Gold prices traded at record high levels on Thursday, fueled by demand for safe-haven assets amid tariff concerns and U.S. inflation reports that reinforce expectations of a future Fed rate cut. Gold has now closed at record levels 10 times this year, after closing out its best year in over a decade, with 46 daily records in 2024.
Following a brief 4% correction down to $2850 into the end of February, Gold Futures are in the process of breaking out of a 3-week symmetrical triangle consolidation pattern. April Gold pierced the $3000 per ounce on Thursday, looking to close above this highly anticipated psychological level on a weekly basis later today.
Since December, the gold complex has been outperforming the stock market with little to no fanfare. As the S&P 500 broke down into official correction territory on Thursday, gold stocks tested multi-year resistance levels.
A weekly close later today above key multi-year resistance at $43 in GDX and $54 in GDXJ, with convincing volume, would confirm a 4.5-year cup & handle breakout and target $60 and $85, respectively.
By acting more like gold than an industrial metal recently, silver now leading the gold price higher is also notable. With the poor man’s gold moving closer to 13-year overhead resistance at $35, the metal is potentially entering a hybrid phase where it maintains both monetary and industrial demand characteristics.
With both silver and the miners bullishly leading the gold price higher, a strong monthly/quarterly close in March above $35 in silver would target a $50 all-time high nearly reached in 2011.
In less than two months after taking control of the U.S. economy on January 20, President Donald Trump’s tariffs have spooked investors, inducing a stock market sell-off that has wiped out $4.5 trillion from the S&P 500’s peak last month, when Wall Street was cheering much of his newly appointed administration’s agenda.
Over the weekend, Trump declined to predict whether the U.S. could face a recession as investors worried about the impact of his trade policy. The news took the S&P 500 down to over 9% from its February 19 record high mid-week, nearing a 10% decline that would represent a correction for the index.
With a correction defined as a 10% drop from a recent peak, the S&P 500 reached such territory after sliding below 5,529.74 Thursday, while the tech-heavy Nasdaq looks to end the week down more than 13% from its December high, taking the NASDAQ 100 deeper into correction territory.
During the stock market sell off, gold and silver have reacted positively amid the potential for slowing global economic growth and sticky inflation as the U.S. and its major trading partners square off over new tariffs.
Before stagflation fears entered the marketplace last week, geopolitical and financial chaos, exponentially rising sovereign debt levels, and marketplace confusion surrounding trade wars had already gone a long way in supporting the precious metals complex.
Interestingly, “Stagflation” – the combination of a global economic slowdown and a resurgence in inflation – is one of the most searched terms on Google right now.
Following a barrage of recent data related to surveys and sentiment indicators pointing to a slowdown in economic growth, mentioned in this space last week, traders are betting that the U.S. economy has lost steam and is on the verge of sliding toward a stagflationary recession.
Several new Trump policies has increased uncertainty for businesses, consumers, and investors. Notably, back-and-forth tariff moves against major trading partners like Canada, Mexico and China is creating confusion and uncertainty that makes it difficult for companies to plan long-term.
After the Atlanta Fed recently projected GDP to fall by nearly three percent during Q1, U.S. February inflation data released this week showed consumer and producer prices remaining firmly rooted well above the Federal Reserve’s mandated 2% target.
Robust demand for both gold and silver persist as economic data continues to weaken, while inflation readings remain elevated and sticky which hints of coming stagflation.
Several Wall Street firms have recently voiced stagflation fears — including JPMorgan, Goldman Sachs, and Morgan Stanley — reducing their respective growth targets, referencing the anticipated effects of restrictive trade and immigration policies.
There is about a 40% chance of a U.S. recession this year and a risk of lasting damage to the country's standing as an investment destination if the administration undermines trust in U.S. governance, according to J.P. Morgan's chief economist.
"The market has gone from one cut this year to expecting at least three," Mohamed El-Erian, chief economic adviser at Allianz, told Yahoo Finance on Monday. "So, the market thinks that the employment part of the Fed's mandate is going to force the Fed to cut."
El-Erian now sees a 25% to 30% chance of the U.S. economy entering recession this year, up from a 10% chance seen before the Trump tariff bonanza began.
