FED Sparks Market Volatility

[00:00:07]You are listening [music] to Golden Rule Radio, your weekly discussion of the precious metals markets and the markets closely associated with the metals. I'm Tory alongside Miles and Rob and together we have over 80 years of experience advising on and brokering the precious metals and each week the three of us like to provide a technical analysis of the metals charts and then cover the underlying fundamentals and the news that helps move and predict those markets and make those charts go where Miles says they're going to go.

[00:00:34]>> Cuz he's the chart monkey.

[00:00:36]>> That's right. That's Miles' job. So we always start with Miles on a weekly recap. Show us the charts for the week and for those of you who are interested in seeing the visuals you can find them on our website which is mackalvany.com/radio.

[00:00:51]>> Thanks Tory. I got to find where I've got that little bit map chart monkey character on my computer.

[00:00:58]>> Dot plot? Do you have your own dot plot?

[00:01:00]>> I don't know what a dot plot is.

[00:01:02]>> Well, the Fed doesn't anymore either but we'll get to that later in the show.

[00:01:06]>> [laughter] >> So I was thinking about an old dot matrix printer that my dad had back in the 80s but that's a different thing.

[00:01:14]>> I know what one of those are.

[00:01:15]>> you had a couple. So what goes down must come up. You know, last week's opening charts was a pretty consistent everything's down week. This week we've got the opposite with everything up although not up quite as much as it would have been if we had recorded our show a couple hours ago. So we will >> [laughter] >> we will talk about the FOMC here in a little bit as we have a new Fed chair kicking off his maiden voyage this Wednesday here. So starting off with gold up about four and a quarter. So 4.25% up hitting us at 4,250.

[00:01:55]I did not make that up. Those are the same numbers and it just happened to work out that way. Now, gold was up as much as about 7 and 1/2% prior to the FOMC and that's going to be a running theme as we go through the charts this week. So, the FOMC did have a buy the rumor, sell the news event as we always expect. But, even still, gold up almost 4 and 1/2% just since our recording last week. Silver, not to be outdone, as always, anything gold does silver does better, up 5 and 1/2% currently sitting at 6750.

[00:02:30]So, 5 and 1/2% up to $67.50 as silver was coming off a pretty solid low >> [laughter] >> here a couple days ago. But, silver guys was up as much as 12 and 1/2% this week prior to the FOMC. So, silver continues to be incredibly volatile on a week-to-week basis and we're not even at $100 silver. You know, this is after the correction. We're still seeing 10, 12 plus percent weeks up and down. Moving over to the other white metals, platinum up 7 and 1/2% currently sitting at 1,730.

[00:03:07]Same story, higher a few hours ago.

[00:03:10]Palladium, same story, up about 5 and 1/2% since our recording last week, sitting just under 1,300. So, platinum continues to beat palladium. The S&P up 1.8% to 7,420.

[00:03:28]Same story, the S&P was up almost 4% at one point this past week. But, interestingly, the S&P started to slip prior, a couple days prior to the FOMC today. And that high it put in earlier this week was not as strong as what we saw back on June 2nd. So, we're certainly hoping the S&P is stair stepping its way back up, but we'll have to see how it does depending on what the interest rates are doing and any money that may be getting pumped into that market. And finally, the dollar is also up. Everything's up this week. The dollar's up half a percent. Now, the difference here is the dollar was actually on a downward slide all week, so it was sell the rumor, buy the news in terms of the US dollar. It was on a downward slide all week until post FOMC today where the dollar jumped up just under 1%. It was about.83,.85% today. So, prior to the FOMC, the dollar was down on the week, but we did have a nice little bump up here on new interest rate moves. So, moving over to what happened here at the FOMC, I'm going to let somebody else talk.

[00:04:42]>> Well, a lot did happen and it's not just cuz Orsh had his first press conference and first meeting, but the whole world has been kind of waiting and watching.

[00:04:51]Japan had a rate increase, which is a completely different discussion.

