Bloomberg Strategist: Gold is "Getting Very Scary" at These Levels, It's a Warning for Q4
Summary
Market Outlook: The podcast discusses the volatile market conditions driven by the looming government shutdown and its impact on gold prices, which are approaching $4,000 an ounce, indicating investor anxiety.
Gold vs. Other Commodities: While gold is experiencing a significant rally, other industrial metals like silver, platinum, and palladium are under pressure, reflecting market concerns about economic slowdown.
Stock Market Dynamics: The S&P 500's low volatility and resilience, partly fueled by AI narratives, are contrasted with the potential for a market correction, which could influence gold's trajectory.
Investment Trends: There is a notable shift towards gold ETFs, with inflows up nearly 20% this year, marking a reversal from previous years of outflows, suggesting increased investor interest in gold as a safe haven.
Commodities Analysis: The podcast highlights concerns about copper supply disruptions and the potential for a historical supply squeeze, while crude oil is expected to revert to lower prices despite geopolitical risks.
Silver and Industrial Metals: Silver's high volatility and industrial demand link it closely to economic conditions, with its performance lagging behind gold due to its dual role as an industrial and precious metal.
Cryptocurrency Insights: Bitcoin's correlation with the stock market is at an all-time high, reinforcing its status as a risk-on asset, while gold remains a risk-off asset, highlighting the divergence in investor sentiment.
Key Ratios and Indicators: The podcast emphasizes the importance of monitoring the Bitcoin-to-gold ratio and the VIX volatility index as indicators of market trends and potential shifts in the fourth quarter.
Transcript
[Music] Hey everyone, welcome back. I'm Jerry Saffron. It's a volatile day in the markets as Washington cares towards a government shutdown. So far, the president says it's likely, but of course, this developing story will continue to follow. And you can see the reaction right here in the price of gold. A sharp spike this morning as investors run for safety. Now, pulling back a little bit as traders digest the news. But this isn't just about gold. The market is sending a very clear and conflicted signal today. While gold is up, industrial metals, a lifeblood of the real economy, like silver, platinum, and palladium, they're all under pressure. And it's as if the market is betting on monetary chaos, but is deeply worried about a genuine economic slowdown. Now, this all comes against a deeply conflicted backdrop on the economy here. We just learned consumer confidence has hit a 5-month low with people worried about their jobs. And that's no surprise when you look at the latest Jolts report showing hiring is declining, confirming the trend from last month's dismal jobs report. And of course to help us break through all of this noise, we're joined by Mike Mcclo, senior macro strategist over at Bloomberg Intelligence. Also commodities, I must say. Mike, good to have you with us. Thanks again for joining. >> Oh, thanks for having me back. >> Let's talk about this uh you know this great divergence that we're seeing today. Gold is up. Copper and crude oil are weak. Now you've called this a signal of a profound reversion cycle. Unpack this for our audience a bit. What's the market telling you right now? Gold is getting really scary. Approaching $4,000 an ounce, up 46% on the year. The best year since 1979. I was only 15. I remember that one. Yeah. Well, I wasn't trading then. >> But it's just a significance how much it's doing. But it's it's basically virtually all risk assets, most nobody stock market are underperforming gold this year. And you mentioned some other ones, all the industrial precious metals. Remember there's four precious metals, gold, silver, platinum, platinum. Now they're catching up versus gold. But the signals are quite disconcerting. And the key thing I like to point out is we're seeing this record run in gold nearing that major threshold. Might think it's just a matter of time it prints that 4,000 markets might round numbers, but it's happening in an environment with volatility in the stock market about as complacent as it's been in 5 years on a 60-day basis. That's very rare. So, when you get volatility that low, the lowest 60-day volatility S&P 500, it's running below 9%. Again, it's worse before COVID. There's little room for it to go up, particularly as we enter that volatile time of year and we're just ending the the slow period time of year. And gold might be run front running a little bit of some issues. So, what I'm just looking at happening is gold right now, I think, is stuck between 4,000 and 3500. 