Why is this Happening?
Over the past two weeks, gold and silver have experienced historic sell-offs, with some of the most volatile consecutive down days in recent memory.
Why have precious metals faced such a brutal sell-off? What’s driving Wall Street’s strong conviction that exiting these safe-haven assets is the right move?
The answer, as always, lies in real interest rate expectations.
Real interest rates are determined by the difference between nominal rates—such as the interest earned when lending money to the U.S. Treasury for 10 years, the most common fixed-income investment—and inflation.
Currently, lending the government money for 10 years yields 4.30% in interest. Meanwhile, the official CPI inflation rate is 2.3%. Factoring in inflation, the real interest rate comes to 4.3% – 2.3% = 2%.
Gold prices typically rise when real interest rates trend lower and fall when they trend higher.
In practical terms, if inflation remains at 2.3% while yields increase, gold prices are likely to keep dropping. Conversely, if the Federal Reserve cuts rates, bringing bond yields below 4%, gold could soar.
Now, let’s consider the incoming administration.
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Donald Trump isn’t returning to the presidency to maintain the status quo. He aims to implement significant reforms and improvements to the federal government.
Trump’s Treasury Secretary appointee, Scott Bessent, and Commerce Secretary appointee, Howard Lutnick, plan to reduce the deficit by $1 trillion, generate new federal revenue streams, and ramp up oil production by 3 million barrels a day.
The message is clear: America wants to grow again. This vision has markets speculating that the Federal Reserve will hesitate to cut rates further, fearing the resurgence of inflation could undermine its credibility.
As of now, Americans are holding an astounding $6.7 trillion in money market accounts, keeping the dollar strong. However, as confidence in the economy and government strengthens in early 2025, we can expect money to flow out of these accounts and into equities, real estate, and capital investments.
This shift is likely to weaken the dollar in 2025.
Combined with an oil supply boom, this scenario sets the stage for a rally in commodities, including gold and silver. I predict 2025 will be one of the most volatile years in recent memory, bringing challenges for the entrenched “deep state” elites and their beneficiaries.
Silver could easily climb to $37–$42 per ounce, while gold has the potential to break $3,000.
To fulfill his promise of peace, Donald Trump will need to exert intense and uncompromising pressure on multiple fronts. The early days of his administration may feel like the brink of World War III, but rest assured—it won’t escalate to that level.
Best Regards,
Lior Gantz
President, WealthResearchGroup.com
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