Annual and quarterly updates
The latest Synthetic Systems. As this is a new year, we have an annual as well as a quarterly update. As per custom, annual runs are designated by whole numbers and quarterly by decimals.
Both series of charts are maintained at Synthetic Systems, accessible at any time via the Synthetic Systems menu item. Each series includes several past runs so that you can see how previous forecasts have worked out.
Recall the vertical scale is not absolute but relative; the information resides in the relative slope of the plots. which are each vertically positioned to conveniently be plotted together. The literally off-the-chart gold plot simply reflects its wide range over the full time window. Notice that copper is expected to rise about the same amount over the next couple of years … it’s not the absolute level but the change that matters.
Notable features of the forecast are an equity correction this quarter, and a corresponding bounce in treasuries. SS anticipates continued strong performance from copper and gold over the coming several quarters. As a reminder, Synthetic Systems may be the best single technical forecasting tool that I’m aware of, but it is only one tool and should be complemented with others including fundamentals and valuations.
SS takes a sort of four corners approach to global markets. Assets not specifically called out are interpolated, more generally constructed as linear combinations of the four. For example, high yield bonds can be read in between the stocks and treasuries plots. Silver would be a composite of the gold and copper plots, a bit closer to copper. Likewise for platinum, though a bit closer to gold. As a rough approximation, US stocks would be stocks plus a bit of treasuries while XS stocks would be a stocks minus a bit of treasuries (or minus and plus a bit of gold and copper – a stronger versus weaker dollar respectively), suggesting that SS foresees XS outperforming US again this year.
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Wow…..Its 9am here in blighty & WILL YOU LOOK AT THEM METALS GO BABY!!!!
Corporate media continue to speak with forked tongue. Now gold is rallying supposedly on “safe haven” buying prompted by the Venezuela story. It’s Roseanne Roseannadanna world … it’s always something. Gold is up because of a virus. Then it’s up because of Ukraine. Then the Middle East. Then tariffs. Or just the all-purpose “uncertainty”.
Media’s simplistic headline-driven narrative meanwhile has no explanation as to why gold is actually up less than copper on the Venezuela news. Copper is a “safe haven” asset now? Same old same old … either they’re economic ignorami or misleading to cover their own inflationary malfeasance. The big picture hasn’t changed … metals are flying because fiat is swirling down the porcelain receptacle. The financial establishment is losing credibility and people want real stuff it can’t inflate.
This is the same media that whenever the word inflation or affordability is mentioned, can readily remember tariffs but can’t remember the Fed printing up trillions of dollars and cutting interest rates. It’s given us utterly no reason be trusted to tell us the truth about Venezuela or why metals prices are soaring.
This is one of the few attempts I’ve seen in the media to actually address the metals’ response to currency decline. Though it relies on some fallacies, Roberts at least deserves credit for a reasoned argument. Here’s why it still falls short.
Precious Metals Aren’t Predicting Economic Collapse
Let’s start with the title. No, metals prices aren’t predicting economic collapse, they’re tracking currency collapse.
Next, the claim that government “inflation” statistics show that the currency is holding up just fine depends on the veracity of those statistics. Market prices tell a different story. The dollar has not only depreciated against metals, but against most other assets.
Not to mention the widespread public perception of an affordability crisis yet further calls into question the statistics that Roberts seems to take as gospel. Without implicitly trusting government numbers, there is no way to dismiss the possibility that yes, inflation is indeed running much higher than the stats admit.
Roberts does not acknowledge the Fed’s massive printing and rate cutting, inflation by definition. No mention of the federal government debt spiral, approaching $40T and adding another trillion every few months.
That bond yields aren’t higher can reflect much more than tame inflation. It can also reflect financial repression. The Federal Reserve is buying $40B a month of Treasuries, supporting prices and suppressing yields. Oh, they’re just buying on the short end? Of course … Treasury has shifted most of its issuance there. The combined effect is as if the Fed were buying across the yield curve.
For reasons that aren’t clear, momentum is a problem for gold prices, but not for tech stocks or bitcoin.
Roberts’ assertion that gold is not money because it’s not used in everyday transactions is purely semantic. There is no universal law that says every form of money performs every function of money. The dollar may be king when it comes to making everyday transactions, but it’s an utter failure as a store of value. This is where gold comes in. Gold is further displacing the dollar as a global reserve asset, assuming a growing role in international and institutional transactions.
Roberts asserts “Let’s start with the assertions that fiat currencies are collapsing. There is a complete lack of evidence to support that statement.” The evidence is stark. The fundamental fact Roberts misses is that the price of a commodity involves not one, but two values; the value of the commodity and the value of the pricing unit. It is a ratio. That the value of dollars is declining relative to the value of these metals as well as most other assets is beyond dispute.