4,000 is significant resistance. I just went back and looked at decades, years, even, you know, depending on what days. It's such a stretch from more any normal moving averages for head heading higher that for it to get above that level. It's similar to a lot of peaks in past. The most most like I really like to compare to was when we hit 2000 in 2020. That peak lasted for four years and then it's got that good level of support down 3500. That was April's low. So I think it stuck between this level for a while and by in Q4 it can test both >> and really not matter too much. But the big picture is what the stock market does. >> Yeah. Yeah. And let's talk about that thesis because it seems to hinge on that key catalyst, right? A stock market correction. I mean, you said gold might need a that that little blimp to really kind of take off. Right now, you see it. I mean, the S&P 500 is resilient, fueled by this AI narrative. The S&P 60-day volatility is near its lowest since before the pandemic. What if the stock market doesn't roll over? If we get a soft landing and equities continue to grind higher, I mean, does that create the major headwinds you're talking about for $4,000 gold? What? >> Well, it's if if the stock market doesn't roll over, stays resilient, volatility stays low, we do the same old stuff, >> easily, gold could 8 to 10% get right back down to that 35 3,400 level. It's still up a lot in the year. I mean, that's well over a third, which puts in the top the top like eight of the last hundred years on an annual basis. And that's just how far stretched it is. But what's really happening significantly lately is this major shift to inflows and gold ETF inflows. gold ETF total inflows. Now, our measure on the Bloommer says they're up almost 20% this year. To put that in context, the last four years there were outflows. So, that's switched very positive. The last time we had a really good inflow year was 2020 and they increased almost 30%. So, we're on a pace is 2020. But what happened in 2020 is a major shift in the global world order. We had COVID kick in the biggest money pump in history and volatility spiked. Now, it's the opposite. We're getting okay, another shutdown. kind of getting used to that. In the States, >> we have a The thing I want to mention, I think most notable is that gold just loves President Trump. His his nuances are wonderful and gold, every time he says something, I think gold smiles. >> You know, you've also noted that from a positioning standpoint, I mean, the gold trade isn't credited. You just kind of talked about it. Managed money net longs are still well before that peak. I mean, uh, couldn't that be interpreted differently? Instead of maybe seeing it as room to run, could it be a sign that the smart money isn't fully buying into the rally yet? perhaps waiting for a deeper pullback before committing. >> That's a good point. So you I'm glad you managed man managed money net positions. Their total right now about as far as comics open interest is about a third maybe 33% of total open interest last near last year's big runup when we first started getting towards that 2600 level. They got up to 45% of open interest. That's about as high as it gets. So those overweight longs are way curtailed and it's shifting more to long-term investors. But there that's just a good way to measure. I think managed money positions are just a good way to measure where you might get excessive bullishness or where you might hit stops if the market rolls over a little bit. But the bottom line is the deepest pockets in planet are still buying and that's central banks and they're a lot harder to measure. Um particularly as you see the war escalating and wars escalating in Europe. Um and things like Mr. Trump are saying that we might, you know, encourage Ukraine to take back some of their land. This is just it's almost a perfect storm for gold. But I I point out long-term, you know, all those indications I have, you go 4,000 anytime soon, that's such an overbought level, um, it's not a level for most investors to be laying into new longs, but I'm concerned of what it means for the macro and that's potential, you know, just a potential. Here's here's the key thing I'm worried about. Just a little bit of minor reversion in S&P 500 volatility. So, right now, the VIX volatility index is running 16%. The average for the year is right below 20. Let's say we pop up to near 20 kind of means nothing in the big picture. And the thing is, do we stay above it by the end of year? And that's why I think the fourth quarter this year is going to be significantly telling for what might happen for the next few decades. >> Yeah. Wild, wild years, I should say. >> Yeah. Next couple of years. I mean, looking at those some of those charts, have you seen this type of volatility? I mean, even on the gold front watching this uh as a little people waiting for maybe a little breath here. >> Yeah. So, we're we're overdue for that. What's the spark? And like I said, typically I go to manage money net positions and I look at the ratios, Jeremy. It's really kind of scary. Look at the there's right now it takes 61 ounces of WT sorry G um barrels of WT WTI crude oil per 1 ounce of gold. The highest close ever at the end of the year was 39. And those two years were 1933 and 2020. Not really good years for markets. So things like