Market Update

The latest in financial markets

Another day, another all time high for gold. But it’s not about gold … copper, silver, even erstwhile laggard platinum are all in the game, all three even outperforming gold today.

Gold traded over $2875 just minutes ago. Media have been promoting a $3000 target; that round number is now clearly visible, even if the path thereto turns out not to be a straight line.

What next is the bigger question. I am on record as saying 2025 gains won’t match 2024 gains. Not that I would mind being shown wrong on that point, but it would be a symptom of serious illness of the US dollar.

Stocks have become a bit more democratic, with the great Mag 7 having been knocked of its lofty perch by a growing realization that, however lucrative it may be, artificial intelligence’s high costs have not been sufficiently taken into account by investors, as I have previously cautioned. Not surprisingly given that serious discussion of such wouldn’t have served the Wall Street media marketing hype well.

But it’s a nice break from routine to see companies that do unimportant things like produce and market food, clothing, shelter, transportation, etcetera getting a little market love.

Gold is brightly outshining bitcoin, which I don’t mind a bit. Aggressive establishment sponsorship suggests a suspect agenda. Like other games of chance, crypto’s set up so that over time the house wins. As a practical matter, it also underscores that gold’s diversifying value is not shared by its would be usurper; bitcoin continues to be much more correlated with stocks, acting like a tech stock without the burden of quaint notions like assets or earnings. I continue to believe it will ultimately share the fate of all forms of man made money.

Bonds are rallying nicely, recovering some long lost diversifying value. I recently observed that bonds’ correlation to stocks depends on the cause of stocks’ motion … if it’s concern about corporate profits that are driving stock movement, correlations are low; if it’s bonds themselves, correlations are high. We’re seeing more of the former now.

20 thoughts on “Market Update

  1. Finster says:

    We’re seeing Wall Street media’s game plan emerge to simultaneously blame tariffs and exculpate the Fed for the coming surge of consumer inflation. First, repeat daily if not hourly how economists (beholden either to Washington or Wall Street) say tariffs are inflationary. Second, do not repeat the fact that the Fed last hiked rates a year and a half ago, with consumer inflation still well above its own inflated target, and has in fact cut rates a full percentage point in 2024 Q4.

    Exhibit A, from an ‘unbiased’ economist:

    https://www.bloomberg.com/news/articles/2025-02-05/fed-s-goolsbee-warns-against-ignoring-tariff-inflation-impact?embedded-checkout=true

    Media apparently hold the view that the average consumer of financial news is an idiot with no memory beyond the latest news cycle and an economic ignoramus such that it doesn’t understand any of it other than what it is is told to understand by its selected experts. The possibility that inflation is a benefit to Wall Street and tariffs a cost merits no mention.

    1. Finster says:

      The media’s “sticky inflation” mantra is another dodge. The Fed stopped hiking rates a year and a half ago. Its last policy actions were easing. Yet it’s not that it’s been running lax monetary policy, it’s just that the inflation is sticky.

      Wow.

    1. Finster says:

      I haven’t followed the BOE closely over the years but from what I have gathered central bankers are the same everywhere. The Fed’s response to Covid was easy money. IIRC BOE’s response to Brexit was easy money. When you have a hammer in your hand everything looks like a nail?

      The citizens’ defense is to have a gold bar in your hand.

  2. Finster says:

    Short term the technical setup favors outperformance of stocks:gold. The VT:IAU ratio I’ve cited on a couple of occasions is back in the area where it’s repeatedly bottomed and reversed higher over the past few years. Gold has powerfully outperformed stocks over the past several weeks, and based on this indicator, is is likely to pass the baton to stocks over the next several. This ratio incidentally is silent on price performance of either in dollar terms, and on the longer term outlook for both.

    If you roll snake eyes several times in a row, it doesn’t necessarily mean you will next time. But it might mean your dice are loaded. If, contrary to my expectation, gold outperforms stocks over the next several weeks, something has broken, and it’s something big.

