Category: Cryptocurrency

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Trump Backs Down

Key Points

  • President Trump backed off his threats to seize Greenland and said he will not impose additional tariffs on EU members.
  • Stocks rallied, but the mega-cap Magnificent 7 remain under pressure.
  • Gold and silver retraced to test new support levels.

From Reuters:

On a whirlwind trip to the World Economic Forum annual meeting in Davos, Switzerland, Trump backed down from weeks of rhetoric that shook the NATO alliance and risked a new global trade war.

Instead, Trump said, Western Arctic allies could forge a new deal that satisfies his desire for a “Golden Dome” missile‑defense system and access to critical minerals while blocking Russia and China’s ambitions in the Arctic. “It’s a deal that everybody’s very happy with,” Trump told reporters after emerging from a meeting with NATO Secretary General Mark Rutte. “It’s a long-term deal. It’s the ultimate long-term deal. It puts everybody in a really good position, especially as it pertains to security and to minerals.”
He added: “It’s a deal that’s forever.”

A NATO spokesperson said seven NATO allies in the Arctic would work together to ensure their collective security.
“Negotiations between Denmark, Greenland, and the United States will go forward aimed at ensuring that Russia and China never gain a foothold – economically or militarily – in Greenland,” the spokesperson said.

Trump said on his Truth Social platform that the US and NATO had “formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region,” and that “based upon this understanding, I will not be imposing the Tariffs that were scheduled to go into effect on February 1st.”

…Earlier in the day, the Republican US president acknowledged financial markets’ discomfort with his threats and ruled out force in a speech at the Swiss Alpine resort.
“People thought I would use force, but I don’t have to use force,” Trump said. “I don’t want to use force. I won’t use force.”

The S&P 500 rallied to test the former resistance level of 6900, but declining Trend Index peaks continue to indicate selling pressure.

S&P 500

The Nasdaq QQQ ETF displays similar selling pressure.

Invesco Nasdaq 100 ETF (QQQ)

Selling pressure on mega-cap technology stocks is more severe, with the Roundhill Magnificent 7 ETF (MAGS) testing primary support at 63, and the latest Trend Index peak at zero.

Roundhill Magnificent 7 ETF (MAGS)

Mega-caps are falling faster than small-cap stocks, with MAGS in a steep downtrend relative to the Russell 2000 Small Caps ETF (IWM).

Roundhill Magnificent 7 ETF (MAGS) relative to iShares Russell 2000 Small Caps ETF (IWM)

The post-Liberation Day regime has been particularly lucrative for the corporate halt and lame. As Apollo chief economist Torsten Slök pointed out yesterday, Russell 2000 members generating negative earnings per share have returned nearly 50% on average since the close of trading last April 2, some 20 percentage points better than the components operating in the black. Over the same period, a Goldman Sachs-compiled basket of the most heavily shorted stocks has generated a 61% return, leaving the S&P 500’s 21% figure in the dust. (Grant’s Daily)

US stocks are also underperforming their global peers, with the Dow Jones US Index ($DJUS) falling relative to the Dow Jones World Index excluding the US (W2DOW).

DJ US Index ($DJUS) & DJ World ex-US ($W2DOW)

Financial Markets

Bitcoin broke support at 90,000 but is now retracing to test the new resistance level. Recovery above 90,000 would indicate that tight liquidity is easing.

Bitcoin (BTC)

10-Year Treasury yields eased to 4.243%, headed for a test of new support at 4.20%.

10-Year Treasury Yield

Dollar & Gold

The Dollar rallied after a sharp fall on Tuesday, but still displays long-term weakness.
Dollar Index

Gold is retracing after testing $4,900 per ounce on Tuesday. We expect retracement to test new support at $4,600.

Spot Gold

Silver is similarly retracing to test support, and a breach of $90 will likely indicate a correction to $80 per ounce.

Spot Silver

Conclusion

Gold and silver continue in strong uptrends. Demand is driven by concerns about geopolitical risk and fiscal stability, amid large deficits and precarious sovereign debt levels across many developed economies.

A reader asked if there are signs that a blow-off top is forming in gold and silver, but regular corrections to test new support levels ease pent-up demand and limit the risk of a blow-off.

Stocks rallied on news of easing tensions over Greenland, but mega-cap technology stocks lag. This signals the final stage of a bull market, when market leaders no longer lead the rallies and investors chase riskier small caps.

