The first three months of 2025 promised to be a bumpy, but markets should brace for even more chaos and uncertainty in Q2. Few expected the world to be on the verge of a full-on trade war, along with the Federal Reserve predicting stagflation during a sovereign debt crisis.
President Donald Trump has named April 2 Liberation Day, the date he will unveil reciprocal tariffs on countries around the world. But the possible repercussions of a hostile U.S. trade policy is not the only thing concerning markets, the growing fear of WW III is also weighing heavy on investors’ minds.
The collapse of a fragile ceasefire in the Middle East, along with Russia's conditional stance and ongoing attacks having diminished the prospects of a resolution in Ukraine, have intensified global risk aversion.
NATO Secretary-General Mark Rutte has warned Vladimir Putin there will be a "devastating" response if Russia were to launch an attack on Poland or another member state.
This high-tension geopolitical environment has reinforced the demand for safe-haven assets to assist in taking the gold price to new unprecedented heights above $3100 per ounce.
Since President Trump's inauguration in January, gold has been on a parabolic run that has seen the safe-haven metal rise more than $400 within his first 50 days back in office.
In fact, gold has outperformed every other major asset class since Trump became a second term President, including Wall Street’s benchmark S&P 500, the Magnificent Seven Stocks, and Bitcoin.
As I type this missive, both gold and silver prices are solidly higher heading into quarter-end next Monday, with Comex June Gold Futures moving to a new record high of $3117 per ounce and Silver Futures moving above key overhead resistance at $35.
A steady stream of safe-haven demand is keeping the precious metals prices elevated. President Trump’s announcement this week of tariffs on all auto imports was a key catalyst, reigniting concerns that Trump may not roll back his tariff plans.
The real-world consequences of heightened tariff rates could be a tremendous strain on the American consumer. The Yale Budget Lab earlier this month estimated that Trump’s tariffs could cost the average household $2,000 in inflation-accounted disposable income a year.
Prices have already gotten much more expensive over the last five years because of heightened inflation. The cumulative inflation rate during that period, according to the Consumer Price Index (CPI), has been over 23%.
The U.S. consumer has not experienced a higher five-year inflation rate in over 30 years. The median five-year inflation rate since the late 1940s is only a bit more than 14%.
Last week, Federal Reserve Chairman Jerome Powell said the central bank expects GDP to grow just 1.7% this year, with PCE inflation rising to 2.8% in 2025 – meaning the Fed is already predicting stagflation.
The Conference Board’s Expectations Index released on Monday slumped to a 12-year low of 65.2, which it noted was well below the threshold of 80 that usually signals a recession ahead. The index is based on consumers’ outlook for income, business, and labor market conditions.
On the heels of the Conference Board’s survey that showed U.S. consumer confidence dropping for a fourth straight month in March, ratings agency Moody's said that U.S.' fiscal strength is on track for a continued multi-year decline as budget deficits widen and debt becomes less affordable.
The agency said in a report that the country's fiscal health deteriorated further since Moody's lowered its outlook on the U.S. triple-A rating in November 2023.
"Even in a very positive and low probability economic and financial scenario, debt affordability remains materially weaker than for other Aaa-rated and highly rated sovereigns," Moody's said.
Economic surveys for March have been notably bad. The Philadelphia Fed’s non-manufacturing business outlook fell to its lowest level since the early days of the Covid-19 pandemic. Major U.S. airlines have also warned of a slowdown in travel spending.
U.S. consumers are starting to curb their spending in response to high prices and a worsening economic outlook, according to consumer finance company Synchrony Financial.
Americans have been accumulating more debt amid strain in their finances, with delinquencies edging up for auto loans, credit cards and home credit lines, the Federal Reserve said last month.
American businesses are also losing confidence in the U.S. economy under Trump, as tariff uncertainty is causing complete chaos in boardrooms across America.
CNBC’s CFO Council quarterly survey for Q1 2025 learned that America’s top CFOs are increasingly pessimistic about the economy due to President Trump’s “disruptive” and “aggressive” tariff policies.
Around 60% of respondents believe the U.S. will fall into a recession by the second half of this year, with 15% believing the recession will come in 2026.
When this survey was conducted last quarter, prior to the tariff wars and trade volatility, only 7% of CFOs believed the nation was heading into a recession. The rise in this figure is a glimpse at how heavily trade uncertainty is destroying confidence.
Moreover, the dramatic widening of the trade gap is adding to heightened anxiety about the economy as Trump’s tariffs raise concerns about a stagflationary recession.
The U.S. continues to import gold at record levels, with stockpiles surging over the past two months over Trump tariff fears. New York gold inventories climbed 25% last month, having jumped 43% in January, with COMEX inventories at 42.6m oz on Tuesday, double the inventory in December 2024.
A perfect gold storm began with an historic 13-year cup & handle breakout above $2100 at the end of Q1 2024. Technically, Gold Futures have recently exceeded the initial Cup & Handle breakout target of the psychologically important $3000 per ounce. The safe-haven metal has now set its sights on the logarithmic target of $4000.
This uber-bullish pattern was established in 2020 as gold topped out and began what eventually became a 4-year handle-making phase, then completed the 13-year pattern consolidation by breaking out above $2100 at this time last year.
However, a now parabolic move has taken Gold Futures to a monthly Relative Strength Index (RSI) above 83. This suggests that perhaps there will be an intermediate term peak as soon as next week, followed by a bout of healthy profit-taking.
On the downside, there is support at $3000 and $2950, with stronger support on its rising 18-week moving average at $2795. A drop in Gold Futures below strong chart support at $2800 would produce near-term technical damage and begin to suggest an intermediate-term market top being in place.
On the upside, after reaching its first primary Fibonacci target at $2461, the next Fibonacci target in gold is at $3336 based upon the depth of the 2011 to 2015 pullback.
Meanwhile, gold stock price weakness continues to be bought as the S&P 500 appears set to renew its decline after a back-test of its 200-day moving average earlier this week.
The S&P 500 is on course for its worst month since September 2023, as the Trump tariff turmoil and war fears meets investors worrying about overvalued AI companies hitting investor sentiment.
Following one of the fastest weekly selling rates on record, the Nasdaq has formed a bearish flagging pattern below its 200dma and the cash is finding a home in the previously neglected precious metals mining space.
President Trump's trade policy is reshaping capital flows, with the gold complex being the primary beneficiary. As historically overvalued general equities are now mean-reverting to the downside, historically undervalued gold stocks have been mean-reverting to the upside.
According to Reuters this week, funds that invest in gold miners are set to attract their largest net monthly inflows in more than a year in March, as record-high gold prices improve firms' profit outlooks and boost cash flow.
After a recent a 4.5-year cup & handle breakout above major multi-year resistance at $43 in GDX and $54 in GDXJ, the technical targets are $60 and $85, respectively.
With the gold price now rising faster than inflation rates, the value in the sector lies in both silver and quality junior equities. Following a grueling 4-year bear market in silver and the junior mining sector into 2025, we appear to be in the early stages of a massive breakout in these high-risk/reward sectors as well.
With gold making 46 new all-time highs in 2024, and 20 more new highs already in 2025, it stands to reason that this is shaping up to be the year silver finally makes its run following 4.5 years of consolidation, mostly below $30, to create a strong base.
A monthly/quarterly close in Silver Futures above $35 at the end of March next Monday would open the door to $40, and a possible test of the all-time high at $50 later this year.
With gold stocks breaking out of a huge accumulative 4-year base, the beaten down and left for dead in 2024 mining sector is in the process of a 2025 mean reversion, with many quality juniors still 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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