Vince Lanci: If CPI IS Weak The Metals Should Explode | Arcadia Economics

Last week, markets reacted to economic data that showed a slowdown in productivity, indicating a recession was inching even closer. This week is CPI. The last few data releases had come in stronger than expected, indicating the deflationary impulse that started when Powell began raising rates was dead and gone. Welcome to the Morning Markets and Metals with Vince Lanci, where each day he brings you the precious metals in financial news to get you ready for your day. And now, here’s Vince. Good morning, everyone. I’m Vince Lancey, and today’s morning meeting we’re going to talk about CPI and how important it is this week, and UBS reaffirms their 2,500-old pricing target.

We’re going to look at that for a little bit as well. Let’s take a look at the markets first, though. The dollar is 105.23 down 8. 10-year yield is 448 down 1.5 basis points. It has to be 500. It’s 5232. Up 15, the VIX is 1334, crushed. But it’s up 78 today. Gold is 2340 down 19 and changed almost $20 on its loads of the evening. Silver is 2812, hardly unchanged, basically unchanged, down a penny. Copper is up almost $0.05 at 466, 1%. So this is China buying base metals. All right, WTI is up $0.40.

I’m sorry, $0.48 at $0.7890. Natural gas is 215, strong again. Bitcoin is 62,500 after a weekend, a strong morning up 1,000 points. Ethereum is 2956 hovering around that 3,000 strike. Platinum and Palladium. Platinum is pulling away at $9.97 and Palladium is $9.79. Platinum is up $3. Palladium is up $2 and change. Grains are mixed. Wheat is strong, no surprise there. $6.68 up 2 and change. Corn is $4.55, offered unchanged, and soybeans are down 5.5 cents. Okay, there’s the front page of Goldfix. Couple important posts this weekend. Zoltan Pozar, who we’re fans of and we’ve written about him before his work before and translated it for subscribers.

He has a very high end newsletter out and we don’t have that to share, but we do have some notes on it and while we have a post out on that, giving you an idea of where the bond market is going and where gold will go by implications from his analysis. We also have Michael Hartnett’s work, which is let’s say he thinks the Fed’s going to ease. We’ll start with that. Moving on to the topics that we’re here for. CPI has been surprisingly strong the last four months. I’ll just read some of this to you.

I wrote this today. So last week markets reacted to economic data that showed a slowdown in productivity indicating a recession was inching even closer. This week is CPI. The last few data releases had come in stronger than expected, indicating the deflationary impulse that started when Powell began raising rates was dead and gone. If you look at that chart there, you’re trying to figure out what you’re looking at. The red line is what happened and the bluish green line is what they expected to happen. So for this whole square, this is your edge chart.

This whole square here, they expected that, they got that, they expected that, they got that. So every month has been higher than expected. So people are going to be talking about it in that framework of expectations of another higher surprise. If CPI should surprise by coming in softer this time, there could be a very real fireworks display. Meaning based on the momentum of economic data like productivity, unemployment, the economy is now rolling over again. All the stuff we sold last week says all that good stuff we’re seeing about the economy rolling over, we’re talking about higher has peaked and is already turning down.

Now, also a week, two weeks ago, Powell admitted that he expects to raise, I’m sorry, to lower rates at least once this year. And with the soft data last week, if he gets his soft CPI data this week, if he gets that, then the market’s going to explode. So I’ll read a little bit more of what I wrote here. By his own admission, Powell and company expect to ease this year at least one time, the market expects this to happen in July now. Now, why would CPI come in soft after all that, those five months in a row over-performing? Well, there’s something called OER, owner’s equivalent rent, that doesn’t show up that big, I’ll put it back.

And owner’s equivalent rent is what people think they can get for their real estate if they wanted to rent it. And it’s really not a very accurate data piece individually, but month to month, it shows trend very nicely and it kind of lags. So I’ll show you what I’m talking about. The thin, dark blue line, that’s the real data and the light, wider line, that’s the real-time anticipatory data. So the OER itself, the thin line, lags behind the data. So certain banks, zero hedge and ourselves included, believe that the OER will come in very weak this month as it catches up to that blue line there, the light blue line.

And you could very well have a surprise lower in CPI. So Powell was, back to the script here, Powell was uncharacteristically optimistic at the FOMC press conference saying inflation will get to 2%. We and others like Standard Charter think the data supports his optimism. If CPI were to come in soft and it could, given certain data points, which I just described, then you’d likely see a risk on type of move where stocks gold and this time even bonds rally. So everyone on the street that writes about the stuff is saying CPI has been hot every month for the last five months.

If it’s hot again, it’s going to be a disaster. And that’s true, but they’re only writing about the past. They’re not looking forward or looking at the data for the future. Admittedly, it could come in hot. Sure. But to just blindly say that, because that’s, that’s what the mainstream media does. All right. Moving. Anyway, if CPI comes in soft this week, gold should explode. Silver should really explode because it’s an industrial metal because it’ll move more like stocks. And China is already issuing more debt to get their economy going. It could be a big week.

