Transcription
All right, it was the week the headlines tried to call the top on gold. Now, the price cracked, the sell-off led the business pages, and even one of Wall Street's biggest banks walked back its forecast. But that's not what we heard in this chair.
Now, this week, we sat down with some of the sharpest voices in the macro world, a former Fed insider, a legendary mining financier, the economist who called the housing crash, and one of the best known fund managers in the metal space. And almost to a person, I mean, they told us the same thing. This is not a top, it's the entry point. I'm Jeremy Saffron. This is This Week in Focus.
All right. And one quick thing before we get into it. This is our very first episode. Now, This Week in Focus is a new Friday show where we take the biggest conversations we had all week, put them into one place, so you walk away knowing what actually mattered. Now, if you like it, tell us in the comments. We're building this one for you, and what you say is going to shape where this goes. So, let's see that table because this week was wild. Uh, the gold sliced under $4,000 on Wednesday, a level it hasn't touched since November. And by Thursday, it had clawed back above it. Even with the bounce, gold is down roughly 5% on the year. Silver, I mean, took even a harder hit, sitting near $58.
So, what drove it? Two things. According to the government's inflation report, the cost of living is now rising at its fastest pace in 3 years, 4.1%, which has the market bracing for the possibility that the Fed hikes rather than cuts. And according to the CME Fed Watch tool, traders briefly put the odds of a hike to September around 70%. Now, at the same time, the other half of the market went the other way. Oil erased all of its wartime gains as the Strait of Hormuz reopened on progress towards an Iranian peace deal, and the AI trade came roaring back with Micron's blowout, uh, its outlook lifting the NASDAQ. So gold gets squeezed. The Bank of America pulls its $6,000 gold target. Uh, that is the backdrop. Here's what the people who do this for a living made of it.
And we'll start with the why. Now, the Fed has a new chair this month, Kevin Walsh. And his first move was a hard turn, higher for longer, with the whole committee behind him. Former Fed insider Danielle D. Martino Booth says that that shift and what it could break matters more for gold than any single inflation print. Take a listen.
>> If, if Worsh is going to kind of be the new sheriff in town, >> yeah, and maintains higher for longer and thereby helps facilitate a blowup in the private credit market that bleeds into the private equity market, um, then yeah, this was a great buying opportunity for gold because it doesn't matter where inflation is per se, because in times of financial crisis, gold is where to hide.
And the crisis she's watching isn't in the stocks everyone stares at. It's in private credit markets. >> We're seeing a lot of serious pain points in the economy that would be exacerbated greatly, um, should rates stay where they are. So, um, you know, he, uh, he may get his boss's wishes taken care of sooner than you would think if the market is going to force the Fed's hand, um, by way of something continuing because private credit's already blowing up. Private equity is following it. But let's see if it bleeds into the public markets. But at the end of the day, you have to give Kevin Worsh credit because he, he had a unanimous vote. I mean, that was, that, that was absolutely shocking. Um, and I suspect that some of the gray hairs in the audience, by the way, including Jay Powell, >> were probably barking like a seal with happiness that he wanted to go back to being a more succinct institution that leaks less.
So her point, hawkish Fed that holds rates high could be the pin, and gold is the hiding place, which sets up the question every guest came back to. If the risk is real, why are they still buying?
Now, we also had fund manager Lawrence, or Larry as we call him, Leard answer was the kind of bluntest of the week. He says we are nowhere near the end of this. Take a listen.
>> I know which side of this I want to be on. I mean, I do not, in my opinion, we are in a bull market for silver and gold, and we are in the third inning, you know, not the ninth inning. So, um, because this inflation issue has really not been resolved.
Now, his reasoning starts with a Fed he says is trapped by the debt. >> You can't shrink the balance sheet because if you do, the debt, the debt collapses, the entire structure collapses.
All right, which leads us to his one rule, I guess, for the whole era. I think we've got inflation baked into the next five years at least, maybe longer. And, and the implications of that, as all your listeners know, is you want to own things they can't print and inflate. And silver and gold are at the top of the list, and Bitcoin's in there, too.
All right, so third inning, not the ninth. Hold that thought because the next guest takes it from a trade to a whole new monetary system.
Now, the deepest take of the week came from Frank Gustra, a guest of this show, who argues that the pullback is noise and that the real story is a monetary system being rebuilt underneath of us. Copper can easily go from what is it, $6.20 a pound right now. Um, it could go to say, $8, $9, $10 a pound. Gold, on the other hand, could pick a number. Mhm. >> Gold can go from $4,000 to some crazy number because it's a, it's part of the monetary system, and, and we know that that the fiat experiment as we know it is falling apart. That experiment is over. And so now, uh, so gold has a different upside dynamic potential than copper does. So you buy gold for a different reason. You buy copper.
