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Big Picture View (summary)

• Precious Metals: Gold, miners and especially silver are over-bought, at increasing risk of correction and flat out bullish. The view is that a coming correction will be the first one of the 2025-2026 launch into the new macro. In the coming years, precious metals are expected to greatly out-perform stocks.
• Commodities: Also expected to out-perform on the big picture macro, subject to any interim correction. Most commodities have lagged the precious metals, but they tend to follow the PMs and that is expected in the coming years of an inflationary macro.
• Stock Markets: Global is out-performing US and below we discuss the technical point where that could become a new macro phase. Most stock markets are expected to under-perform precious metals and commodities in the coming few years.
• Bonds: In a new macro phase of rising yields and declining bond prices. Debt paper was for the old macro. Real things are increasingly valued in the new macro. Insofar as this debt is held for income, the highest perceived quality (Treasury in the US) and short-term (0-3yr) and/or inflation protected are recommended.

The 3 Snowmen

Long-term subscribers may remember the 3 Snowmen. The HUI measured target of 888 I had back in the 2010 time frame. It was a simple measurement of the crash and recovery pattern of 2008-2010. As a TA, that is often what I do; measure things.

Well, in a fine lesson about being open-minded, Bernanke’s cyclical inflationary emergency operations altered the macro and croaked my target for the counter-cyclical gold sector. Mr. Fat Head (H&S) formed and that was that. The dawn of a terrible bear market, 888 just fantasy unfulfilled.

That was an important lesson I heeded and took personally. It’s why I critiqued gold bug promotional interests over the subsequent years. Bernanke and his successors had figured out how to create cyclical inflation to temporarily benefit the economy. That was detrimental to gold stocks due to both inflation and its positive economic cyclicality.

That is all over now. It ended chart-wise, in 2022 (ref. Continuum chart below).

I did not even realize the Snowmen were at hand until a subscriber pinged me about it. Of course, the rationale for the 888 measurement expired in 2012 when Huey topped. What is happening now, including the registering of that target, is one of two things:

1. The final drive of the bull market that began in 2016, with a bear market to follow, or…
2. The first impulse into the new macro (and its new rules) that sees gold only just getting started in relation to traditional paper assets, and hence, a long-term bullish picture ahead.

I’ll take 2, first impulse in the new macro, Alex. But the first correction could feel like a cyclical bear market in its intensity.

What Could Trigger Correction?

With all due effort not to be a chronic top caller, the first correction, when it arrives, is likely to be a big one, for whatever reason it may come. The Fed meets this week and will hold rates steady (per 95.6% of CME traders). But that is already factored.

However, subsequent to this meeting, rate cut projections have backed way off from the last time I checked CME traders’ targets. March (85%) and April (71%) now also favor rate holds.

Now, what if Powell goes down in history as the ballsiest Fed chief in history and actually raises rates at one of these meetings? We’ll leave that as low probability, but possible in this crazy, shall we say “dynamic” environment Trump and those behind him (like Bessent) have cooked up.

Or CME’s increasing margin requirements could finally break silver and pressure gold. That seems too obvious, so we are allowing for the metals to shrug that off indefinitely, as there is likely much physical silver and gold in motion (and in demand) driving markets along with futures and the stuff CME deals with.

Finally, it could just come time. Every bull market takes corrections. Silver is vertical and it has just smashed into and through its big round number, 100. Gold is at 4988, about to ding 5000!

Considering these round numbers, the status of the Fed and the massively extended price of silver, we can call it what I’ve been calling it… “high risk”. Hence, driving my portfolios I feel like this guy:

This week should be interesting, as there is usually a lot of energy in the markets into, during and/or after FOMC week.

While silver and to a lesser degree gold have announced themselves on the world stage, dragging commodity metals/minerals like palladium, platinum, uranium, nickel, REE, lithium, copper and more along for the ride to varying degrees, the stock market has been laboring as well. Let’s delve into some of the ratio indicator charts freely available at nftrh.com for your reference as needed.