Acknowledgments

Posted on

Gold, silver signal tilt to a new monetary system

Key Points

  • Gold and silver fell sharply on Monday, December 29, in thin holiday trading.
  • The CME increased margin requirements for gold and silver in a vain attempt to curb the strong bull market.
  • Gold and silver rallied on Monday, January 5.
  • Bitcoin also rallied, signaling improved liquidity in financial markets.
  • The long-term bull market in gold and silver indicates the shift to a new global monetary order.

Gold found support at $4,300 per ounce after the CME raised margin requirements for precious metals on December 29 to take some heat out of the strong bull market. The effect was short-lived, with gold rallying off support on Monday, January 5, to again test resistance at $4,500. Recovery above $4,500 would offer a short-term target of $4,700 and a medium-term target of $5,000.

Spot Gold

Silver similarly retreated from its high at $86.63 per ounce, finding support at $70. Support at $70 held, and the precious metal is again rallying to test resistance at $80. A breakout above $80 would signal a new advance, with a short-term target of $90 and a medium-term target of $100.

Spot Silver

Bullion Shortages

CME attempts to crash the gold and silver markets are a sign of growing physical shortages at the COMEX futures exchange. The $25,000 margin hike for each silver contract, during thin holiday trading, was deliberately timed to maximize its effect on traders with leveraged positions.

Why would CME deliberately crash precious metals markets? Self-preservation. As in a bank run, when bank vaults are depleted, panic ensues. A collapse in inventories would send prices soaring, but ultimately would destroy exchange credibility.

Bullion dealers have warned for months that buyers are increasingly standing for delivery, which is depleting physical inventories of gold and silver at metals exchanges. Earlier in 2025, the London Bullion Market required up to six weeks to effect bullion deliveries, attributing the delay to “labor shortages.”

The CME had an “outage” on November 28, the day silver broke to a new high above $55 per ounce. The outage acted as a circuit breaker, limiting dealers’ ability to trade in a fast-moving market.

The US and China have declared silver a critical metal and are likely to increase stockpiles. China, a major global silver producer, has also instituted export controls effective January 1 that are likely to exacerbate silver shortages.

The strain on bullion markets is increasing, with JPMorgan, one of the largest global bullion traders, relocating its entire precious metals trading desk to Singapore, according to unconfirmed reports. JPM has neither confirmed nor denied the rumors, after an email apparently circulated to all JPM trading staff instructing them to move with their families to Singapore. Singapore is growing as a financial hub and will likely have better access to precious metals from China.

Currencies & Liquidity

The Chinese Yuan has strengthened against the Dollar over the past three months, with declining Trend Index peaks below zero indicating long-term buying pressure (against the Dollar).

Chinese Yuan

Bitcoin broke through the 90,000 resistance level, indicating a fresh injection of liquidity into financial markets.

Bitcoin (BTC)

Declining Trend Index peaks on the Nasdaq QQQ ETF indicate continued selling pressure despite the rise in liquidity.

Nasdaq QQQ ETF

Conclusion

The CME is resorting to desperate measures to stem physical shortages of gold and silver inventories, a sign that the exchange is losing relevance as buyers increasingly stand for delivery.

The bull market in gold and silver is a sign that central banks are reducing their exposure to fiat currencies such as the Dollar. China is leading the drive towards a new global monetary order, with currencies backed by gold and silver as the global reserve asset, rather than holdings of sovereign debt, which are prone to default or currency debasement (inflation).

A significant advantage of such a system is that it would limit currency manipulation and facilitate fair trade. An attempt to suppress one currency against another, to gain a trade advantage, would cause an outflow of bullion reserves and a currency crisis.

The shift to a new monetary system backed by gold and silver seems inevitable, as does a long-term bull market in gold and silver as demand for the new reserve asset grows.

Acknowledgments

Posted on

The real risk of a Fed rate cut

Key Points

  • ADP National Employment Report estimates that the private sector shed 32,000 jobs in November.
  • Traders are pricing in an 89% chance of a 25-basis-point rate cut by the Fed on December 10.
  • ISM Manufacturing and Services PMI shows inflation is not yet under control.
  • A rate cut will likely weaken the Dollar, increase demand for real assets, and drive up long-term yields.

The ADP National Employment report estimates that the economy lost 32,000 jobs in November, the 3-month moving average turning negative for the first time since the height of the pandemic in August 2020.

