Gold and Silver Are Now Pricing In Stagflation | Arcadia Economics

Gold is up. Stagflation. But silver is up. It was down yesterday. But copper is up. It was down yesterday. Ah, yes. And so the volatility in silver and copper will remain volatile. However, you’re getting close to, possibly, a bottom in the base metals, which will reflect in a nice bounce in silver. Welcome to the Morning Markets and Metals with Vince Lancey. Where each morning, Vince brings you the financial and precious metals news to get you ready for your day. And now, here’s Vince. Good morning, everyone. It’s Friday. I’m Vince Lancey. Today we will look at Trump tariffs and the Asian effect, as well as do a proper market recap to prepare you for the trading day like they used to do.

Something you haven’t seen probably in years. We’re going to try and do one of those today. But first, let’s look at the market. You can see the title there. Bad news is good news, at least for gold. We’ll get into that in a second. Here we go. The dollar is down 30-31 at 10-4-03. 10-year yields are up. I’m sorry, down five basis points at 393. S&P 500 is 5383, down 53 handles. That’s not insignificant. Gold is $24.61, up almost $17, slightly off its highs. Silver is $28.94, undoing most of yesterday’s sell-off, up 1.4% at 41 cents.

Copper, $4.12, up 5.5 cents, 1.3%. This is significant behavior. I’ll tie this together for everyone. WTI is $76.91, down 74 cents. Natural gas is $1.94, unchanged. Who cares? I always care about who cares, right? Bitcoin is down another $480. Relentless sell-off, interesting. $64,777. Therium, $31.66, down 41. Palladium, $9.08. Platinum, $9.69, up 4, up 11, respectively. Gold, silver, nowhere at $84.90, and grains are violently mixed, meaning soybean is up 14 cents at $10.58, but wheat is down 2 cents at $5.42. Corn is in the middle, pretty much unchanged bid. What are you looking at there? You’re looking at the theme of today’s market recap, which we will do for you.

Bad news is good news for gold. Looking at the board, while I’m just giving you a quick overview here, today is non-farm payrolls. At 8.30, you probably will have already had it out by the time you see this, but the behavior going into non-farm payrolls is typical, not 100%, but it’s typical of a stagflationary environment. The dollar is weaker. Why? Because they think the Fed’s going to ease. Bonds are stronger. Why? Because they think the Fed’s going to ease. But stocks, which had been ahead of themselves expecting the Fed to ease, are down.

Now, they’re down because of earnings, which we’ll get to later in the program. Gold is up. Stagflation. But silver is up. It was down yesterday. But copper is up. It was down yesterday. Ah, yes. And so the volatility in silver and copper will remain volatile. However, you’re getting close to possibly a bottom in the base metals, which will reflect in a nice bounce in silver. We’ll discuss that a little bit more. WTI is down 70 cents. Hard to read that, except that the fundamentals of oil are coinciding with the financials in the West, meaning there’s not a lot of oil right now.

The play is to be long oil stocks. Bitcoin, no comment there. I have some data on it, but there’s a rotation going on. I guess Bitcoin is being looked at like it’s a tech stock again. Again, I’m just telling you a story, but that’s how to interpret it. Now, after non-farm payrolls, this can completely reverse. We want to give you the paths that it could take through non-farm payrolls. So there’s yesterday’s stories. Gold aimed for 2,700 to 2,900. We stick by that. Gold connecting the dots. And why did Malay offshore Argentina, Argentine gold just now? For founders, very nice post by Bill Gross, he of PIMCO, bomb market fame.

I’ll just share this with you. The Monopoly game is really like the gold standard because it’s really like a market on gold standard because the amount of money you get every time you pass gold is the same. But when they increase the salary, if you were to increase the salary or throw some money behind free parking, that’s fiat. Anyway, Goldman says three cuts by year end, they’re coming. JPM’s rolling now is the Powell press conference. The big banks are calling for multiple cuts. Every time Powell doesn’t cut, they’re calling for more cuts. They’re not judging that as right or wrong.