Internal Indications

With Silver and gold bashing new all-time highs on Friday, the rally is in full force. Will it hit its first correction at the round numbers? Your guess is as good as mine. All a long holder can do is make like the guy above and enjoy the ride as much as he is. :-)

Of course, profit-taking and hedging are things too. But timing needs to be at least decent or both of those things can be less than satisfying when a rampaging bull continues rampaging. I am going to keep a leash on my silver shorts, and not let the market go too far against me if the manic festivities continue. Alternatively, I may add puts or going the other way, release all bearish positions again. Your move market. FOMC on deck.

Inside the markets, everybody now has the memo that it is gold over paper (whether bonds or stocks) in the new macro.

Here again is the beautiful view of the big picture macro showing gold breaking its base with a lot of headroom vs. SPX before it could ever be called a bubble. Silver/SPX has spiked impulsively and that is likely a launch into the new macro for silver as well. But it is more vulnerable than gold in the interim.

HUI/SPX is motoring along as it tries to break out of its base. Remember the days when everyone hated the miners? Well, they no longer hate them but if awareness ever hits the mainstream the HUI/SPX ratio could have a long and bullish way to go in the coming years.

Back to the shorter-term internals, as long as the miners (GDX) are leading the metal we have an intact positive indication.

GDX/COPX is interesting as it continues to consolidate. It’s a market not yet decided about whether a cyclical inflationary macro will soon take over for the counter-cyclical disinflationary one.

However, Gold/Copper looks more bullish and this is not a sign that the macro is yet ready to swing inflationary in any notable way. But Au/Cu is not signaling “cyclical inflation” (a friendlier inflation than a Stagflation) at this time. One day, the future inflation problem is expected to be economically corrosive.

An important gold mining sector fundamental continues to rise, as oil/energy comprise 60% (+/-) of gold mining cost inputs. Most gold miners will be reporting earnings in early February. Earnings will be good. But for “commodity” producers, earnings are often best at turning points. Hence, we should keep an eye on this sector fundamental.

Meanwhile, the still dive bombing GSR indicates a speculative and hyper-bullish atmosphere is still in place for the precious metals (duh), and increasingly, commodities. It is also more positive than negative for broad stock markets. The problem here – and why I have a high risk profile currently – is the extreme nature of the decline. This chart does not show it, but the next downside objective is 47.50 on the Au/Ag ratio (currently at 48.30).

Joining the tanking GSR (spiking Silver/Gold ratio) is the SGR’s companion, the TSX-V/TSX ratio, which is also still bullish as it ticks a new high for the cycle. Indeed, they say that latter stage precious metals/commodity rallies often see the most speculative stuff (in my case of interest, mineral exploration companies that populate the TSX-V) pop off like bottle rockets at the end of a more broad rally.

Of my exploration holdings, PGE.V (PGEZF) has started to ramp, but others (MMG.V, TLO.TO, AE.V, AIR.V, ALDE.V, etc.), while bullish, have not gotten hysterical. It’s possible that might happen as an ending signal. Possible, not predictable.

On the stock market, we see the Global (ex-US) giving Trump and his TACO tariff routine the finger. If this ratio breaks to a new high above the April, 2025 high a new secular trend in global vs. US could be in play.

Healthcare maintains a stance from which to base and turn up vs. the broad SPX/SPY. That would imply latter stage defensive behavior by investors.

Similarly, Growth continues to tank in relation to Value. Another negative internal signal. Despite this, I have hung on to Tech stocks as QQQ/SPY is not as bad and I have had a hunch about Tech. Just a hunch with a few supportive charts at support.

Finally, XLY/XLP is in consolidation and looks suspect after a post-April rise with the bullish market. If this is a top, a market correction is likely. But it has not yet broken down.

As long as this chart shows continued Semiconductor leadership and Tech leadership hanging on to its 50 day average, I will stay bull oriented (with all due risk management at the ready). NDX/SPX is key here as Semi is caught up in global trade noise to a larger degree.