ADP Private Sector Jobs

Losses are heavily weighted toward small firms, which have taken a hit from tariffs, shedding 120,000 jobs in November, while mid-sized firms added 51,000 jobs and large firms 39,000.

ADP Private Sector Jobs

The Fed is expected to announce a 25-basis-point rate cut on December 10 in response to weak jobs data. Markets are pricing in an 89% probability of a cut, with the discount rate on 13-week T-Bills falling below the Fed’s current 3.75% to 4.00% target range for the fed funds rate.

3-Month T-Bill Discount Rate

Other parts of the economy remain resilient, with the ISM Services PMI increasing to 52.6% for November, well above the 48.6% breakeven level typical of past contractions.

ISM Services PMI

New orders also signal expansion, but the rate slowed to 52.9%.

ISM Services New Orders

Employment has improved over the past four months, but remains in a contraction.

ISM Services Employment

Most importantly, from the Fed’s perspective, 65.4% of enterprises reported increased prices, down from 70% in October but still reflecting strong inflationary pressures.

ISM Services Prices

The Manufacturing sector reported similar price rises in November, though the rate of increase is slowing.

ISM Manufacturing Prices

Financial Markets

The Chicago Fed National Financial Conditions Index edged higher to -0.522 for the week ending November 21.

Chicago Fed National Financial Conditions Index

Dynamic indicators, however, like Bitcoin below, continue to warn of a sharp contraction in financial market liquidity.

Bitcoin (BTC)

The secure overnight financing rate (SOFR) jumped to 4.12%, above the 4.0% rate the Fed charges on its standing repo facility (SRF), signaling that the Fed is struggling to control pricing in the $12 trillion repo market. Repo lending is primarily secured by US Treasury Bills and Notes, and a spike in the SOFR repo rate would trigger a sharp sell-off in the Treasury market.

Secured Overnight Financing Rate (SOFR) & Interest on Reserve Balance (IORB)

Rising long-term yields in Japan and Europe are sucking liquidity out of US financial markets. The Bank of Japan (BOJ) is also expected to hike its policy rate on December 18, with the 3-month Japanese Government Bill discount rate jumping to 0.633%, well above the current 0.50% policy rate.

Japanese Govt 3-Month Bill Discount Rate

A BOJ rate hike would likely trigger a sell-off in US financial markets as hedge funds unwind large carry trades funded in Japanese Yen.

The US Dollar Index broke support at 99 and is expected to fall sharply in December, taking a double hit from a Fed rate cut and a BOJ rate hike, which would narrow the current spread by an estimated 50 basis points.

Dollar Index

Treasury Markets

Long-term Treasury yields are softening in anticipation of a Fed rate cut, but could face a sell-off amid tightening liquidity.

10-Year Treasury Yield

Stocks

The S&P 500  also rallied in anticipation of a Fed rate cut, but again, the rally risks being undone by contracting liquidity.

S&P 500

Mag 7 technology stocks continue to show gains over the past 6 months, apart from Meta Platforms (META), with Alphabet (GOOGL) building an advantage in the competition to lead AI.

Magnificent 7 Technology Stocks

Small caps are also strengthening, with the Russell 2000 ETF (IWM) testing resistance at 250.

Russell 2000 Small Cap ETF (IWM)

Gold & Silver

Gold is retracing to test support at $4,200, with high prices taming investor enthusiasm for the present.

Spot Gold

Silver is consolidating in a narrow band above support at $58 per ounce. Respect of support would confirm our target of $62.

Spot Silver

Energy Metals

Energy metals are another prospective inflation hedge for investors.

The Sprott Uranium Miners ETF (URNM) broke resistance at 56, joining copper and lithium miners in an uptrend.

Sprott Uranium Miners ETF (URNM)

The Sprott Copper Miners ETF (COPP) broke resistance at 31.50, confirming a fresh advance.

Sprott Copper Miners ETF (COPP)

Sprott Lithium Miners ETF (LITP) is also in an uptrend since breaking resistance at 11.

Sprott Lithium Miners ETF (LITP)

Conclusion

Forced to choose between its two mandates, the Fed seems willing to prioritize maintaining full employment ahead of stable prices. Cutting rates while the unemployment rate is low (below 5.0%) may please President Trump, who wants to run the economy hot, but risks a sharp rebound in inflation.

High inflation would lower the debt-to-GDP ratio but would likely increase outflows from US Treasury markets and raise long-term interest rates as international bond investors demand a higher risk premium. It would also later necessitate a sharp increase in interest rates to get the genie back in the lamp.

