The 10-year US Treasury yield has diverged from the Federal Reserve’s interest rate cuts, climbing 200 basis points from 3.5% to 4.5% since September 2024, signaling a potential debt market collapse.
In 2025, $7 trillion of US debt needs refinancing, on top of already double tax take spending, causing hyper spending and a glut of debt instruments.
The yield curve inversion is reverting strongly positive, typically preceding major economic downturns like the 2008 financial crisis.
Trump’s inauguration in 2025 may trigger a debt crisis, as economic collapses often occur under center-right parties.
Dollar strength is a headwind for gold and silver, with the gold-silver ratio potentially reaching triple figures or the 90s.
Korean won and Australian dollar weakness signals dollar strength, with the Korean won particularly vulnerable due to its Achilles heel for major crisis events.
The economy faces a stagflationary risk with potential for inflation resurgence amid economic weakening, as indicated by record-high insider selling ratios suggesting corporate expectations of disappointment in 2024.
The Federal Reserve’s shift from dovish to hawkish forward guidance has unsettled markets, disrupting the 15-year pattern of “artful guidance” investors had grown accustomed to.
Gold and silver are in a bull market, with technical indicators suggesting a potential breakout despite short-term caution due to overbought conditions and lack of investor enthusiasm.
The oil and gas sector presents a contrarian opportunity, with demand projected to rise despite electrification narratives, and insider buying from notable investors like Warren Buffett (20% overweight allocation).
Extreme sentiment in the Commitment of Traders report, with managed money positions extremely long and commercial traders extremely short, indicates potential for a market reversal in the short term.
China represents an interesting contrarian opportunity due to extreme negative sentiment and low valuations, with potential risks from sanctions balanced against impacts on U.S. companies like Apple with Chinese production.
Gold’s performance after breaking out to a new all-time high, testing the 200-day moving average, and correcting is historically strong, as evidenced by rallies in 1972 (from $45/oz) and 2009 (from $1,000/oz).
The 200-day moving average acts as a key support level during gold corrections, typically leading to shallow corrections and buying opportunities if it holds.
A breakout above the 40/60 portfolio is a crucial indicator for gold’s performance, potentially leading to a rally reaching $3,500-$4,000 in the next 15 months.
Gold’s weekly chart shows 5.5% more downside potential to test the 200-day moving average, but a successful retest and breakout above the 40/60 portfolio could trigger a strong rally by the end of 2025.
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