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Can the U.S. survive its debt? The 'doom loop' trap, gold's & dollar's future under Trump – Stephanie Pomboy
President Donald Trump's re-election victory ignited a surge in the stock market and propelled Bitcoin to new record highs, but Stephanie Pomboy, founder of MacroMavens, warned that questions remain about the long-term impact on the U.S. economy, particularly in light of the nation's mounting debt levels.
In the immediate aftermath of the election, investors swiftly moved into trades aligning with Trump's policies on tariffs, taxes, government borrowing, and cryptocurrencies.
The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite hit new record highs on Wednesday, with the former surging more than 1,500 points. The last time the Dow jumped more than 1,000 points in a single day was in November 2022.
Bitcoin, buoyed by Trump's campaign promises to make the U.S. the "crypto capital of the planet" and establish a "strategic Bitcoin reserve," surged to new all-time highs, pushing above $76,000.
However, concerns about the U.S. economic situation should not be forgotten, given the nation's nearly $36 trillion federal debt level.
"We have got corporations that are massively leveraged," Pomboy told Jeremy Szafron, Anchor at Kitco News. "You're going to have a problem for a lot of the lower echelon of corporate America that already can't service its debts." Watch the podcast
Gold continues to struggle as Bank of England cuts interest rates by 25 basis points
Falling interest rates worldwide are not providing major support for gold, which continues to experience technical selling pressure.
The Bank of England is the latest central bank to cut its interest rates further. In a much-anticipated move, the BoE cut its Bank Rate to 4.75% on Thursday.
The central bank said that it had room to cut rates as inflation is expected to remain near its 2% target.
“There has been continued progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly,” the central bank said in its monetary policy. “Monetary policy has been guided by the need to squeeze remaining inflationary pressures out of the economy to achieve the 2% target both in a timely manner and on a lasting basis.”
Looking ahead, the BoE said that it expects to cut rates further through 2025, albeit at a cautious pace.
“Based on the evolving evidence, a gradual approach to removing policy restraint remains appropriate. Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further,” the statement said. Read More
Gold prices at session highs after U.S. weekly jobless claims rise to 221k
Gold prices set fresh session highs following the release of in-line labor market data after the number of Americans filing new claims for unemployment benefits last week matched forecasts, while continuing claims continued to rise.
Initial claims for state unemployment benefits rose to a seasonally adjusted 221,000 for the week ending November 2, the Labor Department announced on Thursday. The number was exactly in line with expectations, as consensus estimates forecasted a reading of 221,000 claims. The previous week’s figure was revised up to 218,000 from 216,000.
The gold market rose to session highs following the release of the labor market data, with spot gold last trading at $2,683.21 per ounce for a gain of 0.91% on the day. Read More
TD Securities asked if gold is the new bitcoin
While there have been countless observations that bitcoin is the new gold, one bank has a slightly different take on the two assets, asserting that gold is actually the new bitcoin.
In his latest report, Daniel Ghali, Senior Commodity Strategist at TD Securities, noted that gold has been acting more like bitcoin as its unprecedented rally this summer to all-time highs was never actually based on fundamental drivers.
“A comprehensive flows-based approach doesn't corroborate the last leg of this rally,” Ghali wrote in his report. “There are no shortages of compelling macro narratives that have chased the melt-up in gold over the last few months. Unfortunately, these narratives have not been factually supported by flows.”
Ghali pointed out that funds have been max long since August, and speculative bullish positioning has been largely unchanged since. He also noted that clearing data from the London Bullion Market Association doesn’t point to large-scale buying in over-the-counter markets. At the same time, the pace of central bank buying has slowed; finally, he noted that Chinese demand has also been weak in recent months.
Shanghai traders have sold nearly 25t of notional gold over the last weeks.
Ghali speculated that gold’s recent run to $2,800 an ounce was more about investors hoarding their gold, so prices rallied as supply was limited. Read More
Silver eyes $50 in 2025 as industrial demand grows and gold-silver ratio narrows
Silver has struggled to keep pace with gold over the past year as the yellow metal hit multiple new record highs while its gray counterpart largely remained pinned below $30/oz, but according to one analyst, that could change in 2025, and the gold/silver ratio will start to moderate from its recent highs.
