Gold is down, and the USD is down. The market is celebrating the newly nominated Treas-Sec, who the market believes will fall in line behind Trump in making America great again. One way that would happen, thinks the market, is that a hedge fund manager will be good for the markets. It’s another contrary indicator for our Q1, 2025 potential contrarian time target. You can click the image for the article.
Investors viewed the pick favorably and see the hedge fund manager as someone who will be supportive of the equity market. They believe he may also help mitigate some of Trump’s most extreme protectionist policies.
If he mitigates some of Trump’s most extreme protectionist policies, so much the better thinks the market. Tariffs would create inflationary pressure. A mitigation of that would allow interest rates to fall and keep the Fed dovish, thinks the market. Here is the 7-10 year Treasury bond fund, looking like a buy (if I add to Treasury positions, I will probably stay conservative and keep the durations shorter, in the 1-7 year range).
Gold is getting creamed because… America great again. We could be looking at the first test of the uptrending daily SMA 200, currently at 2419. It would be painful… and healthy on the longer-term view. But let’s also realize that today is an inflammatory news day. A knee-jerk. So gold could just be getting a quick hammering. But for good mental health, gold bugs should keep in mind the prospect of a ‘C’ leg to the SMA 200, rather than get surprised by it if it happens.
Meanwhile, USD is also getting bonked, presumably because a hedge fund guy will take over Treasury and he will fall in line behind Trump’s well known (ref. back to his first term) demands for lower interest rates. The caveats here are that Treasury is not the Fed, the bond market could rebel by driving yields up again, or the disinflationary (Goldilocks) signals of easing yields could one day flip deflationary. That would be when the 2 Horsemen (USD and Gold/Silver ratio) would come into play in a market liquidity crisis, if it gets bad enough. USD has already broken out and the GSR is constructive, as reviewed in NFTRH 837. The president and the Treas-Sec will not be able to effectively “control” the bond market.
As expected the Goldilocks stuff is doing well, including the Cloud software stuff we have been managing lately. That’s the market we’ve got right now, and that’s the market that I, at least, am going to continue to manage.
As gold gets puked, the miners are holding below the resistance we noted last week in a couple updates. This opens up the possibility that a ‘C’ leg could indeed smack the miners down to the GDX 32 area. Not “will”, but certainly “could”.
There is obviously a lot of energy in the markets, post-election. I expect the precious metals to recover in a matter of weeks, if not sooner (for example, this could just be an upcoming double test of the SMA 200 or the support below it around 34 on GDX).
But there is another factor to keep in mind. That factor is what happened in Q4, 2008, Q1, 2016 and Q1, 2020 when the precious metals led the markets down and/or led them back up. Point being, the precious metals often lead. So a hard bear phase in the precious metals could pre-date a top in a stock market that is currently partying hearty amid all this greatness happening, post-election.
With respect to the potential contrarian time target of Q1, 2025 (and inauguration) a significant top in the precious metals now would not be too early to forecast such a top in the broads. Again, just spitballin’ here to established the most sensible narratives. Much more to come as things are getting clearer within the post-election landscape.