More on the Precious Metals

Silver round number: 100

Gold round number: 5000

Wow, who would have thought? Well, most gold bugs, including myself. But then came all those dreary years of learning lessons like the failed HUI 888 target above and even more importantly, lessons about why it failed (due to the mechanics of the brilliantly evil Bernanke era’s new and innovative ways of inflating the system to positive economic appearances).

Today, our “new macro, new rules” theme is being proven. The macro changed in 2022, when the Treasury bond market rebelled and destroyed the secular downtrend in long-term yields.

Our view right from the get-go was that while I could not yet define many of the coming effects, one effect of this change was going to be policymakers’ (Fed & Government) relatively impaired ability to create (monetary, print) and disperse (fiscal, spend) new funny munny into the economy in any sort of effective way.

Do you think the gold and silver markets now see this? Yes, me too.

When a correction finally halts this hysterical move in silver and much of the precious metals and commodity complexes eventually follow into correction, we’ll have our first test within the new macro. However, here we should refer back to the big picture Gold/SPX and Silver/SPX charts above and keep in mind that what is going on now is a catch-up slingshot move, now that the spell of the old macro has been broken.

Spell? Yes, the spell that many were put under within the illusion that Bernanke and his offspring could remotely and successfully manage a financial system over the long-term to little obvious ill-effect. That both sides of the political aisle could forever spend that newly printed money into their favored areas.

That Ponzi racket ended with the virulent inflation problem manufactured by the Fed in Q1, 2020 and spent into the economy, first under the Trump administration and then under the Biden administration. Today, Trump 2 seeks a subservient Fed chief who will drop rates, try to keep the system liquefied and create more munny to be spent on favored areas.

Why again did the Continuum chart above rebel? Well, once again Debt-to-GDP handily answers the question. The paper/digital money scam has run its course. It’s just that a majority still don’t know it. The Continuum above knew it in 2022, and those of us studying the markets closely soon caught on as well.

Debt fuels this economy. Period. As you probably know, GDP is in a long-term uptrend. “America great again” (and has been for many years)!! No. America has been able to leverage its debt (currently an untenable $37+ Trillion and ticking upward) to keep the Ponzi-conomy going. Some will accuse me of a case of TDS (and they have), but Dear Leader demands easier money, a more dovish Fed, more debt, and unwittingly, more inflation.

In the new macro, and considering gold has barely gotten going in relation to the bloated stock market (again, ref. long-term Gold/SPX chart above), the precious metals are pulling out the Trump card, so to speak. In 2025-2026 we are being shown the puzzle pieces that were missing from the picture when the Continuum first rebelled in 2022.

Though much of the developed world is in a similar boat, I am a US citizen and so I focus on the US. A late great power that is driving itself berserk after a decades-long ‘debt for growth’ orgy.

I think the US will come back from this, both to its senses and to a sounder financial system. Gold will be at the center of this. The stock market will not. It was the beneficiary of the old macro. Unfortunately, a vast majority is operating as if we are still in Kansas (AKA the old macro). We’re not there anymore.

Indeed, if a rebound in stocks vs. gold doesn’t happen soon (again, it’s FOMC week), the SPX/Gold ratio will make its first monthly close below a key level. Either way, interim relative stock rally or continued decline, the era of stock market preeminence has been over since 2022 and into the foreseeable future.

US Dollar

It’s been a free style report thus far, and let’s keep it that way. On to Uncle Buck…

The US dollar (daily chart) got cracked last week, failing the moving averages once again. Bearish. But it’s FOMC week and I for one wonder about how internally pissed off (of course he’d never show it) or at least fed up one Jerome Hayden Powell may be at this time. I wonder what he may say at his presser after he holds the Funds Rate steady.

With this tepid but not failing economy and the inflationary inputs already in place and those to come, might the Fed find the time right to poke a president who can’t stop shooting himself in the foot in the eye? A few sweet nothings to the media during his PC?

Bottom line, the US dollar hangs in the balance. Trump policies want it weaker (not great again). But the Fed, freshly backed by the real seats of power (big bankers, and very secondarily, both political aisles) may decide it’s time to, well, Trump Trump. Teach a little lesson about who’s really running things.