Falling Bitcoin prices and rising secure overnight funding rates in the $12 billion repo market signal tight liquidity in financial markets. Unwinding carry trades may destabilize financial markets if the Bank of Japan hikes its policy rate on December 18 as expected. A Fed rate cut and a BOJ rate hike would narrow the current carry trade spread by an estimated 50 basis points, risking a sharp sell-off in several trillion dollars of US assets financed in Yen.

The danger is that the Fed may reintroduce QE to stabilize the repo market, as it did during the last Powell pivot in September 2019.

Demand for gold, silver, and energy metals — copper, lithium, and uranium — is likely to increase as concerns over inflation grow.

Acknowledgments

Posted on

Cass Freight Shipments Index Plunges

Key Points

  • Economic activity is contracting. The Cass Freight Shipments index signals a recession.
  • Bitcoin warns of a sharp contraction in financial market liquidity, which is likely to affect stock prices.

The Cass Freight Shipments (seasonally adjusted) Index declined to 0.984, a level typically associated with recession.

Cass Freight Index - Shipments (SA)

The decline confirms the earlier signal from our leading indicator.

A year-on-year decline of more than 2.0% in the 12-month moving average of the unadjusted Cass Freight Shipments Index provides a leading indicator of recessions.

Cass Freight Index - Shipments (NSA)

Financial Markets

Bitcoin continues to decline, warning of a sharp contraction in financial market liquidity that will likely affect stock prices.

Bitcoin (BTC)

The secured overnight funding rate (SOFR) increased to the Fed’s standing repo facility rate (blue dashes below), which is now 4.0%. The higher SOFR rate indicates that the repo market is having to pay a premium over the rate paid on reserve balances (pink) to attract sufficient funding from commercial banks.

Secured Overnight Financing Rate (SOFR), Interest on Reserve Balance (IORB) & Standing Repo Facility (SFR)

When monetary conditions are looser, the repo market is primarily funded by money market funds, which are prepared to accept a lower rate than the IORB, only offered by the Fed to commercial banks.

Stocks

The S&P 500 rallied after a gap down at the open, but was unable to hold onto gains.

S&P 500

Treasury Markets

10-year Treasury yields shot up to 4.15%, suggesting that the prospects of a December rate cut are again fading.

10-Year Treasury Yield

Rising long-term rates caused a pull-back in gold and silver. We expect gold to retest support between $3,900 and $4,000 per ounce, but respect will likely indicate another test of $4,400.

Spot Gold

Silver is similarly retracing to test support between 50 and 46.

Spot Silver

Conclusion

The Cass Freight Index recession signal reinforces last week’s warning from the Freightwaves CEO of a crisis in the long-haul freight industry.

The sharp contraction in financial market liquidity risks a correction in stock prices.

Gold and silver pulled back on a rally in long-term interest rates, but we remain bullish on their long-term prospects.

Acknowledgments

Posted on

Stocks fall, gold rises

Key Points

  • Bitcoin broke support at 100K, signaling that financial market liquidity is contracting.
  • Major stock indices and ETFs declined as Fed officials hosed down prospects of a December rate cut.
  • Copper and uranium miners are falling, indicating doubts over the AI infrastructure buildout.
  • Gold rallied to $4,200 per ounce, signaling a flight to safety.

Bitcoin broke long-term support at $100,000, signaling a financial market contraction.

Bitcoin (BTC)

Repo markets continue to signal stress, with the secured overnight financing rate (SOFR) above the rate paid on reserve balances.

Secured Overnight Financing Rate (SOFR) & Interest on Reserve Balance (IORB)

The $7 trillion in money market funds is already tapped out, attracted by the sizable premium of the SOFR above the overnight reverse repo rate offered by the Fed.

Secured Overnight Financing Rate (SOFR) & Overnight Reverse Repo Rate

In 2023, the Fed lowered the overnight reverse repo rate (pink above) to encourage money market funds to shift their investments to the repo market. The $2.3 trillion outflow into the repo market helped offset the effects of the Fed’s securities sales (QT), creating the illusion of monetary tightening without actual tightening.

Fed Reverse Repo (RRP) Liabilities

Stocks

The Nasdaq QQQ ETF fell more than 2.0%. The lower Trend Index peak above zero indicates secondary selling pressure, which will likely test support at 590.

