Category: Nuclear Energy & Uranium

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A Lull in Hostilities

Key Points

  • Hostilities in Lebanon faded.
  • Tankers transiting the Strait of Hormuz increased.
  • Brent Crude futures fell to $77.64 per barrel.
  • 2-year Treasury yields rose above 4.20% amid expectations of tighter Fed monetary policy.

Brent Crude futures (Aug’26) fell to $77.64 per barrel on reports of a lull in hostilities in Lebanon.

Brent Crude Futures (ICE August'26)

Prices fell more than 3% on Monday after ​the United States granted Iran a 60-day sanctions waiver following initial peace talks, ​and as officials reported a lull in hostilities in Lebanon under the ⁠broader agreement.

“The gradual increase in oil flows through the Strait of Hormuz continues to weigh ​on the market,” said ING analysts in a note.

Two crude tankers with just under 2 ​million barrels of oil sailed through the Strait of Hormuz on Monday, ship-tracking data showed, in a sign that traffic was picking up following weaker flows on Sunday due to concerns over passage through the ​waterway. (Reuters)

The text of the Memorandum of Understanding signed by the US and Iran can be separated into two parts. The MOU is mostly “talks about talks” where the parties merely agree to negotiate the terms of a Final Deal, but it contains an agreement to cease hostilities while negotiations take place, including:

  • Immediate termination of hostilities on all fronts, including Lebanon.
  • Ensuring the territorial integrity and sovereignty of Lebanon.
  • The US to lift its blockade of Iranian shipping.
  • The US to waive existing sanctions against Iranian crude oil and petroleum exports.
  • The US to release frozen or restricted funds and assets belonging to Iran.
  • Iran will make its “best efforts” to ensure the safe passage of shipping through the Strait of Hormuz.

The MOU offers Iran a financial reward in exchange for allowing safe passage through the Strait. The deal is tenuous, and already the IRGC has threatened to close the Strait due to ongoing hostilities in Lebanon.

Israel is not a signatory to the MOU, and will not readily agree to the first two terms if it feels that they compromise their national defense. The Gulf States are also not signatories, and will similarly defend their national interests.

Financial Markets

2-year Treasury yields climbed to 4.209%, more than 45 basis points above the Fed funds target range, in expectation of tighter Fed monetary policy.

2-Year Treasury Yield (CNBC)

The Chicago Fed National Financial Conditions Index below -0.50 continues to signal easy monetary conditions.

Chicago Fed National Financial Conditions Index

Bitcoin1 is testing primary support at 60,000, signaling a shift in financial markets to risk-off. A breach of support would warn of a market-wide contraction.

Bitcoin (BTC)

Treasury Markets

10-year Treasury yields firmed to 4.51%, suggesting another test of resistance at 4.75%.

10-Year Treasury Yield

Stocks

SpaceX retreated to test its June 12 opening price of 150.

SpaceX

The Magnificent 7 also lost ground, with the Roundhill Magnificent 7 ETF (MAGS) retreating below support at 68 on the weekly chart below. Declining Trend Index peaks warn of a correction.

Roundhill Magnificent 7 ETF (MAGS)

The S&P 500 also shows signs of secondary selling pressure.

S&P 500

Dollar & Gold

The Dollar strengthened amid expectations of higher short-term interest rates. Breakout of the US Dollar Index above 100.50 indicates an advance to 103, but first expect retracement to test support at 100.

Dollar Index

Gold is testing primary support at $4,000 per ounce, with declining Trend Index peaks warning of selling pressure. A breach of $4,000 would indicate another decline, but beware of a bear trap. Gold is in a secular uptrend that we expect to last for decades.

Spot Gold

Energy

The Dow Jones Global Oil & Gas Index broke support at 575, signaling a primary downtrend.

Dow Jones Global Oil & Gas Index

Uranium

Sprott Uranium Miners ETF2 (URNM) broke primary support at 58, also signaling a downtrend.

Sprott Uranium Miners ETF (URNM)

Copper

Copper is testing support at 13,500, and declining Trend Index peaks warn of selling pressure. A breach of support would warn of a bull trap, with a decline to test the 50-week moving average.

Copper

Sprott Copper Miners ETF2 (COPP) reinforces the bearish copper chart, retreating from resistance between 44 and 45 while Trend Index peaks below zero warn of persistent selling pressure.

Sprott Copper Miners ETF (COPP)

Lithium

Sprott Lithium Miners ETF2 (LITP) is also retreating, and a fall below 13 would test primary support at 11.

Sprott Lithium Miners ETF (LITP)

Critical Minerals

Sprott Critical Materials ETF2 (SETM) shows similar signs of selling pressure, and another test of primary support at 30 is likely.