Incidentally, PPI is on Monday. I’m sorry, Tuesday. That doesn’t have anything to do with CPI this week. Moving on to UBS. UBS has a daily or a weekly report out and they talk about what’s most important to them. And the second most important thing that caught their eye was gold. And they have two or three paragraphs on it. I’m going to read you one of the paragraphs and give you a little comment on that. UBS, a second win for gold. Our view, while gold prices have faced some recent rate related headwinds, we have retained our bullish forecast and expect gold prices to rise to 2,500 an ounce this year.

Some investors may also consider structured strategies to purchase gold at levels below our forecast trajectory six months out. Gold miners are another way to express this view though through equities, though they are more tactical in nature. There’s a lot in that paragraph if you know how to read these things. And at the bottom and premium, we tell you exactly what that means because it’s a very specific type of statement and we translate it for you. But keeping it simple, it’s bullish. They’re surprised at last week’s behavior. I understand why they’re saying that.

And they’re telling clients to buy the dip. And now miners are on their radar. Don’t worry that they’ve said it dismissively with tactical in nature. Miners are on their radar. That’s very interesting, I think. All right. Moving on. There’s the UBS report. The news. The Wall Street Journal has an article saying that the Fed’s going to ease that’s opinion is news. President Joe Biden’s top economic adviser pledged Democrats with push to reverse Donald Trump’s corporate tax. This hurts business. Sam Altman, this is particularly interesting, not necessarily because of the company, but everyone’s talking about AI.

Well, if you have the capital, you want to put your money not into AI browsers or AI pop up customer service nonsense, bullshit. You want to put your money into things that need to be built out to support AI. So batteries, transformers, energy. Next, superpowers led by the U.S. and European Union have funneled nearly 81 billion towards cranking out the next generation of semiconductors. Said this before, I’ll say it again. Chips are money. Now, they’re small. You can hand them off as money. They’re actually being used in that way. Number one, number two, a chip is energy.

If you can use a chip in a robotic situation, you increase efficiency, you reduce energy cost, you fire employees. All right. That makes money for a company. Chips are money. So chip wars are coming. The Biden administration is preparing to raise tariffs on clean energy goods from China in the coming days. This is a joke. I mean, the economic aspect of it is is obvious to me. The economic aspect of it is if you raise tariffs on Chinese goods coming into the U.S. that are in demand. I’m not saying they are in demand, but if they are in demand, then you’re created in the 1970s.

Trade wars, tariff wars, domestic inflation. But the meta comment here is if we’re supposed to be saving the earth, why the fuck are we taxing things that are going to help the earth be saved? See, it’s not about climate. It never was. It’s about money. It always is. We’re going to skip the geopolitics today. Premium. There’s the cover page of the UBS report. There’s UBS report. We have the that’s the I’m sorry, the standard charter report. We have the UBS report as well. Let’s take a check back on the market. So gold is hovering down 18 and change.

Twenty two forty one. Let’s go to the chart for a second here. I said on Sunday with the the the gold fix founders class group, I should say. These are the lines I’ve had here before. So, you know, it’s kind of disheartening that we got above here and didn’t close into there. And I would be bearish below this line. And I would look for it to flatten out in here. So if this area holds, then the market rotates. Our technicians will just say, look to bull flag and they’d be right. If it doesn’t get it, doesn’t hold the necessary here and look for this whole range to be retraced.

Now, that said, I don’t care about that information. I just gave you because all bets are off when CPI comes out, right? But CPI comes out, whatever the market does, it’s going to do. And then you look at your levels to trade. You don’t use them for predictive behavior. Silver up two cents now, right? There you go. So silver had a bigger rejection of its of its level, but it got to the level that I said it would get to. Then I said it has to get above this to test the final boss, right? Well, we have retracement.

So, you know, if you look at the silver chart, that’s a healthy retracement, meaning you have a long wake. It looks like shit. And now you have a market that’s holding its own. So gold looks worse than silver. And that’s what’s telling you. But I would say if you’re looking at this pre CPI, whatever’s happening between now and Wednesday doesn’t mean anything unless you’re trying to put a position on. So if you’re like, oh, I think CPI is going to be low, I want to buy gold. Well, then the dips will be a gift to you, right? If you think CPI is going to be high and the market rally is going into CPI, then that’s a gift to you as well.

You want to sell your gold out, take your profits. Anyway, I’m Vince. Have a great day. Thanks for watching this morning’s markets and metals update with Vince Lancey. Brought to you each day by Miles Franklin Precious Metals, where this week’s special is one ounce gold Australian kangaroos for only $59 over spot. Gold Australian kangaroos are one of the coins coming from one of the six sovereign mints. And with the gold price pulling back recently, you can get your Australian kangaroos at only $59 over spot by emailing Arcadia at milesfranklin.com or calling 833-326-4653. 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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