    Stay tuned…

  3. Mega says:

    Lots of large banks are suddenly ramping Gold, thus we might be in for a pull back………..
    Mike

  4. Finster says:

    https://www.gold-eagle.com/terrified-investors-are-clutching-their-gold-ultimate-safety-blanket

    ““I love gold. I lead with it—it is one of my favorite commodities. But I didn’t love gold in ‘21 and ‘22 because it wasn’t a good hedge against inflation,” she said.”

    A common error. Gold was an excellent hedge against inflation. Like many analyses, it blithely assumes consumer price increases equal inflation and fails to account for the lag. The bulk of the inflation occurred not in ‘21 and ‘22, but in ‘20. That’s when the Fed launched its multi-trillion-dollar monetary bazooka. Gold responded instantly. Consumer prices took a year or two. Investors that followed lagging data missed out.

    Faulty premises cost money.

  5. Mega says:

    Am loving “Trump 2.0″…….they tried to kill him & this time he come back swinging!
    The USAID thing is like the Church committee of the early 1970s looking at the then deep state.
    Trump is cleaning house & these parasites are getting killed!

    Much more to come i hope………

    1. Finster says:

      This much is beyond question: It’s an improvement over the four year national nightmare we just endured. It’s hard not to marvel at a 78 year old guy that can take what he has and still come out on top.

      Trump has the advantage of having served a full four year term, spent the next four on the outs, and having been persecuted the whole time. He’s learned a thing or two from it. He’s doing a great job on on illegal immigration. He risks exceeding his brief on some other fronts; for instance getting too granular on business and trade. The last thing the economy needs is more government micromanagement. Cut red tape, put in some modest speed-bump type tariffs, and let the free market do the rest. And the government needs a sovereign wealth fund like a street derelict needs a safe to store his gold hoard.

      He’s wise to step back from hectoring the Fed for lower interest rates. We’ll have to see if it lasts. The economy is still suffering from having endured over a decade of artificially low rates … including too much debt, inflation, an expanded wealth gap, and a monster stock market bubble.

      Good move on the USAID thing; one cockroach down, thousands to go.

      He’s pushing the limits of executive power; something every recent president has done. We have three branches of federal government, and it’s the legislature’s prerogative to legislate. Not to mention powers reserved to the states.

      The attempt to slash government by cutting the government workforce is a bit backwards. Government employees are there to implement federal regulations. If you eliminate the workers before you cut the regulations you’re going to create a monster mess. Start with cutting regulations. The tax code, Social Security, Medicare, Medicaid, housing, education, medicine … all cry out for simplification. Cut the hundreds of thousands of pages of federal regulations and then you will need fewer federal workers.

      It won’t be easy … the Deep State is fighting back. And the federal debt monster didn’t just appear when he took office and won’t just go away either. It’s already in a self-reinforcing spiral big enough to crash to global financial system … a something big that could break at any time. Runaway gold prices would be an early omen.

    1. Finster says:

      Maybe bigger than that … Argentina elected a libertarian … populists and nationalists are gaining in Europe … Britain had its Brexit … more in store for London?

  6. Finster says:

    Would London sacrifice its status as a global financial center?

    Would Apple sacrifice its rep for privacy and security?

  7. Mega says:

    Gold up 1.2% at Gold open in London…….everyone trying to get their Gold BACK from the BOE….Ho Ho Ho

  8. Finster says:

    Whoosh!

    Gold is up 46% since this time last year.

    The rush to real money is on.

    The 9.1% surge over just the past four weeks also qualifies as stoutly overbought. So a selloff should be expected at any moment. My guess is traders will try to notch the $3000 target first … though almost anything is possible … this is literally uncharted territory.

    The media’s favorite explanation however is tenuous at best. Copper is up almost the same amount – actually just a hair more – over the past four weeks.

    So either central banks are secretly stockpiling massive quantities of copper or the media are missing the real story.

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