[00:04:55]I kind of thought the Federal Reserve might do a quarter point hike here now because of that.

[00:05:01]>> Surprised and it was unanimous.

[00:05:03]>> The vote was unanimous, yeah. The expectations are not. I mean, the expectations nine of the 18 who voted on the dot plot, right? Which is each member basically gets up in front of the classroom and puts a dot on where they think interest rates are going to be in the future. So, they do 2026, 2027, 2028, and then longer term. And the update is good because people kind of see, well, what does the Federal Reserve think interest rates are going to do?

[00:05:32]And nine of the 18 felt like there needed to be a rate hike in 2026. Nine of the 18 felt like they could remain unchanged or even be lowered. So, there is some division in terms of the forecast, but in terms of today's vote, yeah, you're right, Rob, it's unanimous.

[00:05:50]We'll see what transpires from that.

[00:05:52]I'll tell you what we did learn is that the dot plot, it sounds like it's going to go away.

[00:05:57]So, Warsh is not a big fan of the forecasting.

[00:06:00]So, it's called forward guidance. And so, the markets are going to have less of the Fed's opinion on what things look like going forward. And predicting the economy's impossible anyway. You know, everybody would be billionaires if if you could actually do it, but he did establish five new independent task forces to oversee five key areas, but most importantly, they left the rates unchanged at 3.5 to 3.75%, and again, at least half feel like it's going to remain there really through 2027, according to the dot plot. So, don't look for interest rates to really be coming down, you know, over the next year and a half. They don't feel like PCE is going to return to its 2% target until deep into 2028.

[00:06:44]>> When you say PCE, you're referring to price earnings ratio?

[00:06:48]>> No, the PCE is the personal consumption expenditures, and that's released each month also, but that's basically the cost of living. You know, what are we spending, in a sense, and that's what one of their objectives is is to keep inflation in check, which means keeping prices of all goods sold in check.

[00:07:07]>> Yeah, well, the big driver behind consumer prices is the cost of oil, and that has come down. We'll see what happens this weekend in Switzerland during their signing of the memorandum of understanding, which has another 2 months to hammer out details.

[00:07:24]Not much to really criticize about. I mean, it's not what we had hoped for.

[00:07:30]It's a little bit like kissing your sister through the screen door.

[00:07:34]But in the meantime, our market is going to be driven a lot by what happens this weekend. I mean, we're not even taking trades without funds in house going into this weekend cuz either it's going to be great news and the market's going to start moving back up. When I say market, gold and silver, or it's going to be another one of those rug pulled out from underneath the peace process and the metals are going to crater. I doubt seriously if we're at the same price level this time next week as we are today.

[00:08:03]>> Well, I had a conversation with somebody outside of the office. It wasn't another broker at Macleavy and Precious Metals, but I was saying the same thing about this week because you had that MOU kind of being developed and they were talking about it, but you had Warsh's first Fed announcement, right?

[00:08:21]This first FOMC.

[00:08:23]And it's not like you can predict up or down, but we knew there'd be some volatility. And I think you're totally right, Rob, that that's going to continue for another week that we don't know. And And look at the reversal in gold. I mean, that's 3% down, silver down more than 4%, the ratio back up another point to above 62.

[00:08:41]And that's another huge swing. And why is that happening? It's happening because Treasury yield spiked after the Fed announcement. Okay, it's strong dollar policy. Interest rates are going to remain higher. So, the Treasury market cast its vote on the dot plot, too, and said that the rates are going up.

[00:08:58]And then certainly the US dollar rally that Miles started with is big. So, gold goes down that way. But if they actually do some strong dollar policy, it's okay for gold to come down. Remember, it reacts more than it predicts.

[00:09:11]>> Well, that's true.

[00:09:11]>> So, we're not in the job of predicting gold price, either. We just want to tell it like it is, tell you why it's reacting the way it is.

