
1）USD/CHF
Chart: The two green arrows mark the two signals in the community notes; the first reflects the core-position logic of a range trade
The second marks the transition from a range to a breakout
Macro logic is crucial when trading breakouts; technical analysis cannot do this
At 2.14, we published a note in the community and established a starter position in USD/CHF, At 4.9, it reached the lower boundary of the range, which was a very important decision point, so we posted at the time。The several breakouts over the past 3 years were all false breakouts. Following a technical approach would have meant missing this breakout, because once the false-breakout line was crossed, the price gapped up.
In macro trading, cross-asset logic must be given particular weight when trading an impulsive breakout, because within a single market you have no pricing anchor!
In the Notes dated 9, we wrote:
“If things do continue to unfold as we expect, the weakening of CNY will continue to pressure high-beta developed- and emerging-market currencies, while further boosting safe-haven currencies such as the Swiss franc and the yen. That is why, as mentioned at the outset, there is no rush to close out these profitable trades, the first round of these trades was based on U.S. fundamentals; now we are in the second trading cycle, which is about our own policies. When the policy effects have run their course, it will be time to close out the positions at a profit。”
For further reading: Notes240409 The depreciation of CNY in this cycle + Why we are still holding the two trades mentioned earlier
Chart: A view over a longer time frame
The other trade, besides the Swiss franc, is the yen:
https://mp.weixin.qq.com/s/6Tk-sBSUDLprek6WBxK04g
Chart: The publication dates of several yen-related Notes all fell at key turning points
Chart: A broader perspective
The yen trade has greater certainty. Compared with the Swiss franc, the yen's pricing dynamics are easier to assess, and the Bank of Japan and Japan's Ministry of Finance frequently stepping in creates more concrete trading opportunities, so build more smaller structures. Whether to build smaller structures depends on the characteristics of the market; different assets and markets have different trading characteristics.
There are many related Notes in this section, so I won't include them all here,
Use the dates or search terms to find the corresponding Notes in the community and review them yourselves.
The weekend is over. Wishing everyone reading this a happy life and a smooth week ahead!
If you've read this far, give it a like so we know!
Note: Everything in this article is for reference only and does not constitute investment advice, nor does it serve as a basis for any laws, regulations or regulatory policies. Investors should not use or rely on this information as a basis for making decisions.