I think this hits the main points. If you see any others that raise questions, let me know and we’ll address them.
https://news.sky.com/story/35-000-homes-without-power-in-berlin-for-days-after-left-wing-activists-attack-power-lines-13490546
Loony left
2025 was the year it cracked. The financial establishment tried to bury gold in the dustbin of history by promoting a fake substitute. It literally attempted to pass it off as “digital gold” and adorned its media stories with images of gleaming golden coins. A gullible public ate it up for a while, but reality has a way of reasserting itself. It hasn’t given up, the propaganda continues to flow, and as Wolf Richter says, nothing goes to heck in a straight line, but heck is ultimate fate of all man made money.
very much wot i thought years ago……….
I saw $1000 silver…….i think that’s tad too much…….but $140 might be on the cards
Given the gold and copper plots, SS apparently sees a bright future for silver and platinum as well. But expect a bumpy ride. In the long run there is no ceiling on the price, because the pricing unit can go to zero.
As $->0, P->♾️.
Fingers crossed
The metals we track have had a very strong start to the year. In their ETF incarnations, since Friday’s close, as of last check:
CPER: +5.37%
IAU: +2.69%
SLV: +5.52%
PLTM: +7.09%
Broad commodities put in a respectable showing as well:
COMT: +1.78%
As I’ve remarked before, daily gains of this magnitude are unsustainable and prone to sudden sharp reversals. As always, cautious positioning and sensible diversification are prudent.
I just want to emphasize that although I designed Synthetic Systems, I do not tell it what to think. It’s pure math, operating on pure fact. Its purpose is to provide an independent view; if I could steer it to reflect my market opinion, it wouldn’t fulfill that role.
Here is another perspective on the investment outlook from Vanguard:
Vanguard’s outlook for financial markets
Vanguard’s projections can be looked on as complementary to Financology’s, being more detailed in terms of asset classes and less detailed in time frames. It’s interesting to note nevertheless that Vanguard sees some of the same themes, including commodities and XS stocks both outperforming US stocks.
……………& THey off!
Just been feeding Mum her Tea (She had a panic attack just before so i sat with her for awhile) & i had Bloomberg on…………..TIN having a big day, strangely all the metals on fire……this must feed though to inflation?
Mike
I’d call it a symptom of inflation. When dollars lose value, it takes more of them to buy the same stuff.
This means prices rise. But they don’t necessarily rise uniformly. It might turn out that bond prices rise first, then stock prices, then commodity prices, then consumer prices, then labor prices … which partly accounts for why so many economists are confused. The popular habit of identifying inflation with consumer prices alone has left the field a hopeless mess.
Best to your mum, Mike. Looking forward to more of your Dispatches from England…
Are we seeing EJ’s “Crack up boom”?
I’m not sure exactly how EJ would define it, but only a small segment of the economy here is booming. Vast sums of capital are flowing into things like talking computers and space exploration. Most people are struggling. People have smart phones but can’t afford houses and many are even upside down on their vehicles. Many are woefully short in retirement savings and can’t handle a few hundred dollar emergency expense. Just last week a hard working friend was distraught over one. The very first stock I bought was Cedar Fair, an amusement park operator. Last year it merged with another amusement park operator, Six Flags. Whimsically appropriate ticker FUN. Together they run some of the country’s finest amusement parks, successful for decades, but the past year or few business has been going down the tubes. Too many of their traditional customers either can’t afford to have fun or don’t have time because they’re working multiple jobs. Conventional ecostats like CPI, GDP, and employment aren’t picking it up, but the economic reality on the ground is worse than what we normally see when economists are calling it recession. You could say part of the economy is booming and the rest is cracking up.
Blast from the past:
CNBC Your Portfolio 1994 0624
This was must see TV for me as a beginning investor 32 years ago. Some interesting differences and similarities between then and now.
Step back in time to before the dotcom bubble. A bear market in bonds. Gold and commodities didn’t have to shoot the lights out to get mentioned on CNBC. Tech stocks selling at 8-12 times earnings. Come to think of it, P/E ratios getting attention to begin with.
I don’t think people can’t afford a trip to 6 flags so much as they don’t want to. Tastes change & they rather be on line.
