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TOP NEWSThis Gold Market Anomaly Could Spark a Major Rally
Gold ETFs are missing from the current rally - but State Street predicts their return could trigger a surge to $3,100/oz in 2025.
"I Believe Triple Digit Silver Is An Absolute" - Mike Maloney w/Alan Hibbard
In this episode of The Gold & Silver Show, Mike Maloney and Alan Hibbard break down the facts behind silver’s ongoing supply deficits and the surging
READ MOREDecember Fed Minutes Show Cautious Path Despite Rising Risks
The Federal Reserve's December meeting minutes show a complex policy landscape, with officials increasingly worried about inflation risks while maintaining their easing bias. Despite cutting rates for the third consecutive time to 4.25%-4.5%, there was notable discussion about inflation risks, particularly regarding incoming President Trump's proposed trade and immigration policies. While some officials advocated for holding rates steady, and Cleveland Fed President Beth Hammack dissented in favor of no cut, the committee remained open to further easing if inflation moderates and labor markets remain strong. This stance contrasts with external views, such as monetary policy expert Adam Posen's prediction that the Fed might need to start hiking rates by summer due to Trump's economic plans.
READ MOREMarkets Slash Fed Rate Cut Bets After Strong Jobs Report
Strong December employment data has dramatically shifted market expectations for Fed policy in 2024, with traders now anticipating just one rate cut in June, down from previous expectations of multiple cuts starting in May. The surprisingly robust job growth has led markets to significantly scale back their rate cut forecasts for the year.
READ MOREFed Officials Split on Rate Cut Path as Policy Debate Intensifies
Two key Federal Reserve officials have challenged the market's expectations for aggressive rate cuts, suggesting the Fed's benchmark rate may already be close to its neutral target. Kansas City Fed President Jeff Schmid and Governor Michelle Bowman both indicated that the 100 basis points in cuts since September have brought rates near their optimal long-term level, warranting a more gradual approach to future policy changes. Their stance contrasts with other officials like Chairman Powell and Governor Waller, who maintain that current rates remain restrictive. This policy divide could intensify in 2024 with new voting members joining the committee. Adding to the complexity, the Fed is waiting for clarity on incoming President Trump's economic policies before making further policy decisions. Bowman, potentially the next Fed vice chair for supervision, also called for increased transparency in bank regulation while maintaining a balanced approach to oversight.
READ MOREGold Defies Market Logic as Fiscal Fears Drive Safe Haven Buying
Gold is demonstrating strength in early 2024, defying its typical inverse relationship with dollar strength and Treasury yields. The precious metal's rise to four-week highs, despite these traditional headwinds, signals a fundamental shift in market sentiment driven by deep concerns about U.S. fiscal stability. Market experts, including Gold Newsletter's Brien Lundin, suggest that the simultaneous rise in Treasury yields, dollar strength, and gold prices reflects growing unease about U.S. debt levels and deficits relative to GDP. The Federal Reserve's potential loss of control over rates has further fueled this trend, pushing investors from central banks to individuals toward gold as the "ultimate safe haven." This shift has helped gold futures reach $2,690.80 per ounce, marking a 1.9% gain in 2024 despite conditions that historically would have pressured prices.
READ MOREUK Markets Flash Warning Signs as Bond Vigilantes Return
Bond markets are signaling growing investor unease about government fiscal policies, with the UK emerging as a focal point of concern. The situation began with a US-led global bond selloff as markets scaled back Fed rate cut expectations, but has evolved into a particular challenge for the UK, where 30-year gilt yields have hit levels not seen since 1998. The market turbulence threatens to eliminate the UK government's £9.9 billion fiscal buffer and has forced Chancellor Rachel Reeves to consider spending cuts over tax increases. This development comes as outgoing US Treasury Secretary Janet Yellen warns about the risks of "bond vigilantes" - investors who demand higher yields due to perceived fiscal irresponsibility. The situation has drawn comparisons to the UK's 1970s financial crisis, highlighting the delicate balance governments face between fiscal management and market confidence.
READ MOREMarkets Reassess Risk as 10-Year Yield Nears Critical Level
The market's relationship with Treasury yields has shifted dramatically from last year's optimistic outlook to current anxiety as the 10-year yield approaches 4.7%. This change is fueled by multiple factors: recent data showing inflation pressures in the services sector, diminishing expectations for Fed rate cuts, and concerns about incoming President Trump's potentially inflationary fiscal policies. Fidelity's Jurrien Timmer warns that inflation might not be fully contained, potentially rising to 3.5-4%, a scenario that could prevent Fed rate cuts and isn't currently priced into markets. While some experts, like State Street's Michael Arone, argue that corporate earnings should be the focus rather than Fed policy, the S&P 500's recent 2.8% pullback since its December peak, coinciding with a 50-basis-point rise in yields, suggests markets remain highly sensitive to interest rate movements.