Sprott Critical Materials ETF (SETM)

Conclusion

Brent Crude and oil and gas stocks are falling as the Strait of Hormuz is tentatively reopened, but the real test will be the impact of global strategic reserves. A continued decline would cause a rebound in energy prices.

Financial markets are shedding high-risk assets amid expectations of tighter monetary policy. Declining Trend Index peaks on the S&P 500 signal a correction.

The Dollar is strengthening, and Gold is headed for another test of support at $4,000 per ounce, but these moves run counter to their secular trends where we expect Dollar weakness and Gold strength.

Energy metals are experiencing a broad sell-off amid expectations of lower oil and gas prices if the Strait of Hormuz is reopened.

Uncertainty remains high, and we expect elevated volatility in the months ahead. We adopt a defensive stance, with minimal exposure to high-multiple growth stocks and long-duration financial assets. Value stocks with stable income streams and short-duration financial assets are a haven in times of volatility, but we still expect a secular uptrend in Gold and maintain our position.

Acknowledgments

Notes

  1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
  2. We analyze exchange-traded funds (ETFs) to determine market sentiment towards a specific sector, industry, or commodity. The analysis is not a recommendation to buy or sell, nor is it a commentary on the merits of the particular ETF.
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Bond Market Deja Vu from 2022

Key Points

  • Investors are dumping long-term government bonds, with the yield on 30-year Treasuries rising to 5.13%.
  • Sovereign bonds across the UK, the EU, and Japan are all affected by the sell-off.
  • The S&P 500 and the Dow retreated on Friday by 1.2% and 1.1%, respectively.
  • Gold and silver fell steeply.
  • Copper, Lithium, Critical Materials, and Uranium are also experiencing a sell-off.
  • President Trump hinted at another major strike on Iran, with his Sunday “The Clock is Ticking” post on Truth Social.
  • Brent futures jumped to above $111 per barrel early Monday.

Investors are dumping long-term government bonds. The 30-year Treasury yield broke resistance at 5.0%, rising to 5.13% on Friday before easing slightly to 5.12% early Monday.

30-Year Treasury Yield

High bond yields, above the rate of inflation, increase the risk of a solvency crisis where the borrower can’t meet its interest payments. Issuing new debt to cover interest payments accelerates debt growth, causing debt-to-GDP to spiral out of control.

UK Gilts 30-year yield jumped to 5.85%.

30-Year UK Gilts Yield

The French 30-year climbed to 4.67%.

30-Year UK Gilts Yield

Italian 30-year yields are at 4.75%.

30-Year UK Gilts Yield

France and Italy have higher debt-to-GDP ratios than the UK. The primary reason they enjoy lower yields is that their long-term yields are suppressed. The Bank of England, on the other hand, is shrinking its balance sheet to restore fiscal stability.

The yield on the 30-year German Bund is even lower because of Germany’s strong fiscal position, with much lower debt levels.

30-Year German Bund Yield

The Japanese 30-year yield is shooting upwards. JGB yields should be much higher because of Japan’s precarious debt-to-GDP ratio. However, the Bank of Japan buys government bonds (JGBs) to suppress the yield and avoid a solvency crisis.

Adding to the selloff on Monday was news that Japan’s government will likely issue fresh debt as part of funding for a planned extra budget to cushion the economic blow from the war, worsening already strained government finances. Yields on ​the 30-year Japanese government bond (JGB) jumped more than 10 bps to their highest on record at 4.200% while the 10-year yield touched its highest since October 1996 ​at 2.800%. (Reuters)

The yield on the 30-year JGB has since weakened slightly to 4.10%.

30-Year JGB Yield

The chart below, by Robin Brooks, compares long-term government bond yields (on the left axis) to countries’ debt-to-GDP ratios (on the bottom axis). Yields in Japan (JP), Greece (GR), and Italy (IT) are being suppressed, while yields in Australia (AU), New Zealand (NZ), and the UK (GB) are higher due to more conservative central bank policies.

JGB Yield & Debt-to-GDP Ratio

Why are Long-term Yields Rising?

There are several overlapping reasons why long-term yields are rising:

Increased defense spending expands government deficits and raises debt-to-GDP ratios, increasing the risk of fiscal dominance.

Fiscal dominance is where the central bank prioritizes bond market stability over currency stability, lowering interest rates while tolerating higher inflation, to prevent a solvency crisis in the bond market.

The US-Iran conflict has caused oil shortages, driving crude oil prices higher. High oil prices are fueling a steep rise in inflation, increasing the risk of capital erosion for bond investors.