My point was about the “K-shaped” economy, a well documented phenomenon. The amusement park anecdote was one element of it; whatever else it is, being online is certainly a much cheaper way to spend time. It’s one facet of a broader trend; people have been cutting back on meals out too. When beef goes up and people switch to chicken, it’s still inflation, even if government economists want to pretend otherwise. American standards of living have been declining in waves since the turn of the century, paralleling the rise of federal deficits and monetary profligacy. We have snazzier toys than we used to, but the basics are harder to come by. When for example it takes two incomes to buy a home, a car, etc that used to be affordable on one, that’s working twice as many hours for the same stuff. Now even two incomes are losing ground.
Where is the lost purchasing power going? Part of it is that excessive diversion of capital into areas that would be sensible for a truly prosperous society, but for one falling short on the basics, are frivolous. The Austrian school calls this “malinvestment”, a symptom of inflation. Another big part of it is the cost of global domination through wars like Iraq, Afghanistan, Ukraine, etc. These things both cost money and destroy resources. The money gets printed up, loses value, and unaffordability happens. The cost is cleverly hidden, but can’t be escaped. It happened in the seventies from guns ‘n butter, eg Vietnam. The latest waves are the result of the trillions printed in the wake of Covid and Ukraine, including the hit to the dollar from using it for Russia sanctions. The fall of the dollar, declining living standards, and soaring metals prices are all connected. You can print money, but you can’t print value.
Billionaire investor Ray Dalio … rising gold prices reflect a weakening economy and a national currency that is decreasing in value
More Americans Are Working Multiple Jobs Than at Any Time Since 1999
“The surge of Americans holding multiple jobs is more evidence of the “K-shaped” economy, where higher income earners are thriving and those on the low end are struggling to get by.”
Periodic Table Of Commodities Returns 2025
“Explore how natural resources have performed over the last 10 years on the interactive chart below.
Click a commodity to see its trend or the sidebar to reveal the historical pattern of your choice.”
Trump says U.S. to ban large investors from buying homes
““For a very long time, buying and owning a home was considered the pinnacle of the American Dream. It was the reward for working hard, and doing the right thing, but now, because of the Record High Inflation caused by Joe Biden and the Democrats in Congress, that American Dream is increasingly out of reach for far too many people, especially younger Americans,” Trump said in a Truth Social post Wednesday.”
This a bandaid substitute for addressing the source of the affordability problem (inflation), but it could be worse … it singles out single family homes, not all homes as the headline implies.
It’s not unreasonable, but is a little like giving the economic body a systemic poison, and then going in with surgery to remove bits of it where its effects are most obvious. For full effect, you have to stop giving the poison. To mix metaphors, it’s playing whack-a-mole with inflation … suppress the symptoms in one place and they just show up somewhere else. It didn’t work in the seventies and it won’t work in the twenties. The only cure is to stop the inflation at its source.
“People live in homes, not corporations”, he added”.
Please remember that when thinking about tax policy. Your tax reform stacked the deck in favor of corporations by lowering their tax rates below that of many people.
The optics of the American operation in Venezuela are deteriorating. The US is taking control of Venezuela’s oil. The claim is it’s taking back what was previously stolen, but the full history is complicated. This could backfire badly … what moral argument would the US have if China declared it wants Taiwan’s semiconductor industry and just took it?
The best case for the Venezuela operation I’ve heard so far is that it’s a question of Venezuela being influenced by the Russia and China or by the US. If that’s the choice, it should be the US. But the rest is a stretch at best. Drugs aren’t it; US has legitimate domain over drug commerce at and inside its own borders. It’s not oil, either.
As for the oil, expect little in the way of impact on oil prices. Venezuela has the world’s largest claimed oil reserves, but the thick, sulfurous crude is expensive to extract and refine. At current prices, the economics for major investment aren’t favorable. Its oil infrastructure is in shambles from years of government management and sanctions, and will take years to bring into efficient operation … if other unforeseen events don’t intervene first.
Mega’s Dispatch from England:- The Corpse staggers on
I was going to do a round up of all the Geo-political stuff but its influx & i just be making blind guesses not the educated ones i try for.
Nope its like watching an 80’s horror/Sci Fi flick where the monster will not quite die!
The Empire is trying EVERYTHING to carry on its sacking of the World resources. The New Monroe doctrine is just a decoy, the empire will nail down its back yard before setting out again to crush all resistance!
Meantime i saw that nasty incident with ICE officers. Its all fine fun calling her a “Domestic terrorist” but many will see a friengted woman in flight mode. I suspect this might very well be the spark that lights the fire………bit like Nixon’s VP calling the young people shot at Kent state “Bums” (Pro tip here, shooting white upper middleclass kids is a good political move).