Invesco Nasdaq 100 ETF (QQQ)

Demand for copper and uranium is expected to increase, with AI hyperscalers projected to invest an estimated $5 trillion in data centers and related infrastructure. Copper is required for both electrical and cooling purposes, so hesitation in the Sprott Copper Miners ETF (COPP) suggests growing doubts over the AI buildout. A breach of support at 28 would be a bearish sign for the AI-heavy tech sector.

Sprott Copper Miners ETF (COPP)

Demand for uranium is also projected to grow, with the IEA forecasting that global electricity demand from data centers will more than double by 2030 to approximately 945 terawatt-hours (TWh). However, declining Trend Index peaks on the Sprott Uranium Miners ETF (URNM) warn of rising selling pressure.

Sprott Uranium Miners ETF (URNM)

Gold

Gold rallied to test resistance at $4,200 per ounce as financial markets shifted to a risk-off stance. A breakout above $4,400 would offer a target of $5,000.

Spot Gold

Conclusion

Financial markets are signaling tighter liquidity, which will likely cause a secondary correction in stocks.

We are overweight in gold and gold miners, and underweight in high-multiple technology stocks.

We see long-term growth in copper and uranium, but are wary of a correction in the short-term.

Acknowledgments

Posted on

How the SRF could blow up the Treasury market

Key Points

  • The Fed’s Standing Repo Facility (SRF) is designed to provide backup funding to the repo market during periods of liquidity stress.
  • The $12 trillion repo market is secured by government securities, normally USTs, and has largely replaced unsecured interbank lending.
  • However, hedge funds are taking advantage of the SRF to finance highly leveraged basis trades.

Unsecured interbank lending has largely been replaced by repo financing after the breakdown of trust in the global financial crisis of 2008.

A repo is short for repurchase agreement, where the borrower sells government securities, typically US Treasuries, with an agreement to repurchase them at a slight discount the following day. The repo (discount) rate, formally known as the Secured Overnight Financing Rate (SOFR), has increased in importance as the repo market has grown to almost $12 trillion, overshadowing the widely known Fed Funds Rate (FFR). Both the SOFR and FFR are managed by the Fed through its open market operations.

A sharp spike in the repo rate in 2008 threatened to collapse the entire financial system. The Achilles heel of the banking system, and the reason for the Fed’s existence, is maturity mismatch. Borrowers take advantage of low interest rates in the short-term market and invest in long-term assets, capturing the wide spread. That works well until the yield curve inverts. Short-term rates spike upward as available credit contracts, causing a fire sale of long-term assets as borrowers scramble to raise cash to repay loans. A spike in the repo rate effectively serves as a margin call on long-term assets.

The first instance occurred during the 2008 subprime crisis, when the repo market ceased functioning, leading to a panicked sale of assets. Then, in 2019, repo rates spiked after the Fed’s QT had lowered bank reserves, reducing the supply of bank credit available to fund repos. The spike led to the famous Powell pivot, where the Fed abruptly ended QT and expanded its balance sheet (QE) to inject liquidity into financial markets.

Again in March 2020, repo rates spiked during the COVID pandemic, causing a sell-off of US Treasuries financed through highly leveraged basis trades.

The chart below shows the spread between the repo rate (SOFR) and the fed funds rate (FFR) in 2019 and 2020.

SOFR-FFR

The Fed responded by establishing the Standing Repo Facility (SRF), through which borrowers can obtain repo finance directly from the Fed when there is a shortage in the repo markets. The SRF acts as a market stabilizer, limiting increases in the SOFR and preventing a repeat of earlier repo market collapses. The underlying purpose is to avoid a fire sale of US Treasuries if the repo market ceases to function.

Hedge funds have increasingly tapped the repo market to finance highly-leveraged basis trades, which take advantage of the spread between repo rates and the implied discount on Treasury futures. The SRF has encouraged these trades by limiting the downside risk. Hedge funds pocket the spread when repo rates are low, and rely on the SRF to save them if rates rise.

We suspect that the size of leverage investment in US Treasuries is greater than commonly believed. Over the past decade, offshore investment in US Treasuries has swung from foreign central banks to private sector investment, primarily through offshore financial centers favored by hedge funds.

Basis trades are likely to continue growing as long as the Fed maintains a standing repo facility to stabilize the repo market. The SRF enables hedge funds to enter profitable leveraged trades on US Treasuries with limited downside risk.

