Friday Recap (12/20/2024)

AU: $2622 ($2649 - Last Week Spot)
AG: $29.48 (30.54)
HUI: 280 (297)
DXY: 108 (107)
S&P: 5866 (6051)
10-Yr: 4.5% (4.4%)
Oil: $69 (71)

The Fed lowered rates 25 bps this week, but Chairman Powell shook up Wall St with his comments at his press conference afterward. The S&P 500 proceeded to drop 3% and closed the week below 5900. Was this bell ringing that the top is in? Probably not, but perhaps. We will know in the next few weeks. Heading into 2025 has enormous uncertainty for a variety of reasons (it's difficult to have high conviction). First, you have an overvalued stock market that is priced with an average PE around 22. Second, you have an economy that is wobbling, with a lot of weak sectors. Third, you have interest rates that will remain high for all of 2025. This means the interest expense for the US Government will be around $1.3T. That's a big number. Fourth, those high interest rates will create headwinds for the economy. I could go on.

The dollar jumped to 108, which is a cycle high (that few expected at year end). That high dollar is creating pressure on the bond market, as foreigners need to buy expensive dollars to buy our bonds. Basically, they can't afford our bonds, which creates fewer foreign buyers. So, how do we get the dollar down so that they can buy more bonds? Ouch, there is no easy answer. The Fed could lower rates, but Powell just said he's not going to. Trump could fire Powell, but if the new Chairmen lowers rates to push the dollar down that could create inflation and derail the economy. It won't be easy for Trump to keep the economy growing and the bond market healthy at the same time. He's going to have to choose. My guess is that he lets the bond market weaken (and inflation high). It's a dangerous gambit.

Gold dropped $27 this week, and silver $1, with the HUI dropping to 280 (down 75 pts from the October cycle high). It's impressive that gold held $2600 with the DXY at 108. That could be a good omen for the gold cycle low in 2025. My target is $2300 to $2500 for gold and $25 to $27 for silver. Perhaps those are too conservative, but I doubt that $2500 or $27 will hold. These will be mild corrections (for gold and silver) and only temporary. Anyone who expects a crash in gold/silver miners likely won't get their wish. The bottoms that were put in back in February 2024 will likely hold by a significant margin. In fact, I think the chance to buy the gold/silver miners on sale is quickly coming to an end. Once gold hits its cycle low in 2025, it will likely rebound back to $2700 fairly quickly, and then proceed to break out above $3000. When will that happen? I don't know, but my guess is before the end of September and perhaps as early as April. So, let's see where we are at in June. Until then, accumulate.