Now, his evidence is in who already moved. They have a, a strategic objective to switch reserves from dollars to gold, and that's happening. And, and I think you said something about the, the amount of gold. Foreign central banks own more gold than US dollars now. And, and a big part of that reason is because gold's gone up in value. Obviously, the value of those ounces of gold have gone up. But that's who would have predicted that, you know, 10 years ago? But here we are. It's happening.
Now, his line on the dollar's loss privilege struck with me. >> But seriously, the petrodollar, if it goes away, because it was an exorbitant privilege that was given to the US to have the reserve currency and then the petrodollar. And they've treated that privilege like an abused wife, okay, a battered wife. And, um, so I think that, uh, that we're going to see this change, but you're going to see the United States react very harshly to those that try and exit the US dollar petrodollar system.
Here's why this one lands right now. Just this morning, Frank emailed me two words, "Told you," and attached this.
>> Maybe anywhere. It's all about the interest rate. Lower the interest rates, you can have all the housing you want. But you have to understand, I don't want to, I don't want to hurt people that own houses, too. These people, for the first time in their lives, they have valuable houses. They become rich. I don't want to hurt them either.
What you want to do is what? Good for everyone. Get the interest rates down. We have this numbskull that was the head of the Fed before, and he's a stupid person, and we call him too late because he was too late with the interest rates all the time. Um, we need low interest rates. Low interest rates will solve everything. We'll solve that. Now, despite that, we're doing well with housing. But where we're really doing well is oil is plummeting and costs are coming down. Uh, affordability.
All right. Now, Jushu's argument is that the political pressure to push rates lower to keep housing and the system moving, even at the dollar's expense, is exactly what ends up driving gold. This week, you heard that pressure in the president's own words. You decide what it means.
And here's the part of the story you won't see in Western headlines. As the price fell this week, China's banks did the opposite of panic. According to the Chinese state media, major lenders, including ICBC and China's Construction Bank, are cutting or waving the fees on their gold savings plans, lowering the minimum buy-ins, and extending trading hours, all to make it easier for ordinary savers to keep buying the dip. Now, think about that. While western money was heading for the exit, the world's biggest gold market was lowering the turnstile. That is the countercyclical demand that the bulls on this show keep pointing to happening in real time.
Now, the economist who called the housing crash, David Rosenberg, says that the bull market isn't broken. It's just breathing. I asked if the bull market was over after the sell-off, and he doesn't even blink.
>> No, I think the bull is still alive. You know, nothing goes in a straight line.
Now, his tell for why the floor under gold is solid is the buyer that never left. >> What else has changed with gold, really? What's changed? I mean, it's still the, the beautiful shiny malleable metal that never changes its characteristics. This had nothing to do with the dowry season in India or, um, really about, um, uh, about Costco selling its, uh, its nice little bars. Yeah, >> this had to do with the C, it had to do with the central banks. You either invest along the central banks or you don't. Uh, I choose to. Uh, so, um, until that changes, and remember, it was the central banks that ended the central banks' cost the 20-year bare market, and then it caused the end of the 20-year bare market back in 1999.
All right. But he also had warnings too, aimed at the other side of the trade. The AI winners everyone piled back into this week. But I would say right now, and for anybody sitting on these winners, especially, uh, in the semiconductor space and the AI space, remember that it's only a paper gain until you sell. I don't have, so as you ask me about, you know, my philosophy is, I am not a momentum trader. I, I do not invest that way. That's not even investing. I am not, I'm not counting cards in Vegas and doubling down. I have never been scared to take profits. I enjoy taking profits. That's when you make your money.
So here's the weekend one-liner. The price said sell. The people who have done this for 30 years said the opposite. A former Fed insider, a financier, the man who called 2008, and a fund manager, uh, veteran fund manager, I should say. All different lanes and the same conclusion that a dip in gold is not the end of the story. It's the part where you're supposed to pay attention.
And we're not done. We just sat down with Rick Rule, one of the most respected resource investors in business, and he called this drop, and his words kind of heavensent. That conversation is up on the channel now, and in a couple of weeks, I'll also be with him at the Rick Rule Symposium in Boca Raton, bringing it to you live. The full interviews with every guest is linked below. If you want the macro and the medals nobody else will give you straight, no hype, hit subscribe. And because this is our very first one, do me a favor. If you want to see This Week in Focus every Friday, say so in the comments. Tell us what you'd keep, what you'd cut, who you want to hear from. We're building this for you. And, and while you're there, tell me, are you buying this gold pullback or waiting it out? I'm Jeremy Som. For all of us here at Kicko News, that's This Week in Focus.