Gold continued its climb back towards 2800/oz, showing strength and projecting a close above the mark sooner rather than later. Alternatively silver has continued to remain relatively flat,resulting in the gold to silver ratio steadily holding over 90. The gold to silver ratio is an interesting metric as it can provide insight to two very similar commodities. They are similar in investment, technological, and personal use, with the main differing factor being scarcity. Yet, they do not follow each other in price as close as one might assume. Traditionally speaking, the gold to silver ratio has lived in the 50-70 range. A ratio of 90 can be interpreted in many different ways. I argue that gold is undervalued in terms of the value of the US dollar. Its price has not kept up with the decades of expansive monetary policy. Furthermore, I believe silver is undervalued, especially in terms of gold. The unfortunate truth though is, these prices generally do not normalize except during times of high economic uncertainty.
Bitcoin saw continuous “closes”(cryptocurrency trading doesn't truly close) above the inevitable $100k mark. This stability comes after waves of slight volatility since first surpassing the major benchmark nearly 2 months ago. It does come in interesting times as the US dollar index is showing formidable growth and strength since the 2024 presidential election. This is somewhat counterintuitive to expectations associated with cryptocurrencies as they are often viewed as an alternative safetynet to fiat currencies and other regulated financial vehicles. Therefore when the dollar is reporting strong it would be expected that some weakness, or at least a lack of support, would be exhibited in the market.
The yield curve has maintained the same characteristic bowl shape look that it has for months now, though it is beginning to flatten some in the short term. The shape still remains inverted, compared to the standard yield curve one would expect to see in a healthy economy, or at least healthy t-bill investment environment. This suggests there is still investor uncertainty, though it more resembles acknowledgement of the existing inflationary issues than it has in the past. This could be a huge signal in the treasuries market, though it is unlikely. History has shown the market more often is reactionary, acknowledging issues in the rear view mirror than precautionary and learning from its mistakes.
Overall, nothing shocking or unexpected as markets continue to function within expectation. The sustained strength in the dollar is worth keeping an eye on. It is built mostly off of the presumptions of the newly elected Trump administration. The unfortunate truth is that President Trump made many fiscal promises that will not be kept, mostly due to the fact that he alone cannot enforce them. He alone cannot lower grocery prices or lower interest rates. Ultimately federal budget deficits will continue, further inflating the inflation problem, further defaulting the value of the dollar.
Media and Metrics:
Peter Schiff Podcast 1004 - Will Trump Be a Meme President?
Peter Schiff Podcast 1005 - The Consensus Trades Are About to Unravel.
Economic Indicators
Leading US Economic Indicators
Initial Jobless Claims
Services PMI
Manufacturing PMI
Existing Home Sales
Consumer Sentiment
Upcoming Indicators
FOMC Meeting and Interest Rate Decision
New Home Sales
Durable Goods Orders
Consumer Confidence
Advanced Trade Balance in Goods
Advanced Retail Inventories
Advanced Wholesale Inventories
GDP
Initial Jobless Claims
Pending Home Sales
Employment Cost Index
Personal Income
Personal Spending
PCE
Core PCE
Comments