Global growth concerns triggering stagflation fears have come back onto the radar of financial markets as weakening U.S. economic data and growing trade tensions hurt consumer confidence and business activity.
Gold continues to be well bid as geopolitical relationships, trade relationships, fiscal policies, defense policies, public health policies, and more, are undergoing scrutiny, and change.
Along with stagflation fears and rising geopolitical uncertainty, gold has room to run higher following its recent shallow 4% correction, with the $3000 target back in play.
With the negative consequences of U.S. President Donald Trump’s tariffs and aggressive immigration policy beginning to create cracks in the U.S. economy, the "Forever Bull Market" may finally be in the process of forming a major top.
Previous tariff fears morphing into trade wars on multiple fronts has completely wiped out the equity market’s post-election gains, benefitting what has been a perfect gold storm since the safe-haven metal broke out of an historic 13-year cup & handle pattern above $2100 per ounce 12-months ago.
Both the S&P 500 and the NASDAQ have given sell signals after moving below recent lows to test their respective 200-day moving averages into Thursday, while technically overbought gold continues to receive safe-haven bids following a brief $130 correction of recent out-sized gains.
Markets no longer think Donald Trump is full of bluster and are moving quickly to anticipate a slowdown in U.S. and global growth as he raises a wall of tariffs around the world's largest economy, and trading partners start to respond in kind.
The yet unknown economic effects of U.S. trade tariffs may have long-term consequences on the global economy. This uncertainty, alone, remains bullish for the safe-haven metals.
In his Tuesday night address to Congress, Trump revealed plans to expand tariffs even further, promising that new “reciprocal tariffs” and non-tariff actions would follow on April 2.
China, unfazed, issued a defiant statement. “If war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” declared the Chinese foreign affairs ministry.
Trump made it clear last Wednesday that trade with Europe also remained in his sights, saying he is planning to hit goods made in the EU with tariffs of 25%.
"The European Union was formed to screw the United States - that's the purpose of it and they've done a good job of it," he said. "But now I'm president." The EU said it would react "firmly and immediately against unjustified tariffs".
The tariff situation remains very fluid, which will likely keep a floor under the gold and silver markets for at least the near term. After implementing across-the-board 25% tariffs on goods from Canada and Mexico earlier this week, President Trump on Thursday announced a one-month reprieve for both countries on goods compliant under a North American trade pact.
In addition to diversification and safe-haven demand, gold continues to benefit from central bank buying as sovereign debt concerns persist, along with growing weakness in the greenback as the USDX broke down sharply Wednesday from critical head & shoulders neckline support at 106 to a 4-month low to critical support at 104.
The latest research from the World Gold Council (WGC) this week showed central banks’ appetite for gold remains robust, as total global reserves increased by 18 tonnes during the first month of the year.
The solid demand in January comes after central banks bought 1,045 tonnes of gold in 2024; this was the third consecutive year that official holdings increased by more than 1,000 tonnes, well above the long-term average.
After its central bank added 5 more tonnes of gold in January, China also unlocked more fiscal stimulus this week. For the world’s second largest economy that Beijing is determined to grow by another 5%-or-so this year, China promised greater efforts to support consumption and cushion the impact of an escalating trade war with the U.S.
Premier Li Qiang, in a speech at the opening of the annual meeting of China's parliament, warned that "changes unseen in a century are unfolding across the world at a faster pace".
Copper is another commodity seeing significant upside. Prices jumped to their highest level since November 2022 on Wednesday after President Trump signaled he may impose a 25% tariff on the metal next week.
Just six weeks into his second term, the U.S. president has waffled on hitting imports from Mexico and Canada with 25% levies, put an additional 20% tariff on goods from China, threatened reciprocal tariffs globally and cut off military aid to Ukraine. During his first presidential term, it took Trump two years to raise tariffs as much as his administration has now applied to Chinese goods.
All this while Trump's unconfirmed cabinet minister, tech billionaire Elon Musk, is wielding the axe on public spending as head of the Department of Government Efficiency (DOGE). His actions thus far have resulted in funding freezes, deep spending cuts and the purging of thousands of federal government workers.
With the Trump administration on a mission to cut government inefficiencies, the big reduction of the federal workforce will likely result in U.S. lost income and consumer spending.
Layoffs announced this week by U.S.-employers reported 172,017 job cuts in February, with DOGE accounting for 63,583 of total cuts. Global outplacement firm Challenger, Gray & Christmas said on Thursday that the planned job cuts were the highest level since July 2020, when the economy was in the grips of the COVID-19 pandemic.
The 245% surge of federal government layoffs last month, to levels not seen since the last two recessions, offers the clearest sign yet of the toll taken on the labor market by the policies of President Trump's administration.
The Non-Farms Payrolls report released this morning showed the U.S. economy adding 151,000 jobs in February, slightly below forecast, with the U.S. unemployment rate rising to 4.1% last month from 4.0%.
Meanwhile, Republicans and Democrats in the U.S. Congress appear to be nowhere close to a deal to avert a government shutdown next Friday that would throw Washington into deeper turmoil.