[00:09:20]And it is important to know that markets move when people say things. And whether it's monetary policy, like the Fed has, or it's fiscal policy, like the Treasury has, the US government spending, it matters. And the Dow Jones Industrial Average, last I looked, was down like 800 points after the announcement. The S&P erased like 1.2 trillion dollars in under two hours.

[00:09:43]>> Yeah.

[00:09:44]>> All since that Fed announcement about two and a half hours ago.

[00:09:47]>> Yeah.

[00:09:47]>> So, we'll see if if those markets remain volatile as well. It's not just the metals.

[00:09:52]>> Yeah. There's a lot going on.

[00:09:53]>> Yeah. Yeah, and my understanding of the MOU, the memorandum of understanding is that there's not a whole lot that's really understood.

[00:10:01]>> [laughter] >> So, we'll see.

[00:10:02]>> Well, you mentioned those Treasury yields and like you pull up something like say, you know, a reasonable time like the yield on the five-year which is currently sitting at uh about 4 and 1/4% with US interest rates down at what 3.75.

[00:10:19]Last time yields were here, US interest rates, this would have go back to February of last year, interest rates were at around 4 and 1/2. So, we're looking at yields starting to rise even though interest rates haven't. And I'm wondering if that is a concern for rising yields, higher return. I mean, there's maybe market concerns, there's potential instability like Rob was saying, there's concern over what's going on with Iran and potential hopefully uh some peace deals brokered this coming weekend. But there's definitely a flight from riskier assets, you know, risk-off assets into more consistent or more guaranteed returns even in the liquidity side of things as those yields are starting to push up quite a bit, bit more than we've seen in a long time, above where the interest rates themselves actually are.

[00:11:16]>> But I also think it's a factor. I mean, typically if you have a flight to safety, yields will come down as people load into Treasuries.

[00:11:24]And I think you're having more Treasuries being laid off into the market than there are people standing ready to buy.

[00:11:31]So, I think the flight to safety doesn't appear to be the US Treasuries, but where is it going?

[00:11:38]>> Yeah, where is it going? I mean, 45% of central banks, you guys the World Gold Council just released this.

[00:11:44]>> Saw that.

[00:11:45]>> Said they plan to buy gold over the next 12 months. That's the highest reading on record. So, again, if the biggest money is doing it, why aren't we doing it? And I talked to somebody yesterday who came in to a massive exit. It's kind of like the SpaceX story that you hear about.

[00:12:01]Yeah. You know, these people become overnight millionaires.

[00:12:04]And explaining the role of gold and the conservative approach, the hedge and the asset preservation that it is.

[00:12:11]You take a certain portion of your investment portfolio, you sock it away.

[00:12:15]And if you look at the investment triangle that we go through, which we're happy to talk with you about and it's been decades since we've recommended and it works over time.

[00:12:23]>> Yeah.

[00:12:24]>> None of this stuff really matters. It's all noise. If you allocate your assets in such a way that you're diversified truly, not just in stocks and bonds.

[00:12:34]Right? But you do have metals and you have a cash position and you're getting some yield and return and you've got some other growth and income options.

[00:12:42]I'm telling you, it just works, but at the end of the conversation, it was still kind of like, "Well, you know, how much do you put into gold? One 1%?

[00:12:50]>> Mhm.

[00:12:51]>> 2%?" And it's like, they're missing it.

[00:12:53]>> The market hasn't given them any reason, you know, people have a fear of missing out. And if they see the market running higher, that gives them more desire to be in it. When the market is like where we are now, I mean, Miles show that chart. I mean, we've hit in the 38 to 4100 dollar price range three times in the last what?

[00:13:16]>> Year?

[00:13:17]>> Yeah.

[00:13:17]>> This is a great time to be stepping in.

[00:13:20]I mean, you look at the charts and you go, "That's what I want to buy. I want to buy where I know where the floor is and I'm not going to get burned, and we're within 2 and 1/2, 3% of what we believe is very likely the floor of the price, but it's not giving them any There's no excitement. You know, I want to buy SpaceX when it's going up.