I think there might be “resistance” …..am i am not talking Demo am taking direct kinetic force. Locals attack ICE in DNC areas & local police step back……….Trump try’s to send in the FBI to go ” Hoover” (Co & Intel pro) on them……only for them to Send Mulder & Scully 😉
This tragic event does suddenly present a operturaty for the DNC to light some fires. The Lib Press will love it!, you can just smell those news TV ratings right now. Just pull a few stories with a “Rodney King” spin…….& LA Riots here we come.
Anyway, its been a long day, but Mum’s panic attacks have dropped off & i need to get her ready for Bed,
Peace to all.
Mike
Hey Team,
Former poster over at iTulip, and long-term lurker here.
Firstly, thanks for everything’s. SS and commentary here has been most helpful in maintaining our extremely successful positions.
Secondly, EJ just posted on LinkedIn he just sold his remaining 20% silver position he’s been holding since he sold 80% nearly 15 years ago.
And he is planning on relaunching iTulip soon!
Thirdly, I’ll try to contribute a bit of value(hopefully) in exchange for the immense value I have received.
A few bullet points:
Venezuela Oil may be a story, but it may be only a secondary/tertiary story. It will take a few years to raise Vz production to 1.5m and longer to get to 2m. However doing so applies downward pressure to pricing and could move the needle in hurting Russia and Iran who are existentially dependent on energy prices.
I think it fits my feelings on a potential Trump strategy to pump, pump, pump to recreate an 80’s Oil Glut that supported economic growth(on the back of cheap energy) and contributed heavily to the collapse of the Soviet Union(their energy export dependent hard currency reserves cut in half).
Perhaps they try to recreate that cheap energy economic growth while hurting Russia/Iran.
I think that’s a tomorrow story.
However, the bigger today story is Vz strategic minerals.
Much as Taiwan(TSMC)/US/Netherlands have a monopoly on advanced semiconductors(<3nm), China has a monopoly on strategic mineral supply chains.
Action directed at Vz helps to break China’s monopoly on strategic minerals.
As does the quite hyperbolic Greenland story, where the U.S. already has authority to station troops with notification to Greenland/Denmark.
It’s highly unlikely China would attempt to seize Tawain and its advanced semicon chip fabs(90% plus global capacity) as seizing them in operational condition and operation them afterwards would make the raid seizing Maduro look extremely easy.
Having worked in semicon and the military chip fabs are incredibly hard to build and run, and incredibly easy to disrupt/destroy.
If it came to that, and we lose advanced semicon production for 5-10 years we would see a global depression akin to a 3-5x GFC.
These are moves that align with a narrative that a war is already being fought.
It’s just that most of it has fallen under the threshold of public detection.
Thanks Chris. Appreciate the iTulip update. In case your mention of Taiwan was responsive to mine, I hope it’s clear I was only conjuring a hypothetical scenario to make a point about Venezuela. Interesting bit about EJ and silver … the rapidity of its recent ascent reminded me of his call fifteen years ago. As it happens I just trimmed my own position as the rally took it well over my target weight; shifted a bit from SLV to oil and broad commodities via the energy heavy SPGSCI ETF COMT. I still like and maintain a long term allocation to silver and platinum, though they be a little overheated in here. Keep us posted …
“Secondly, EJ just posted on LinkedIn he just sold his remaining 20% silver position he’s been holding since he sold 80% nearly 15 years ago.”
Am stuffed
You just can’t keep silver down. I sold 5% of my SLV position yesterday, another 5% today, and still have a 15% bigger position than I did a mere month ago.
Heads up…………..Russia just hit a Nato base in Ukraine with Oreshnik
Trump says he wants government to buy $200B in mortgage bonds in a push to bring down mortgage rates
This will be ineffective. It will probably make things worse.
Anyone with an economic memory longer than five minutes should remember what happened to house prices after the Fed slashed rates and bought bonds in the wake of Covid. They soared. A lower interest rate allows the same monthly payment to buy a larger mortgage. So not only is it historical fact, but common sense. Housing does not become more affordable by virtue of lower interest rates.
The way to solve an affordability problem is to start by asking: Why is there an affordability problem? We addressed that in Why Is Housing So Unaffordable? In short, the purchasing power being appropriated by the government to spend on a plethora of programs from welfare to corporate subsidies to military operations and world dominance has to come from somewhere. It’s not manna from heaven.
So economically, this ploy is like taking money out of one pocket to put in the other. Not to mention a massive irony glossed over in the article … the last time housing became more affordable, it was deemed a crisis that government needed to solve.
Not possible it’s best the government just stop its meddling?
Up date on that missle strike…………..they hit ukraines main gas storage plant
Wot happened to EJ’s business projects?
Mike