If they were to do such a thing, harden up a bit, the USD could take an improbable rally and other markets, including the precious metals, could get hit. All speculation at this point, folks. Understand that.

Market Sentiment

After going through the Trump down/up tariff TACO mixer,* sentiment is about where it was last week. Briskly over-bullish, but not extreme. This includes Smart/Dumb money, AAII and NAAIM, which all backed off just a teeny on the tariff noise. Fear/Greed index backed off to Neutral.

The bottom line is that like last week, over-bullish sentiment is not standing in the way of further market upside, although it is generally unhealthy from a contrarian perspective.

* And he’s at it again…

Final Thoughts

Please understand that in adding silver short positions again I am not top calling. I am poking, trying to catch this thing while hedging. Playing around with the house money gained over the last year. As for the precious metals in general, I am talking about risk a lot lately because by definition risk is rising. It’s the way it goes. And with silver’s vertical move, risk is going vertically up.

Again, I want to make clear the way I see these events. After a long bull market, a hysterical move like this is usually an ending move. 2011 in silver, for example. But in the context of the new macro and the precious metals only recently having taken leadership over the bloated pig, I mean venerable stock market, I view the current move as a launch into the new macro.

It will be corrected and it may feel like a bear market. But over the coming years, I think we are in a new phase and should continue defining that phase. We’re not in Kansas anymore.

Last Minute Addition

I just received an email from a subscriber asking about gold and silver. In essence, he has been holding gold since 2008 and has increasing anxiety about the metals blowing off into another decade or more of price futility. His question boils down to what would I do with regard to holding or selling after such great gains.

I am now just paranoid enough to no longer discuss personal holdings. But I do have my opinion, which has not changed since 2002. When gold was $350 or $1200/oz. I did not worry about it. When it is near $5000/oz. I don’t worry about it. If I were focused on its price I’d have a level of concern. It’s sort of why I sold PSLV and SPPP too soon. But I am focused on insurance in a failing system.

In my view, the value of gold is not in its price. The value is when things fall apart. The casino plays with paper and paper derivatives. Actual enduring value is a whole other thing.

So the question of what to do with one’s gold at these lofty price levels is completely personal. If you bought it to make coin (paper money in the casino) take your “coin” and sell it. Don’t be greedy. If you bought it as long-term insurance, you could gamble and sell it, pay taxes (depending on your country’s standards) and hope to buy the next long-term bear market. Personally, I would not take that gamble, viewing gold as “value”. As a pure profit taker, I’d be selling the 5k round number.

Portfolios

Gold is long-term risk management & monetary value/stability in a balanced portfolio.

Taxable “Savings” Account

I have added back a view of the taxable account, as it’s not much extra work to present it this way. It’s filling in those darn notes on the former right side column that was the time consumer.

Positions are in order of size. This is a savings and income account with equity exposure.

The taxable account carries high cash levels as long as cash and equivalents are paying out. This is considered a savings account of sorts, rather than a speculation or even investment vehicle. The goal is to speculate around the periphery. In another market phase (e.g. post-correction/bear/crash), the account may get more in the game.

Roth IRA (non-taxable, no contributions)

The chart ticked a new high and I’m still…

Cash is around 30%, short-term bonds 35% and equity exposure 35%. Any additions are likely to be small and speculative exploration positions I may find interesting; although I’ll probably cool it there too. I have enough miners and royalties that have gone way up, enough commodity/resources exposure for now, and enough “bull stonks”. I generally see myself now as a seller, not buyer.

Frankly folks, I am looking forward to booking gains and resting easy a bit. I want to be in a position, big picture wise, where the next correction is opportunity, not pain.

Cash & income-generating Treasury bonds are at levels that are right for me and my real-world situation. Your situation is different. Cash will be adjusted as needed.

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Notes From the Rabbit Hole (NFTRH) is a weekly market report in which we provide analysis on financial markets.  We make every effort to provide accurate and high quality content, but this analysis ultimately represents our opinions and these opinions are provided without warranty or guarantee of any kind.  See full terms & conditions of service under the ‘About’ heading in the main menu.