The talks have been complicated by President Trump, who has ignored spending laws passed by Congress, suspended foreign aid, and fired tens of thousands of federal workers.
Large swaths of the U.S. government would be forced to stop operating at midnight on March 14 if Congress does not pass detailed spending legislation that would keep agencies running.
In another sign of the darkening economic landscape, U.S. retail giant Target on Tuesday said it expected little to no sales growth this year, with CEO Brian Cornell telling CNBC that higher prices were on the way. Retail bellwether Walmart, and electronics retailer Best Buy, also recently warned about expectations for 2025.
Following the Atlanta Fed's GDPNow estimate for first-quarter 2025 growth plunging to -1.5% last Friday, additional data on Monday sent the forecast tumbling even further to a staggering -2.8%, reinforcing a stagflationary recession warning as inflation remains well above the Fed's fantasy 2% target. This week’s plunge to a -2.8% GDP contraction marks the worst forecast since the COVID-19 lockdowns in 2020.
Eight of the 12 Federal Reserve districts reported flat or slightly negative growth in February, according to the central bank’s survey of regional economies known as the Beige Book, released Wednesday. Six districts reported no change in economic activity, while two saw slight contractions. The remaining four districts saw only “modest or moderate growth.”
“The Fed’s regional report card … suggests that the economy is slowing,” said Priscilla Thiagamoorthy, senior economist at BMO Capital Markets. Tariffs were mentioned 50 times in the report, she noted, and almost all districts cited trade uncertainty.
Furthermore, the U.S. international trade deficit widened 34% in January to $131.4 billion, the Commerce Department said Thursday. This is the widest deficit going back to the start of the series in 1992.
With estimated negative growth and inflation remaining sticky, a stagflationary recession later this year in the U.S. is not out of the question. Some analysts are expecting a downturn that could sweep the continent given the dependence of Canada and Mexico on exports to the U.S. market, while retaliation could further deepen the impact.
At the same time, slowing economic activity is raising expectations that the Federal Reserve will be forced to cut interest rates this year, even with inflation remaining elevated above its mandated 2% target.
The U.S. Treasury also faces $9 trillion in debt refinancing by 2026, with rising interest payments set to surpass defense spending, increasing pressure on bond yields and raising fears of a sovereign debt crisis.
A looming stagflationary recession would result in serious pain for mainstream investors heavily exposed to overcrowded trades like AI stocks, and cryptocurrencies. But for those with early positions into the relatively tiny precious metals mining complex, a recession would be highly profitable and beneficial.
With the Q4 2024 reporting period in full swing, solid earnings of record cash flows and robust production has made an undervalued mining sector extremely investable as the historically overvalued stock market shows signs of an overdue 10-20% correction.
While gold has gone on to record multiple new all-time highs, the gold stocks remain under-owned as volume in both GDX and GDXJ continues to dwindle since the pandemic panic spike low in March 2020.
This is occurring even as the mining complex is up from the 7-year cycle low seen in September 2022. In fact, trading volume has decreased in both miner ETFs during a recent correction, and increased in the S&P 500 during the selloff in general equities.
“Never short a dull market” is an old saying on Wall Street. This is good advice during the mining sector malaise, especially with stock-trading volume being typically much lighter than average.
With investors taking profits in overvalued general equities, gold stocks are setting up to experience inflows via cash raised by generalist funds and retail investors as gold against the S&P 500 is close to breaking out of a 4-year base.
Since December, the gold complex has been outperforming the stock market with little to no fanfare evidenced by falling trading volume. After a 3-week span of lagging gold and the stock market, silver and the miners resumed their relative strength to both mid-week, signaling the recent correction in the mining sector has likely been completed.
A weekly close later today above multi-year resistance at $43 in GDX and $54 in GDXJ with convincing volume would target $60 and $85, respectively, following a potential cup & handle breakout. And a strong monthly/quarterly close later this month above $35 in silver would target the $50 all-time high nearly reached in 2011.
The higher-risk/reward junior precious metals developer/explorer stocks, which trade primarily on the TSX Venture Exchange (CDNX), are even more undervalued while being largely ignored since early 2021.
Many are trading under the value of their gold holdings at valuations of under $50/ounce of gold in the ground, with several quality optionality plays trading at less than $10/ounce of gold in the ground and located in top tier jurisdictions.
With gold stocks set to breakout of a huge accumulative 4-year base, the beaten down and left for dead in 2024 mining sector is ripe for a 2025 mean reversion.
At Junior Miner Junky, my subscribers and I are well prepared to set sail on a sea of opportunity for outsized gains after loading our highly leveraged junior portfolio boat with 20 quality small-cap gold, copper, and silver related stocks.
The Junior Miner Junky (JMJ) weekly newsletter is a one-stop shop for precious metals stock speculators. Along with providing detailed macro commentary and technical analysis for subscribers following the real-money JMJ junior portfolio, the letter also issues detailed company reports and occasional flash updates on highly anticipated press releases issued by juniors covered by JMJ.
If you require assistance in accumulating the best in breed precious metals related juniors, and would like to receive my research, newsletter, portfolio, watch list, and trade alerts, please click here for instant access.