But starting with the premium markets, there’s a nice report out by ANZ Research. And they’re in New Zealand, so they have a foothold in Asia. And let me just read this. Asia and the Trump redux presidential candidate, Donald Trump. Donald Trump is going into the US November elections promising far more prohibitive trade policies than those implemented during his presidency in 2017-21. Taking these proposals at face value, which you shouldn’t, but you have to for your analysis, we examine the implications for Asia. A 60% tariff or more on all US imports from mainland China is likely to truncate aggregate demand in both economies and put global supply chains in disarray.

Keep this in mind, the Democrats will, from the political point of view, the Democrats will frame the tariffs as inflationary. And that can be true when the economy is doing well. But if we’re going into a recession, tariffs will only push us further into a recession. Tariffs only exacerbate the trend in place. They do not reverse trends. All right. That’s my opinion. Any potential gains to the rest of Asia from trade being diverted and production relocated away from mainland China will be limited by the growing risk that a second Trump administration would likely make it more challenging for products with significant Chinese content to enter the US.

So China’s loss is not Vietnam’s gain. China’s loss will, however, be Taiwan’s gain. We also anticipate greater export competition among Asian economies in non-US markets as well as greater penetration of Chinese exports in Asia’s domestic markets. Sustained weakness in mainland China’s economy will likely exacerbate this competition. Nothing we don’t know. A universal baseline import tariff of 10% of all US imports could raise the risk of a global trade war. We’re in a global trade war. It’s just not a headline yet. And the resulting disruptions would be greatest for export-oriented and manufacturing-heavy economies.

Taiwan, Vietnam, Thailand, South Korea, and Malaysia stand out as the most vulnerable in the region. Okay. We have the fall analysis as well as the industry’s most affected at bottom by country. So China, its smartphones, photovoltaic cells are in there. That’s one of the top ones for Vietnam. Anyway, let’s have a real live market recap for yesterday. The kind that you used to listen to where you come away hopefully feeling a little bit smarter, a little bit more informed, and a little bit more curious as to, hey, what did he say there? And you want to look it up or you want to ask someone.

So let’s go through the whole market and hopefully make your day start out a little bit more properly informed. Let’s start in Japan and Asia. Big equity sell-offs happened yesterday. Japan took another hit within the kai, dropping 5.8%. Former BOJ executive director indicated a high chance of an October rate hike. They’re fighting inflation, right? They’re causing recession. Japan’s rate-sensitive banks fell by nearly 10%. Makes sense. Semiconductors dropped 9%. Makes sense. Look at what happened in the US. And automation was down 7%. Frankly, I don’t know what automation means. It must mean robots.

It looks like a serious risk-off episode. As Japan’s currency strengthens, their stocks are going to go down. That’s it. Onshore China held up better with the Shanghai composite only down 0.9% compared to the Heng Seng’s 2%. Taiwan’s 4.4% and South Korea’s 3.5%. So those are ripples, but it starts with Japan. Metals lead lower next high. This is something I saw in a Goldman report that I’m paraphrasing and I think is very informative and kind of a missing piece of the puzzle we may all be looking at as Metals people. Metals, base Metals, in Asia outperformed slightly with copper and iron ore hosting small gains, possibly due to lingering hopes for onshore stimulus.

True. But Metals have already priced in a slowdown. Equity haven’t caught up yet. That’s a really valid statement. Industrial commodities will lead the sell-off followed by equities. Equities have a lot more hope in them. So think about the US when I say this. This is consistent, meaning base Metals. I think silver gets caught up in this with how small investors treat commodities in recession fears. They sell them and hope their stocks will hold up. Usually when no recession happens, they cover in a torrid Metals rally. How many times have we seen that? But make net money because stocks also rally.