The Federal Reserve is expected to hold interest rates steady at its policy meeting next week. But fears of an economic downturn may force Fed Chair Jerome Powell to hint of a possible rate cut in June during the subsequent press conference.
At least that's where the betting is in futures markets, where contracts that settle to the Fed's policy rate were increasingly priced for 25-basis point reductions in June, July and October following U.S. President Donald Trump's remarks last weekend about a "period of transition" as he ratchets up tariffs on China, Canada and Mexico.
As mentioned in this space repeatedly, the key ingredient missing from this phase of the gold bull market has been Western retail investment demand, especially from the United States, as investors have been distracted by AI and crypto.
The Nasdaq had its worst day on Monday since 2022, as investors fled the MAG7 group of mega-cap stocks and those tied to the wider artificial-intelligence trade.
With the Magnificent Seven (MAG7) not looking so magnificent anymore, along with an ominous double top at $108K in Bitcoin, the feed of credit into speculative momentum in AI and crypto is faltering.
As global gold ETFs saw continued inflows during February with holdings across all regions growing, Bitcoin and the Nasdaq, dominated by the MAG7, have led the way to the downside in the stock market.
Stock market sentiment has become extremely bearish, which is where bottoms are found. But negative readings can last quite a while, especially as President Trump's trade policy is reshaping capital flows with gold being the primary beneficiary.
While the S&P 500 was starting its decline last month, SPDR Gold Shares (GLD), the world’s largest gold-backed ETF, saw a one-day inflow of $1.9 billion. This was the biggest increase in more than three years.
With the U.S. stock market showing clear signs of having formed a significant top, it is becoming increasingly clear that Bitcoin is a speculative digital asset, while physical bullion continues to be the go-to store of value.
For the third time since the 1970s, we are likely in the early stages of a tech meltdown. The first came in 1973 with the peak of the Nifty Fifty, which induced a 48% haircut in the S&P 500 and ignited a precious metals bull market as investors rotated into safe-havens.
The price of gold increased from a low of $106 in 1975 to $850 per ounce by January 1980 as stagflation, an oil crisis, and international conflicts drove investors into both safe-haven metals.
One of my most vivid childhood memories is going through father's change every evening during the 1970s, looking for dimes and quarters minted before 1965 as the silver price soared to nearly $50 by January 1980. I still hold those coins.
The second tech bubble was the dot.com/high-tech boom of the 1990s that peaked in 2000, taking the S&P down 49% this time. But it came in two tranches, the first going from the top in March 2000 to the 9/11 crash bottom in September 2001. The second went from January 2002 to October 2002.
This turn of the century tech-wreck ignited another gold bull market, which saw the safe-haven metal move from a 2001 low of $255, to reach $1923 by 2011. I was a bit late to this gold party, arriving in 2003.
However, after accumulating large positions in several quality juniors by mid-2005, the capital gains harvested from those stocks into 2011 were life-changing compared with the silver coins found in my father's change back in the 1970s.
So here we are once again, only this time the world is experiencing a sovereign debt crisis to go along with the popping of another credit bubble.
As with the others, we should prepare for at least a 45-50% correction from the top that would eventually take the SPX down to 3,075 during this correction, keeping in mind what goes up fast comes down even faster.
Although the U.S. stock market eventually recovered in both instances, it took several years to get back to the former top each time as investors rotated capital into safe-havens – namely the gold complex.
For those with early positions into the relatively tiny precious metals mining space, the recession associated with both tech meltdowns was highly profitable and beneficial.
With investors taking profits in overvalued general equities and crypto, 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 breaking out of a 4-year base.
Over the past several weeks, quality juniors have begun to outperform gold miners. With this thin market being unloved, undervalued, and under-owned for the past decade, higher-risk/reward small-cap issues can quickly result in doubles, triples, and even 10-baggers in a hurry.
With gold stocks set to break out of a huge accumulative 4-year base, the beaten down and left for dead in 2024 mining sector is ready for a 2025 mean reversion, with many quality juniors trading at low-risk entry points.
At Junior Miner Junky (JMJ), my over two decades of experience in the mining space has subscribers and I well positioned for outsized gains. After loading our highly leveraged junior portfolio with 20 quality small-cap gold, copper, and silver related stocks, several are breaking out to multi-year highs with the sector, with others yet to catch up.
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