“Gold remains an investor favorite for hedging portfolios against various risks, but the shift from a ‘soft landing’ to a ‘no landing’ argues for greater balance between defensiveness and exposure to economic growth,” wrote Julian Wee, financial markets strategist at UBS. “Silver has historically been strongly correlated with gold, while being better able to benefit from expanding industrial demand.”
Amid the rise in geopolitical tensions, gold has emerged as the preferred way to hedge risk, Wee noted, highlighting that the yellow metal “has risen as much as 35% and demand continues to be robust amid multiple risk events and falling policy rates globally. This month at least, gold seems to have shown itself as the choice hedge against the risk of slower economic growth and an acceleration in inflation.”
“But gold is not the only precious metal whose price demonstrates an inverse relationship to risk aversion,” he said. “Against the backdrop of resilient US GDP growth, investors might do well to consider an addition to portfolios that retains a good amount of defensiveness, while also incrementally adding to the ability of these portfolios to benefit from stronger economic growth: silver.” Read More
Presidential election's ripple effect: markets respond to Trump's victory and Fed's rate cut
In the wake of Donald Trump's swift and decisive presidential election victory, financial markets experienced significant movements across multiple sectors. The peaceful transfer of power quickly diminished uncertainty premiums, leading to distinct reactions across various asset classes.
The U.S. stock market immediately launched into a strong rally, reflecting widespread belief in Trump's pro-business stance. Markets hit record highs for the second consecutive day, while Treasury yields dipped following the Federal Reserve's latest rate cut announcement. This market optimism appears deeply connected to expectations about the new administration's business-friendly policies.
Gold bounced back after yesterdays -$86 single days drop taking February gold to $2691.60. Today gold recovered, gaining back 47.80 fixing gold futures to $2739.40. Read More
Bitcoin hits new all-time high of $77k, gold and stocks rally on Fed rate cut
The post-election excitement extended for another day across financial markets as cryptos, stocks, and gold all rallied higher, receiving an added boost from the Federal Reserve, which lowered interest rates by 25 basis points on Thursday afternoon.
“In the wake of Donald Trump's definitive win in the presidential elections, we've seen a sweeping rally across various asset classes,” said analysts at Secure Digital Markets. They noted that interest rate cuts are “traditionally favorable to assets like BTC, as [they] tend to weaken the dollar and boost market liquidity.”
“Elsewhere, the Bank of England has moved decisively, with an 8-1 vote favoring a 25 basis point rate cut, bringing the key rate down to 4.75%,” they added. “This adjustment marks the central bank’s second reduction this year, following the initiation of its easing cycle in August.”
With interest rate cuts seen as a return to ‘easy money policies’ by many investors, they’ve wasted no time jumping back into the markets after the days of volatility that was predicted until the winner was known lasted only until the morning after the election.
Following Wednesday’s bullish moves higher, traders kept the party going on Thursday, juiced by the Fed’s decision. At the closing bell, the S&P and Nasdaq finished up 0.74% and 1.51%, respectively, while the Dow was flat.
Gold also course-corrected from yesterday’s declines and rallied back above $2,700. At the time of writing, spot gold trades at $2,706.10/oz for an increase of 1.77% on the session. Read More
Gold price holds its ground as Federal Reserve cuts rates by 25 basis points
The gold market is holding on to solid gains as the Federal Reserve cuts interest rates in a much-anticipated move.
The Federal Open Market Committee lowered the federal funds rate by 25 basis points, in line with expectations. The rate now trades in a range between 4.50% and 4.75%.
The central bank didn’t provide much guidance on the future path of its monetary policy, noting that the economy continues to expand at a solid pace.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate,” the central bank said in its monetary policy decision.
The gold market is not seeing much reaction to the 25-basis point cut. Spot gold last traded at $2,690.40 an ounce, up 1.18% on the day.
Michael Brown, Senior Market Analyst at Pepperstone, said that the Fed’s statement is pretty much a carbon copy of its previous statement. He added that there is nothing to suggest that anything has changed in the Fed’s cutting cycle. Read More
Disclaimer: These articles are provided for informational purposes only. They are not offered or intended to be used as legal, tax, investment, financial, or any other advice.
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