Rocket fuel for the fiat fire
Let’s make this a short one, if only because we need a new thread quickly. Markets were rocked today by news raising fears about the quality of loans in the banking system. This in turn prompts fears of even more aggressive easing by the Fed.
Credit Fears Resurface Dragging Wall Street Lower, Gold Breaks $4300/oz
Dow Jones Futures: Stock Market Falls On Bank Fears, Oracle Slips Late. What To Do Now.
Already good enough for new all time highs in gold: $4369.72
Or should we say new all time lows in $…
Is a gold correction imminent? I have been looking at $4400 as a ceiling for this leg up, last mentioned here:
https://financology.net/2025/09/26/a-long-trip-to-nowhere/#comment-7569
It was already unambiguously overbought at $4200, having gone superexponential, never a sustainable situation.
What next? The function of a correction is literally to relieve an erroneous or excessive condition. Corrections often overcorrect, but to return to trend would put it back in the $4000 neighborhood, taking into account traders’ fondness for round numbers. I don’t see it going very far below that or for very long, because the psychology is now such that anything with a three handle would appear a bargain to dip buyers.
I have to offer the disclaimer of course that there are no hard and fast rules, least of all in hard and fast markets. But in any case the most probable course from here is a trading range between $4000 and $4400 for at least few weeks. After a well deserved rest, gold would then be free to resume its northward trek.
A word on treasuries. The bond market had met the Fed’s September rate cut with rate hikes initially, but since has begun to enact cuts of its own, rallying since 1006. Though still long term bearish on bonds, I’m warming up to them on a cyclical basis. At least for now they appear to have returned to their counter-stock ways.
A contrary opinion. Adam Hamilton agrees that gold is overbought yet still has excellent long term prospects, but unlike me, he is looking for a deep selloff as opposed to a trading range.
Gold’s Biggest Bull Ever Signals Euphoria and Imminent 20% Correction Risk
As a practical matter, it’s not a bad idea to have a plan in place for either outcome.
Quote of the week:
“Former St. Louis Fed President James Bullard said the run-up in gold is “a little worrisome from an inflation perspective,” because it suggest people don’t think the Federal Reserve is reliable or able to tamp inflation down.”
Gold is the hot topic at the IMF and World Bank meetings. Could that help put a lid on prices?
Works for me.
getting killed!
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World’s banking system risks a $4.5tn shock from the shadows
Traders fear problems in America’s private credit market could spread to Europe
https://www.telegraph.co.uk/business/2025/10/18/worlds-banking-system-risks-a-45tn-shock-from-the-shadows/
In other news:-
China has reacted to the Dutch (European) taking their micro chip plant by refusing to export finished chips required by the Euro car producers………….
https://news.sky.com/story/first-test-of-chancellors-securonomics-policy-does-not-bode-well-13451118
Gee Wiz……….you got THE most expensive energy costs on the planet & BIG & increasing TAXES…..thus no investment…….wonder why?
Bonner has it right … the policy needed most is less policy …
Turning Japanese
Mega’s Dispatch from England:- Royal FLUSH
For sometime i wondered WHY Prince Andrew is so hated, or targeted directed hate?
Sure, he an oddus fat sh1t whom is a coward & a Bully. I worked with a guy who severed with him in the Royal Navy………he reg pick fights with ships crew & challenge them to “Milling” Eg Boxing fight…….& you be expected to lose.
One Young officer had enough of this crap & rather than hit canvas went full “Ali” on him.
Andrew was seeing stars for days. Once the ship docked Andy ran home to Mummy & the head of the Navy tod the officer that his career was over….& advised him to leave.
So, not my cup of tea……………but why the hate?
Sure he a then 42 year old guy had sex with an almost 18 year old girl…………gee that never happened before. The age of consent in UK is 16.
Now, a different picture is coming into focus…………..Andrew was planning a Coup!
This has been going on for a long time, just like his great uncle who “danced” wit the Nazi’s & was driven from the Trome so Andrew has followed. His plan to replace Charles by a massive campaign is nuked, William WILL take the crown.
The knife was thrust late week with the news that Andy will have to give up ALL his royal titles!!!
As fr Andy, expect to see VERY little of him from now on
Mega on Monday:- Back to the Future
Well, its nuts again………………….any ideas
“But in any case the most probable course from here is a trading range between $4000 and $4400 for at least few weeks.”