The US Fed has entered into a $100 billion currency swap agreement with the United Arab Emirates. The facility will help the UAE to survive the loss of oil revenues while the Strait of Hormuz is closed. Further currency swaps with other Gulf States will likely follow. The currency swaps are effectively a medium-term loan from the Fed, but risk becoming a standing facility if the conflict in the Gulf is not quickly resolved. Their primary purpose is to avoid the Gulf States selling reserves to make up for lost oil revenue. The sell-off of hundreds of billions of US Treasuries would flood the market and drive up yields.

The AI boom has driven a massive surge in capital spending by mega-cap technology companies as they vie for market share in a rapidly expanding market. Much of the capital spending is funded through long-term debt issuance, leading to a steep increase in the supply of high-quality long-term debt.

US-Iran Conflict

President Donald Trump on Sunday again threatened Iran:

“For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them,” Trump said in a Truth Social post. “TIME IS OF THE ESSENCE!” (CNBC)

Trump’s post caused a sharp jump in Brent crude futures prices when the market opened on Monday.
Brent Crude Futures (ICE July'26)

Stocks & Financial Markets

The S&P 500 retreated below 7500, falling 1.2% on Friday.

S&P 500

The Dow similarly retreated below 50,000, falling 1.1%. A decline below support at 49,000 would signal a correction.

Dow Jones Industrial Average

Bitcoin1 retreated below support at 80,000, warning of further market risk aversion.

Bitcoin (BTC)

10-year Treasury yields jumped to 4.6%. The breakout above 4.5% offers a short-term target of 4.75%. Rising Trend Index troughs indicate strong upward pressure on long-term yields.

10-Year Treasury Yield

Dollar & Gold

A Dollar shortage is driving up the US Dollar Index as global markets struggle with crude oil shortages and rising prices, a fiscal crisis among Gulf States that have lost their primary source of revenue, and lower US trade deficits.

Dollar Index

The Dollar enjoyed similar strong demand after Russia invaded Ukraine in February 2022, followed by a steep fall in November, when energy markets had stabilized.

Dollar Index

Gold is testing support at 4500. A breach of 4400 would signal a test of 4000, but respect of support remains more likely.

Spot Gold

In 2022, Gold initially shot up after Russia’s 24 February invasion of Ukraine, but then declined for 6 months until energy markets stabilized and the Dollar weakened.

Spot Gold

Silver fell steeply last week and is headed for a test of support at 71.

Spot Silver

Energy

Brent crude continues its uptrend, and another test of resistance at $120 per barrel is likely.

Brent Crude

The Dow Jones Global Oil & Gas Index respected support at 580, headed for a test of resistance at 620. Trend Index troughs above zero signal buying pressure.

Dow Jones Global Oil & Gas Index

Uranium

Uranium is taking a beating, with the Sprott Uranium Miners ETF2 (URNM) breaking secondary support at 64. A breach of support at 58 would signal a primary downtrend.

Sprott Uranium Miners ETF (URNM)

Lithium

All strategic materials are under pressure, even Lithium, which has enjoyed strong demand from booming EV sales. Sprott Lithium Miners ETF2 (LITP) broke its new support level at 16.50. Follow through below 15 would signal a correction.

Sprott Lithium Miners ETF (LITP)

Critical Minerals

Critical materials show similar selling pressure, with Sprott Critical Materials ETF2 (SETM) testing support at 35.50, while a lower Trend Index peak warns of selling pressure.

Sprott Critical Materials ETF (SETM)

Copper

Copper retreated below 14,000 after a strong run-up.

Copper

Sprott Copper Miners ETF2 (COPP) reflects similar selling pressure, breaking initial support at 42, while a lower Trend Index peak signals selling pressure.

Sprott Copper Miners ETF (COPP)

Conclusion

We expect a similar playbook to 2022, after Russia’s full-scale invasion of Ukraine: rising energy prices, followed by rising long-term bond prices, and a stronger Dollar.

S&P 500

The S&P 500 suffered a 26% drawdown in 2022, and stock prices will likely weaken, though partly cushioned by the AI boom. We also expect weakness in Gold, Silver, and strategic materials like Uranium, Lithium, Critical Minerals, and Copper — until energy markets stabilize.

Acknowledgments

Notes

  1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
  2. We analyze exchange-traded funds (ETFs) to determine market sentiment towards a specific sector, industry, or commodity. The analysis is not a recommendation to buy or sell, nor is it a commentary on the merits of the particular ETF.
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Xi Has Trump Over a Barrel

Key Points

  • Producer prices jumped by 6.0% over the 12 months to April, warning of higher consumer prices ahead.
  • 10-year Treasury yields responded with a rise to 4.48%.
  • Xi Jinping has the upper hand in negotiations with Donald Trump because of China’s large strategic oil reserves, which they could use to keep prices in check.
  • The S&P 500 reached a new high at 7444, while the Dow is consolidating in a bullish narrow range below 50,000.
  • The Main Street US economy is under the pump, but Semiconductors, Construction, and Heavy Electrical industries are booming due to datacenter spending.
  • Lithium, Copper, and Critical Materials show signs of buying pressure, but Uranium is lagging.