crude oil going down and gold going up on a global macro basis that's a very scary indication and that's it just shows not there's no demand pull. There's no demand pool for the world's most significant commodity yet there is for the ancient store value. And then what's stuck in in between there is most of the other metals particularly copper. The question I'm really watching is can copper stay strong into the end of end of the year yet it's kind of being pumped up for I like to say the wrong reasons potential side supply disruptions and actually actual supply disruptions. >> Yeah. And some of those fundamentals I mean you know you've been bearish calling recent strength kind of a spike to sell and warning that it could follow oil lower. But Mike, I mean, there's a powerful bull case as you mentioned, right? That massive supply disruption at the Grassburg mine in Indonesia. It almost feels like it's completely flipped the market dynamic. I mean, Goldman Sachs just shifted their forecast from a surplus to a deficit for next year because of it. Bank of America is now forecasting a 350 ton deficit and prices above 13,000 by 2027. Uh, are you concerned that your recessionary demand forecast is kind of underweighing that could be a historical supply squeeze in in copper? Could Dr. or copper be wrong this time. >> Uh that's the thing. It's making its relevance as an economic indicator less significant. But these kind of um these kind of supply disruptions usually are temporary. My colleague Grant Spor um who covers this stuff more depthly out of London points out typically get a 5% issue on in copper supply disruptions. This this year it's closer to 10%. But I like to talk about the elephant in the room in terms of copper. Copper is known as the uh you know economic sensitive commodity and on the year it's up about 20%. And the S&P 500's up 15%. You see it's riding that wave. It copper was up for a while almost a third. It dropped back you know the tariffs and now it's just riding that wave of beta. So that's the key thing is beta has to stay strong. So the alpha in the room I think for copper crude oil is already tilting lower is stock market has to stay resilient. And then I point out well the risks are they might just have a little bit of a back and fill by the end of the year. That means all the dominoes tum. that would just be filing things like crude oil and then there's key things about really indication for copper and that's 1.87% eight 7% that's 10 year note yield in China severe deflationary forces and you look at the price of iron ore it's heading lower those are typical companions with copper to go higher but they're heading lower so my point is if this volatile in US by the end of the year just kind of picks up a little US stock market the dominoes tumble and and copper is the number one to watch for potentially just dropping with crude oil iron ore and bond yields in China >> yeah interesting okay let's talk about the other side of that divergence you've been very bullish on your call for crude oil we I mean we've had you on the show we've talked about it saying could revert towards that $40 a barrel. I mean, obviously a little bit of a drop here. It has been on the the downward. I mean, what makes you so confident in that deflationary outcome for energy when you know, OPEC plus is actively cutting supply and and we see these geopolitical risks everywhere. >> Well, that's the key thing. Crude oil and the grains are in the same bucket. They're in the low price cure trajectory after pumping up too high to those spikes in 202022. That's usually what happens to commodities. Commodities go down towards low price cures after they go up too much. They're in the same bucket and there's not really much to stop it right now. Also in the middle of this significant technology revolution. I mean, why does the UF US under the Biden administration have to institute 100% tariffs on EVs out of China? Because there's massive supply of these wonderful vehicles that use no use no um petroleum and are use electricity and are just shifting the world order. And there's a key little fact about crude oil. The last 20 years there's been three lows around 40. Um, and that's since the peak in 2008. Copper kind of looks similar as 2008's peak. And I just like to point out it's not profound to look for a normal reversion in in a commodity to go below it its break even cost to offset excess supply and demand which we have in crude oil right now. In the last few years, it's been around 40. But we're also seeing that major shift. And that's why I think everything tilts on. What's holding crude oil up at like $62 a barrel right now WTI, which is below last year's low at 65. If you see the bent there is the resilience in US stock market. So that's why I point out is that we get a little volatility pick up in Q4 in in stocks. The Dow was already tumbling in commodos commodities. Look at crude oil and that's where copper's in all in the same space. So um the difference is um crude oil is just more significant but it's also being