[00:13:42]>> up 20% a day after the IPO, after the launch.

[00:13:46]>> That's exciting.

[00:13:47]>> Not rocket launch, but the IPO launch.

[00:13:49]>> Yeah, it's That's exciting. That's what I want to I want to be in that.

[00:13:53]>> [laughter] >> Well, sometimes it just doesn't. For the same reason why people who understand the precious metals market, as you guys probably are also finding out right now, are buying a lot of precious metals right now.

[00:14:08]You know, we've got There is a significant amount of precious metals going out the door right now. I would argue, at least for a company like ours, more going out the door for us right now than there was back in January, February. Now, January, February was a little bit different because again, most of our clients who understand the triangle concept and are building towards pieces of the same puzzle, we're looking at things like ratio trading between gold or silver or rebalancing between their metals and their stock portfolio. You know, so there was There was a transfer of assets between kind of predecided, preorganized buckets that we put our investments into. But what I'm getting right now is just phone calls.

[00:14:51]Hey, silver's off by half. I enjoyed that run. Are things quiet? It's June.

[00:14:57]I'm going to pick up some more right now. And >> It's not quiet.

[00:15:01]>> yeah, it's not quiet. Well, and you mentioned a minute ago, it's like, well, where is this rush to liquidity? I mean, obviously we're seeing some of it in the US dollar with the yields pushing a decent clip above [snorts] the US interest rates, which historically only happens in a period of time where generally people are expecting interest rates to be rising.

[00:15:21]Is when you look at the interest rate chart overlaid with the yield chart, you tend to see periods where the interest rates rising and the yields tend to exceed that kind of in anticipation.

[00:15:33]But you brought up the point of you said, "Where's the rush to liquidity internationally if it's not going into Treasury bills?" Well, we already know the answer to that. Gold's up 40% and silver's doubled in the last year.

[00:15:44]We know where the rush to liquidity is going. It's been obvious for years. It's going into the best performing asset of the last 20 years.

[00:15:54]>> Not necessarily in the United States, but most certainly in Asia. And I'm grateful for our clientele because they do get it and we are busy and money is coming in and it's exciting.

[00:16:06]>> Yeah. Well, to that point, 20% of central bank asset holdings are now gold. It's exceeding 20%. It's 1.4% of the individual retail investor in the United States. That's a big disparity and it goes right back to my conversation where they're missing the mark. And what percentage of your portfolio, according to Morgan Stanley CIO last year? 20%. So, time to step up and buy the dips.

[00:16:32]>> Yep. Yeah. Yeah, you increase your metals position when nobody else wants it.

[00:16:38]And then you reorganize your metals position when everybody else wants it.

[00:16:43]Because that's where the opportunities come in and and I think we've worked very hard for a long time to try to teach people that. So, it's kind of fun seeing the fruits of the effort. And speaking to my personal clients out there that do listen to the show occasionally, just appreciate working with you guys and keeping a cool head in January and February.

[00:17:02]>> Yep, and I feel the same way and I'd like to end on that note and just really tell our clients how much we appreciate them. We really appreciate them listening cuz there's a lot of different podcasts that people can be listening to and they choose to listen to ours and we are grateful.

[00:17:18]>> Here, here. Well, that's going to do it this week for Golden Rule Radio. As always, we appreciate you stopping by.

[00:17:23]If you liked what you heard, we encourage you to head on over to our website, where you can find additional information for your precious metals portfolio. We are at mcalvany.com.

[00:17:32]That's m c a l v a n y dot com. You can also find us on Twitter at ICA Gold or Facebook at McAlvany Financial. And as always, if you'd like to discuss your personal portfolio, especially that triangle, with one of the advisors here at McAlvany Precious Metals, you can reach us at 1-800-525-9556.

[00:17:55]Thanks for listening.

[00:17:58]Have a great week.