But when a recession hits, they get killed as they have to sell their stocks anyway, leaving their Metals shorts naked. And then when the Metals turn, they have to cover in a panic. So take what I just said and look at the Metals. Forget about gold for this. Silver and copper have been down for well, specifically copper, but silver has been kind of held up because of its precious aspect. But they’ve been hammered in anticipation of a recession, even though stocks happen. So look, stocks are manipulated and hope keeps them higher as well.

Whereas commodities like Dr. Copper, and I would just call it Professor Silver, tell you otherwise. So I think that’s a good way to look at Metals moving forward in there. Moving on to macro data. Yesterday, ISM came out. Macro concerns spilled over with weak PMIs in Europe. That’s like an ISM. A jump in US jobless claims and a stagflationary drop in the ISM, all casting down on the soft landing narrative. The market is pricing a soft or no landing. Okay, this is the ISM manufacturing from mish talk. Nice little grid there.

If you look at everything, if you just look at the rate of look at the direction, everything that’s good for the economy is contracting. And everything that’s bad for inflation is increasing. It’s that simple. You can take a look at that. Nice little grid there. So that’s stagflation. US stocks, this is where it gets even worse. So if you go from the world to the macro, which is the data down to the individual stocks, the news gets worse. Okay. Yesterday, the market had been optimistic about cyclicals in the US believing inflation was dropping while activity held up.

The Wall Street was expecting a gradual adjustment in rates, not a drop in activity. The drop in the ISM employment component to its lowest level since 2020 was bad. And that’s what stocks did. Now, moving on to companies specifically, which announced earnings after 4 p.m. On the micro level companies, things look worse. Amazon CFO, Brian Ozofsky, noted that consumers are being cautious with spending and trading down. They’re not spending money. CEO, Andy Jassy, echoed this adding that customers are looking for deals and opting for lower priced products. So computers will be really cheap this Christmas.

Put it that way. Now, here’s the big news. Intel, I’m paraphrasing someone else’s words. It’s very politically correct. Intel is also facing challenges. Suspended its dividend. You don’t suspend your dividend if you’re a Fortune 500 or an S&P 500 company. Cutting jobs, a lot of jobs, not five jobs, like 10,000 jobs, and lowering CapEx. They’re spending less money on future development, even though Nvidia is eating their lunch, which will weigh on semiconductors. Snap is down double digits, likely losing share to meta. But here’s Intel. Intel’s earnings come out at 4 o’clock. The stock already closed on its lows at 29 and change.

It’s called, as of this writing, to open at 22. So what’s that? $7, two, four, six. What’s that? Three, six. That’s like 20, 20. Oh, there it is. It’s like 22%. Right? I mean, it’s a lot. Let’s put it that way. Okay. That’s Intel. Okay. Other stocks have had, not as bad as that, but Amazon came in friendly, but growth looks really bad and it was all carried by their cloud service. They’re not selling stuff. Apple came out on the surface of a good, but their growth rate in China was even worse than people thought.

And when you’re looking at a company that’s being priced on future growth, that’s a bad thing. We’re not buying iPhones. They’re buying cell phones, but they just happen to not be iPhones. All right. So this, I think, is the most important part. If you’re trying to get a framework, you’re going to start seeing over the next day or week, depending on how non-farm payrolls comes out, you’re going to start seeing the phrase, bad news is bad news again. Okay. I’m going to tell you that that phrase in this context is complete bullshit. All right.

So let me read this and then I’ll tell you why it’s bullshit. Today’s focus is on the NFP report. The street has shifted to a bad news is bad news regime. So a bit of stability and labor would be positive though not great for December. So far, bottom line, bad news is bad news is spinning something far more true. All of wall street has been crowding into a trade for the last eight months, expecting big things from the fed. And upon every disappointment, they’ve been ratcheting up future expectations only to be crushed again.