Gold had yet to break $4200 when I first called a $4400 ceiling, and we’ve seen nothing since to invalidate it. The high water mark so far is $4378.31. The possibility of a deep correction has been on the table and is still there, but that fades with each passing hour that it doesn’t get started. Our $4000-$4400 trading range is still the highest probability course for the next few weeks.
This would be good news for gold bulls, as it would solidify the prospects for another leg higher afterwards. Perhaps counterintuitively, an imminent advance past $4400 would be too far too fast and also augur poorly for the sustainability of the larger trend.
There are multiple structural differences between this advance and those into previous peaks like 1980 and 2012. One being that stocks were much cheaper, offering a viable alternative, and another being that the federal debt wasn’t in runaway mode, making bonds a viable alternative. The last thing that gold bulls should be rooting for would be a blowoff top. Slow and steady wins the race.
What else is different this time? The world is in the process of returning to gold being its main reserve currency. It is also en route to being a larger part of private investors’ portfolios. It’s hard to overstate the significance of a major Wall Street investment house advocating for replacing the traditional 60:40 portfolio with a 60:20:20 mix. Even a small move by investors in that direction has tectonic implications:
A 20 Percent Portfolio Allocation to Gold and Silver Is Going Mainstream
As I have written before, it is not possible for everyone to buy their way to a higher allocation. Every purchase is also a sale. The only way investors can as a whole increase their allocations is for the value to rise relative to other assets.
I think Geo-politics will be playing as big a role as economics……lets see where this goes
Where does economics leave off and geopolitics begin? Even war and rumours of war ultimately influence gold prices via financial channels, because wars are financed through inflation. Contrary to facile media doctrine, it’s not just some vague amorphous fear factor, it’s a rational reaction to being put on notice that the printing presses are about to go into overdrive. Were it not for this, why couldn’t currency itself be as strong a haven as gold? It works the other way around too. War is always economic to at least some extent. Geopolitics grabs headlines because that’s where the drama is, and exposing the source of inflation would make it difficult to perpetrate, but it’s debt and money printing that are moving gold. Geopolitics is just the cover story.
So if war causes inflation, the ultimate prime mover is geopolitics. But let’s look deeper. Probably 3/4 of all war wouldn’t happen without inflation. Just imagine for instance how much public support the administration would have gotten for the wars in Iraq and Afghanistan if it had had to tell the voting public each family would have to pony up thousands in taxes to cover the trillions in cost. It was only able to sell those wars because it was able to bury the cost in inflation. It was only barely able to pull it off with Vietnam until it failed.
Geopolitics is the actors and their lines. Economics writes the plot. Imagine how much support the US would have sent to Ukraine if the administration had had to tell the public it was going to have to add the cost to its tax bill? Unless the answer is it would make no difference, it’s not such a stretch to say that it’s more the other way around … inflation causes war … and that
economics causes geopolitics.
So we see gold has sold off sharply. Much as we had anticipated. It doesn’t rule out a deeper correction or even a further advance, but keeps our most likely $4000-$4400 trading range scenario firmly intact.
To put today’s sharp decline in perspective, it reverses only eight days of gains. As recently as last week, these same levels were regarded as very high. It reflects the exit of fast money jumping on a momentum trade, but does nothing to the underlying fundamental drivers – runaway US federal debt, a Fed hell-bent on inflation, gold’s comeback as world reserve currency and core portfolio holding – of gold prices we have been talking about. That they’re going to get where they’re going at a less frenetic pace than over the past few weeks is a bonus to long term investors.
Kitco
The very short term is a roll of the dice, but on a very short term basis gold is now just as oversold as it was overbought on a merely short term basis yesterday. I suspect a bounce soon, but that’s a trader’s game. For now, gold is cheap at $4000, dear at $4400.
Agreed lets see if it can put in a base $4,000 ish
I see a lot of superficial media comparisons to 1980, asserting that gold is now higher on an inflation-adjusted basis. One obvious flaw is that they don’t factor in inflation, but rather the CPI. Garbage in garbage out.
And this is hardly 1980 when we had a Paul Volcker standing ready to break the back of inflation.
Update on China/EU Chip fight:-
https://www.autocar.co.uk/car-news/new-cars/volkswagen-warns-factory-disruption-new-chip-crisis-looms