replaced by technology. Part of the technology is a demand pull for copper. But when I think of like electrification, yeah, let's talk about the most most, you know, the best conductor of electricity of all commodities. That's silver. >> Yeah. Well, let's talk about it. I mean, our audience is watching silver, as you know, very very carefully. We watched a little bit of this dip today while gold's up. But you've been less optimistic on silver, expecting it to kind of lag. Gold in a recession due to its industrial side, right? I mean, it just hit its 14-year high. Where are we at? Well, so that that's the key fact. Remember, silver is known as a devil's metal for a reason because it trades two times the volatility of gold. When so on a one to two-year basis, it's up a little more than gold, 60% and one-year basis. Gold's up 50% or so on a one-year basis. Um, that's a bad sign. When you get the same almost the same performance at double the risk, it's not a good sign. So, so I look at silver and still below silver. I think it's probably putting a pretty good support level around 40. It's probably going to make a new high around 50. just a matter of time. But it's in a similar bucket every day that goes by. It's much more industrial in a similar bucket as copper and platinum and platium. They're all following in that space in precious metals. Remember, there's four. Um they're all following beta and gold. And central banks aren't buying anything other than gold, but they're catching up. It's a question how far. And they also face competition from things like cryptocurrencies. But the difference is I like to point out most of these precious metals, a basket of these precious metals on the year up almost 50%. And you look at a basket of cryptoscurrencies are up maybe 10 20% yet they trade 60 times the volatility. So what you're seeing there I think is gold leading all the precious metals higher. There's only four of them. And then you've seen Bitcoin leading some of the cryptocies higher but there's millions of those and there's so unlimited supply is going to always pressure the prices. >> Hey with silver I mean you know silver hitting that 14-year high. I mean is it is it possible when we kind of come back its monetary charact characteristics could kind of dominate? I mean in a true crisis do you think do you think silver's higher volatility mean it actually outperforms gold to the upside as in retail investors rush in >> in a dep demand pull economy when you have a a country like China who creates most of the silver panels and are really expanding economically or not you know they are completely pumping their system to stay afloat. There's that to GDP is running 300%. Money supply is running $45 trillion almost more than double the US. So it's a severe deflationary force there. And silver is just reflecting that potential global tilt towards um a recession that you're seeing in crude oil. And then you have to ask yourself when's the last time we see some substantial upward revisions in global GD GDP estimate growth. So right now they're still f facing this, you know, paradigm shift of tariffs from the world's largest goods um importer, the US. And so silver's stuck in the middle there. It's it's in the same bucket as copper. And I think that's why I'm worried that if we get a pick up in volatility, all the all the metals on the planet that are much more industrial than gold will suffer continue to compared to gold. And they're only really rallying because gold's making them go higher. Again, they're substitutes. I mean, silver's for jewelry, platinum plating can be used for jewelry. So when you get the price of platinum to the lowest versus um gold in I think it was May ever and the gold to silver ratio got to 105 in April. That was really high. Now we're down in the lower end of the range around 82. Um that's just they're all in the back of gold right now. All the all the almost all the metals. >> Yeah. Yeah. Let's look at the bigger picture. Sure. I mean, you compared the current setup, record high stock valuations relative to GBP, GDP, kind of diverging commodities to a major historical peaks like what 29 in the US or 89 in Japan. Uh, obviously a little bit of a warning here, Mike. I mean, what does a profound reversion cycle actually look like for the average investor? Are we talking about a sharp painful crash or a long grinding deflationary period like Japan's last decades? >> The answer is yes. I I'm I don't know, but I'm waiting for indications of that and that's why I think fourth quarter. So going to be so telling Jeremy, we basically need stock market volat volatility stay at a 5year low. Okay, first for that to keep this you know the the wealth creation machine going and that's for gold's warning there's a problem. So I think the risks are that one thing that's really striking me if you look at things like the the ratio of gold in terms of US treasury prices. Now, for bond prices, we can always go back 40 years, but if you look at an aggregate measure of treasury prices, you have to go back