READ MOREBrazil's New Central Bank Chief Faces Immediate Inflation Test
Brazil's inflation challenge persisted through the end of 2024, with annual prices rising 4.83%, breaching the central bank's 4.5% tolerance ceiling. While December showed a modest monthly increase of 0.52%, the underlying data reveals persistent inflationary pressures across most sectors. New central bank chief Gabriel Galipolo faces immediate challenges, as a combination of robust economic growth, fiscal uncertainties, and currency weakness threatens price stability. Despite some relief from lower housing costs, broad-based price increases in food, transportation, and services suggest mounting inflationary pressures. The situation has prompted plans for aggressive monetary tightening, with interest rates expected to reach 14.25% by March, though investors remain skeptical about the government's fiscal consolidation efforts.
READ MORE30-Year Treasury Breaks 5% as Fed Cut Timeline Shifts
U.S. Treasury markets experienced a significant selloff as December's unexpectedly strong employment data forced a major reassessment of Federal Reserve policy expectations. The 30-year yield pushed above 5% for the first time in over a year, while yields on shorter-dated Treasuries jumped more than 10 basis points across the board. This market reaction reflects a fundamental shift in rate expectations, with traders now pricing in fewer cuts and pushing the timeline for the first reduction from June to September. Since the Fed began its cutting cycle in September, yields have climbed approximately 100 basis points, suggesting that current financial conditions may not be as restrictive as the Fed previously assumed.
READ MOREU.S. Labor Market Defies Expectations with Strong December Finish
The U.S. labor market demonstrated resilience at the end of 2024, with December payrolls significantly exceeding expectations at 256,000 jobs, compared to economists' predictions of 160,000. This robust employment growth, coupled with a declining unemployment rate of 4.1%, has significant implications for monetary policy. Markets reacted swiftly, with the S&P 500 futures declining and Treasury yields jumping, as investors recalibrated their expectations for Federal Reserve rate cuts. Market strategists now anticipate sustained higher interest rates through 2025, citing both economic strength and ongoing fiscal concerns as key factors maintaining upward pressure on yields.
READ MORERobust Employment Numbers Keep Gold Rally in Check
Gold prices remained nearly flat after robust US employment data reinforced the Fed's cautious stance on rate cuts. December's stronger-than-expected job growth and lower unemployment rate suggest persistent labor market strength, potentially delaying anticipated interest rate reductions. Gold traded at $2,670.84 per ounce, trimming earlier gains as Treasury yields and the dollar strengthened.
READ MOREFed Faces Choice Between Market Stability and Trump's Rate Demands
The Federal Reserve faces a critical dilemma as bond market tensions rise: it must choose between addressing mounting inflation fears in the Treasury market or accommodating Trump's calls for lower interest rates. With the 10-year term premium reaching its highest level since 2014 and long-term yields rising despite recent rate cuts, the Fed appears likely to prioritize inflation control over presidential preferences, potentially setting up conflicts with the incoming administration.
READ MOREUK Market Turmoil Signals Return of Bond Vigilantes
The UK's financial markets are flashing serious warning signals, with gilt yields reaching levels not seen since the 2008 financial crisis and the pound dropping significantly against the dollar. This unusual combination of rising yields and falling currency typically indicates serious concerns about a country's fiscal health. While most developed economies are seeing higher bond yields due to inflation concerns, the UK's situation is uniquely concerning because it's occurring amid economic stagnation rather than growth. With £297 billion in planned bond sales and a debt-to-GDP ratio of 99.8%, the UK's predicament serves as a canary in the coal mine for other nations, particularly the US with its 120.8% debt ratio. Market analysts suggest this could signal the return of bond vigilantes - traders who target countries with perceived fiscal weaknesses - and warn that even the US's privileged position as the world's reserve currency may not protect it indefinitely from similar market pressures.
READ MOREBofA Warns Companies: Time to Hedge Against Stronger Dollar in 2025
Bank of America's G10 FX strategist Howard Du is warning U.S. corporations to adopt a more proactive hedging strategy for 2025, marking a significant shift from 2024's approach. While companies could previously afford to wait for dollar weakness before repatriating overseas earnings, the macroeconomic landscape has changed dramatically. With the dollar index at a two-year high and Trump's re-election bringing potential trade uncertainties, companies facing currency risk (particularly the 41.6% of S&P 500 revenues generated overseas) need to consider immediate hedging strategies. The bank suggests that global trade uncertainty and potential tariffs could drive further dollar strength, with current volatility pricing not yet fully reflecting these risks. The recommendation is clear: "hedge now, worry later," though mid-2025 might bring some normalization depending on tariff outcomes and fiscal policy.