As Charlie Munger said, “Show me the incentive and I’ll tell you the outcome.”

Stocks

The S&P 500 remains tentative after last week’s contraction in financial market liquidity.

S&P 500

A contraction in the ADP’s four-week moving average of private sector job creation to -11,250 has not helped.

ADP Private Sector Jobs - NER Pulse

Financial Markets

The secured overnight financing rate (SOFR) remains above the rate paid to banks on reserve balances (IORB), indicating financial market stress.

Secured Overnight Financing Rate (SOFR) & Interest on Reserve Balance (IORB)

Bitcoin is re-testing support at 100K, warning that liquidity remains tight.

Bitcoin (BTC)

Dollar & Gold

The dollar is weakening as prospects for a December rate cut improve.

Dollar Index

Silver rallied to test its previous high at $54 per ounce.

Spot Silver

Gold followed, with a rise to $4,230 per ounce. A breakout above the resistance level at $4,400 would offer a target of $5,000.

Spot Gold

Conclusion

Basis trades funded through repo markets are expanding as the Fed’s standing repo facility (SRF) enables hedge funds to profit with limited downside risk while the Fed acts as a backstop.

Basis trades increase the vulnerability of US Treasury markets as hedge funds are highly leveraged short-term holders of USTs. In the past, unwinding basis trades have caused a sharp rise in Treasury yields when repo rates spike. The SRF may prevent a repeat of past spikes but provides an incentive for hedge funds to take on greater risk, expanding the size of their basis trades and increasing Treasury market vulnerability.

Financial markets remain unsettled, with Bitcoin testing long-term support at 100K. Gold and silver rallied, and breakout to new highs would offer targets of $5,000 and $62 per ounce, respectively.

Acknowledgments

Posted on

Gold bear trap & the AI illusion

Key Points

  • Gold recovered above $4,100 per ounce, signaling another test of $4,400.
  • Silver similarly recovered above $50 per ounce.
  • Bitcoin at 106K indicates improving liquidity.
  • The S&P 500 also completed a bear trap, indicating another rally.
  • A recent Stanford study suggests that the adoption of generative AI has had a minimal impact on employment levels.

Gold recovered above $4,100 per ounce, completing a bear trap with a target of $4,400.

Spot Gold

Silver similarly recovered above $50 per ounce, offering a target of $54.

Spot Silver

Bitcoin, our real-time indicator of financial market liquidity, rallied to 106K. Respect of long-term support at 100K offers a target of 116K, indicating the liquidity squeeze is fading.

Bitcoin (BTC)

The S&P 500 completed a similar bear trap at 6750, suggesting a rally to test 7000. Follow-through above 6900 would confirm.

S&P 500

41 AI-related stocks dominate the market capitalization of the S&P 500. Investors have gone all-in on AI and its ability to generate future earnings.

S&P 500 AI-Related Stocks

Jonathan Levin argues in Bloomberg that, excluding the AI-related Tesla and Amazon, consumer-facing sectors of the S&P 500 are in recession.

S&P 500 Consumer Staples & Discretionary

A recent Stanford study on ChatGPT adoption indicates significant increases in productivity in fields with high adoption rates. However, it notes that the improved productivity has, so far, led to increased wage rates rather than reduced employment levels.

Treasury Markets

10-year Treasury yields are consolidating around 4.10%, with resumed BLS inflation readings likely to provide further direction.

10-Year Treasury Yield

Trump-appointee Fed Governor Stephen Miran on Monday repeated his call for a half-percentage-point cut at the FOMC December 9-10 meeting. (Reuters)

Consumer perceptions of long-term inflation remain elevated, with the University of Michigan survey indicating that perceptions of 5-year inflation have averaged 3.7% over the past three months.

University of Michigan: 5-Year Inflation Expectations

Dollar & Gold

The dollar has weakened following high private sector layoffs in October, with financial market pricing indicating a 63% chance of a 25-basis-point rate cut in December. (Reuters)

Dollar Index

JP Morgan estimates that the labor market added 52K jobs in September but lost 35K in October, increasing the likelihood of another rate cut in December.

JP Morgan Estimated Labor Market Growth

Conclusion

We expect further rate cuts to weaken the dollar and boost prices of gold and silver.

S&P 500 performance depends on projected AI productivity gains, driving a massive increase in earnings for AI-related corporations. However, there is currently limited evidence to support this conclusion.

Acknowledgments

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