Producer prices jumped by 6.0% for the 12 months to April 2026, driven by rising fuel prices and transportation costs. The cost of rising fuel prices is spreading through the economy, with the core index (excluding food and energy) leaping to 5.2%. The chart below shows the impact of energy shortages on producer prices after Russia’s full-scale invasion of Ukraine in 2022. We expect the impact of the Strait of Hormuz closure to be more severe.

Producer Price Index (PPI)

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Silver and Lithium Shine

Key Points

  • Silver broke through resistance at $80 per ounce, signaling a fresh advance.
  • Gold remains rangebound.
  • Oil & Gas stocks are weak, while crack spreads are widening.
  • Copper, Uranium, and Critical Materials show signs of buying pressure, following the Lithium breakout.
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Trump Talks “Peace Deal” But Nothing Stops This Train

Key Points

  • President Trump again baits financial markets with the prospect of a peace agreement.
  • Brent Crude (July’26 futures) is testing support at $100 per barrel.
  • However, the crude market faces critical shortages even if a peace deal is signed.
  • The S&P 500 rallied to a new high at 7365, while the Dow threatens a breakout above 50,000.
  • The ISM Services PMI warns that growth is slowing, while soaring prices signal inflationary pressures.
  • Lithium is in a strong uptrend, while Copper, Critical Materials, and Uranium show signs of a recovery.
  • The RBA hiked rates this week and would like to hold for a while, but rising prices may force further hikes.

ISLAMABAD/WASHINGTON/TEL AVIV, May 7 (Reuters) – U.S. President Donald Trump predicted a swift end to the ​war with Iran as Tehran considered a U.S. peace proposal that sources said would formally end the conflict while leaving unresolved key U.S. demands that Iran suspend ‌its nuclear program and reopen the Strait of Hormuz.

An Iranian foreign ministry spokesperson cited by Iran’s ISNA news agency said Tehran would convey its response, while Iranian lawmaker Ebrahim Rezaei, a spokesperson for parliament’s powerful foreign policy and national security committee, described the proposal as “more of an American wish-list than a reality.”

“They want to make a deal. We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make ​a deal,” Trump told reporters in the Oval Office on Wednesday, saying later “it’ll be over quickly.”

Trump has repeatedly played up the prospect of an agreement to end the war ​that started on February 28, so far without success. The two sides remain at odds over a variety of difficult issues, such as Iran’s nuclear ⁠ambitions and its control of the Strait of Hormuz, which before the war handled one-fifth of the world’s oil and gas supply.

A Pakistani source and another source briefed on the mediation ​said an agreement was close on a one-page memorandum that would formally end the conflict. That would kick off discussions to unblock shipping through the strait, lift U.S. sanctions on Iran and set ​curbs on Iran’s nuclear program, the sources said.

A separate senior Pakistani official involved in the talks told Reuters on Thursday that negotiators were hopeful of reaching a deal but noted gaps between the sides remained.

Brent Crude (July futures), buoyed by optimism over a prospective peace deal, is retracing to test support at $100 per barrel.

Brent Crude Futures (ICE July'26)

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First Wave of Gulf War Hits CPI

Key Points

  • CPI jumped by almost 0.9% in March, fueled by a steep rise in crude oil prices.
  • A 21.2% jump in gasoline prices accounted for nearly three quarters of the monthly ​CPI increase.
  • We expect further waves as rising costs reach agriculture, mining, and transportation before filtering through to the broader economy.
  • The S&P 500 stalled at 6800.
  • University of Michigan consumer sentiment plunged to its lowest level since the late 1970s.

The first wave of price hikes hit CPI in March, with the index jumping 0.865%, fueled by a steep rise in crude oil prices driven by the war in the Persian Gulf.
CPI & Core CPI - Monthly

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Jobs Rise but Prices Soar, Growth Slows and Liquidity Tightens

Key Points

  • Non-farm employment jumped by 178,000 in March, well above the expected 60,000.
  • The unemployment rate declined to 4.3%.
  • Growth in aggregate hours worked, however, slowed to 0.4% over the past year.
  • The ISM Manufacturing Prices index jumped to 78.3%, warning of a price shock.
  • Aluminium prices soared to nearly $3,600/tonne due to supply shortages caused by the war in the Persian Gulf.
  • Brent crude closed the week at $109 per barrel, with no end to the Iran war in sight.

The BLS reported a 178,000 increase in non-farm payroll in March, well above the 60,000 forecast. Employment growth has been erratic, averaging less than 15,000 over the past 6 months.

Employment Growth

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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

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

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