Mid-Week Macro (4/23/2025)
Trump toned down his tariff rhetoric this week, and the markets have bounced a bit, with the S&P closing at 5375 today. Trump said that negotiations with China are going to work out. Of course, the uncertainty with tariffs continues to hold the market back. Tariffs will determine the S&P 500 earnings in 2025 and GDP levels. All we can do is guess, but my guess is that Trump is not going to back down and decide that reciprocal tariffs are no longer needed when we get to July after the 90-day pause. For this reason, I think the S&P will soon drop to a new cycle low below 4800.
Gold has been on a tear, with 5 days in April up over $90. We are now seeing large swings in gold. I think this is positive. It traded at $ 3,500 this week, then dropped almost $200, and has now rebounded to $ 3,354. I would much rather see swings than a parabolic move up followed by a crash. The key is that when we get a big down day, it is soon followed by a trend higher. We want the chart to remain strong with an upward bias. I think that is what we are going to get the rest of the year. My target has risen to $3500 at year-end, but I think it could trade much higher than that and could end the year much higher. Gold has shifted into a new direction. It is becoming a must-own asset.
Silver made some noise today. It closed at $33.41. It has been stuck below $33 for a few weeks. I have not been excited about the recent run in the HUI from 300 to 400 (closing today at 389) because silver has lagged. You are not going to get a breakout in the HUI without silver breaking out. The key for silver to break out is a fear trade. We need retail investors to not want to own the S&P 500. Once that happens, the S&P will be below 5000, and investors will begin showing up at their local coin shops buying gold and silver. That has not happened yet. In fact, more people are currently selling silver at their local coin shops than buying.
Most investors continue to have a normalcy bias, expecting the stock market to have a V-shaped recovery. This is why the final battle will be fought on the S&P between 4800 and 4500. If you close below 4500, then it’s game over, and the retail investor will exit. Once you get a fear trade, silver will rip to $50 and the HUI will be off to the races. That is what we are waiting for. I expect this fear trade to last at least two years, because this will likely be a prolonged recession.
As investors, we are always waiting to buy dips. I don’t think we will get many more, but I expect at least one more significant dip when the S&P drops to that 4800 to 4500 range. That’s what I’m waiting for with a bit of dry powder. I doubt it will be very deep. Gold should hold $3000, and I will be surprised if $2800 does not hold. So, I’m not expecting 300 on the HUI to be retested this year.