And when bad economic news comes out, you think normally, right? Normally you think, Oh, bad economic news comes out. The fed’s going to ease and stocks rally. Well, it’s been doing that for a year. So now when bad economic news comes out and you get no release, so to speak, and the fed has an ease, you’re going to see more selling than buying because they’ve been front running the fed for a year now. So when a wall street bank says bad news is bad news, bad news is always bad news. They’re just tripping over themselves, trying to get out because they were wrong about the fed easing.

That’s it. Okay. That’s it. Bad news is bad news means there are too many speculators long hoping for a fed cut, which may come. All right. Moving on. That’s the key to understanding what’s going on coming out of wall street at the nexus between wall street feeding information to to the press distribution of forecast via Forex live, right? Okay. So there are, there are, bell curves, et cetera, et cetera. But let’s just go with this non-farm payrolls. 70,000 to 225,000 is the range of estimates. Ignore those, right? 185 to 165 is the range most clustered.

So if non-farm payrolls are inside those numbers, that’s what’s expected. Unemployment rate, 4.2, 4.1, 4.0, you can see the commensurate, the related percentages. Look, if unemployment comes in above 4.1, that’s bad news. Bad news is supposed to be good news. And if the stock market rallies on an unemployment rate higher than 4.1%, you should think that the stock market still has money to go in and they still think the fed’s going to cut in September. If the stock market sells off with an unemployment rate and bad news becomes bad news, that’s because there’s too many front runners along the market.

If it comes to below 4.1% at 4%, well, do you think good news is good news for the market? No. If unemployment comes in lower than expected, stocks are going to zero. I’m exaggerating, but you get my point, right? Bad news is not bad news and good news is not good news. Everything is lopsided. Everyone’s long. So let me read something from one of Goldman’s traders. The ideal outcome today is payroll growth slightly above expectations. That’s here with no rise in the unemployment rate or acceleration in wages. The worst case would be a big miss with rising unemployment.

A massive beat in NFP could also be tricky. The market might be skeptical of labor re-acceleration given weakness elsewhere, potentially leading to a jump in real rates. The market is volatile and a stable NFP would be welcome. That’s a bank’s way of saying we’re not really sure, but it’s well read. The thing I think that people could focus on after this number is the unemployment rate had been steady because even though payrolls have been shrinking, that’s because jobs that were on the books were being taken off. Now you may start to actually see people get fired.

And we had a report on that out the other day. All right, moving on to market news. The most important thing I think is in the news. Russia freed wrongly convicted Wall Street Journal reporter Evan Gershkovich as part of the largest and most complex east-west prisoner swap since the Cold War in which he had more than a dozen others jailed by the Kremlin were exchanged for Russians held in the US and Europe, including a convicted murderer. There you have it. So that’s something that reflects well on Biden, no matter how you look at it.

And there’s the company at QuickPeak. There’s the report. And that’s it, folks. It’s Friday. Gold’s up 15. Gold’s next leg higher needs silver to go with it. So if you see stocks down, look at silver. If silver is down, then gold may still go up but not as much. If you see stocks up, look at silver. If silver is tracking it, then gold should rip if silver continues to lead. If you see this, stocks down and silver up and gold up and copper up, if stocks turn around and rally, you’re not going to be able to buy silver fast enough.

That’s what’s going to happen. And gold will probably continue to rally, but it’ll be eating silver’s dust. So keep an eye on stocks. If stocks go up, take a look at silver. If silver goes up, then gold is going to be a lot higher. That’s it. I’m Vince. Have a great weekend. Special includes constitutional silver half dollars for only $2.50 over spot, one of the more popular silver items available. And on the gold side, we have 10 pounds American gold eagles for only $39 over milk. And to place an order or get your questions answered, call 833-326-4653 or email us at arcadey at milesfrankton.com.

And as always, thanks for watching. Please note that this video is not intended as legal licensed financial trading advice and is to be used for informational purposes only. Please contact your financial advisor before making any decisions. And thanks for watching. [tr:trw].

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