READ MOREUK Treasury Dismisses Market Concerns as Pound Hits Year-Low
As UK financial markets face mounting pressure with gilt yields rising and the pound dropping to a year-low, Treasury Chief Secretary Darren Jones attempted to calm concerns in Parliament, asserting that markets remain "orderly" and demand for UK debt stays robust. The situation has sparked political tension, with opposition parties calling for Chancellor Rachel Reeves to cancel her planned China trip to address market turbulence. However, the government is standing firm, maintaining that market movements are normal and emphasizing the importance of Reeves' China visit, which aims to reset relations and includes key financial figures like Bank of England Governor Andrew Bailey. The debate highlights growing concerns about Labour's ability to manage the deficit amid rising borrowing costs.
READ MOREFed Minutes: Inflation Fears Rise but Rate Hikes Off the Table
The December Fed minutes show a central bank wrestling with competing pressures: rising inflation concerns, particularly from potential Trump administration policies, balanced against a commitment to monetary easing. While "almost all" officials noted increased inflation risks, this wasn't enough to put rate hikes on the table. Instead, they opted for a more nuanced approach, delivering a third consecutive rate cut while leaving room to slow the pace of future cuts if needed. The decision wasn't unanimous, with Cleveland Fed President Beth Hammack dissenting in favor of holding rates until inflation moves closer to the 2% target. This careful balancing act suggests a Fed committed to its easing cycle but increasingly mindful of inflation risks, even as some external experts like Adam Posen predict a return to rate hikes by summer due to Trump's economic plans.
READ MOREFed's Harker: Rate Cuts Coming but Timing Remains Data-Dependent
In his first public remarks since the Fed's last rate cut, Philadelphia Fed President Patrick Harker outlined a cautiously optimistic but uncertain monetary policy outlook. While confirming his expectation for continued rate cuts, he emphasized that timing and pace will be strictly data-dependent given the "very unsettled times." Harker painted a mixed economic picture: strong macroeconomic fundamentals and progress on inflation, but slower-than-desired movement toward the 2% target and emerging concerns about financial stress among lower-income workers. His stance aligns with the Fed's recent more conservative approach to rate cuts for 2025, reflecting ongoing inflation concerns despite recent progress.
READ MORETreasury Yields Surge as Markets Wrestle with Trump's Economic Agenda
The unusual rise in Treasury yields is sparking debate among economic experts, with Paul Krugman proposing an "insanity premium" linked to Trump's policy pronouncements. The incoming administration's agenda of high tariffs, tax cuts, and mass deportations has economists nearly unanimous in predicting inflationary pressures, potentially forcing the Fed to pause or reverse rate cuts. This uncertainty is reflected in December's Fed minutes, where officials noted increased inflation risks partly due to potential policy changes. Meanwhile, the market response has been mixed - while yields have climbed significantly since September, some analysts like Nationwide's Mark Hackett suggest the market reaction might be more about finding reasons to sell after strong gains rather than fundamental concerns about policy. The situation highlights the complex interplay between political uncertainty, monetary policy, and market psychology.
READ MOREFed's Collins: Economic Uncertainty Demands Patient Rate Approach
Boston Fed President Susan Collins is signaling a more conservative stance on monetary policy, emphasizing the need for patience and gradual movement on future rate cuts despite progress on inflation. While acknowledging inflation's significant decline from 2022 peaks, Collins notes increasing concerns about its persistence and the complex economic landscape ahead. Her remarks come as the Fed navigates between maintaining price stability and preserving labor market health, with additional uncertainty stemming from potential policy changes under the incoming administration. Collins's position aligns with broader Fed projections but emphasizes flexibility in response to evolving economic conditions.
READ MORETreasury Markets Find Footing Ahead of Crucial Jobs Report
The Treasury market found some relief after a significant selloff that had rippled through global markets, with yields retreating across the curve as investors turn their attention to Friday's employment data. The timing is particularly notable as US markets prepare to close for former President Carter's memorial. Fed officials, including Philadelphia's Patrick Harker and Boston's Susan Collins, are maintaining a cautious stance on rate cuts, suggesting a slower pace than previously anticipated due to persistent economic strength. Adding complexity to the monetary policy outlook is the Fed's increased focus on "market-based" inflation measures, which show more moderate price pressures at 2.4% compared to traditional gauges running at 2.8%. This divergence could influence the timing and pace of future rate adjustments.
READ MORE