to 1983, the last time that treasuries were this low versus gold. Um, that's pretty extreme. And this a little reversion. On the other side of that, you look at the stock market cap, the GDP in this country, it's the highest since 1929. So, a little bit of reversion there is maybe what gold's figuring out. It's this question of how it happens and when. And to me, that's what I see. I see gold as just plain scary at these levels. It's telling us there's something there something might be going on but and also it's getting really expensive. So good example 2008 gold >> rallied basically 30% in 2007. It pumped up a lot in 2008 and then when we hit you know things really collapsed in 2008. Gold dropped 20% initially and then recovered. So it's, you know, that's why I'm worried that um there is a it's just it's maybe you live in interesting times and markets are so extreme that you have to be careful like just talking about 4,000 gold up almost 50% in one year with the stock market fine is kind of and with inflation still kind of you know lot high 3%. So a good example is the last time we had this kind of rally in in gold in 1979 inflation was running 10%. And this year it's running below about 3%. That's CPI. Yeah. Yeah. Yeah. It's going to be interesting. Uh all this while Bitcoin's sliding a little bit, it's almost been reinforcing its status as a risk on asset correlated to the NASDAQ as you've called it. But the bull case for for Bitcoin is is, you know, it is a hedge against this very fiscal and monetary excess that you're describing. Why do you think Bitcoin's failing that test right now? And what would it take for Bitcoin to finally decorrelate from risk assets? >> Um lower prices. Bitcoin. Unfortunately, I I fully expected it when it was around 10,000 in 2020 when you know there was a lot of crying in that space to go to underground. Granted added a zero. Now that there's a lot of yelling should expect selling. It's just classic indication of a market that's gone too far. But remember its correlation in cryptos to the stock market is the highest ever. I look at 48 months because it's a 4-year cycle. It's around 6. In 2020 it was negative. So it's clearly the whole crypto space is clearly a risk on space and golds are clearly a risk off space. Yet the stock market's still up 15% of the year. So my point is if we just give back some of those gains, you're going to see the truth about unlimited supply, massive hub and speculative accesses that makes me look reminds me of the you know internet bubble in 1999 and 2000 just many times more. And the key thing I like to point out is when you track a number on the screen that shows you the price of gold or futures, it tracks spikes the price of gold. It tracks a basis. You can always trade that number if it's futures against the actual physical gold. There's a basis there. In vast majority of cryptocurrencies, there's no basis except about 300 million and 300 billion that is in crypto dollars or stable coins. everything all over when we're just, you know, full faith and and and and a number on the screen that things like um Dogecoin that trade 40 value right now is 28 billion. At least that's coming down a little bit. I'm sorry, Dogecoin is 34 billion. That tracks nothing. It's just full faith. And that's my point is when you start seeing a little backup in the excessive valuations of maybe US equities, first place to get hit, first place to get probably might be cryptos. >> Yeah. Well, speaking of those evaluations, I mean, Nvidia is incredible run today. It's in record territory. Officially became the first company in history to hit $4.5 trillion in market cap. I mean, >> Q4 is going to be interesting. It comes back to this thesis. Let's bring it kind of together for the audience as we go into that fourth quarter with this whole government shutdown looming, you know, the stock market that feels complacent and these major divergences in the commodity space. Uh just how important is Q4? I mean, what's the single most important chart or ratio that investors should be watching right now to know where things are going or if they're going to break? >> Well, one of my favorite ratios I've watched for over a decade is um Bitcoin to gold. The amount ounces of of gold equal to one Bitcoin. Right now, it's 29.5. The high when President Trump got elected was 40. >> The low this year is 25. To me the risks are that this goes back below 25 as we find out that um this has been a great leading indicator for the stock market and risk assets. So to me that's a top ratio um to watch and it was way too expensive. It got to 35 recently you know back in July when the VIX was very low and now it's trickling back down as we head into fourth quarter. So um it would be wonderful if we can end this year and say the VIX at 16 is still around 16. Um I'm worried it's going to go back above 20. It'd be wonderful if we can keep those trends going, but we're heading towards the reality of um late cycle things. And then the discombobulation of Mr. Trump. Um the um pushing back on the Fed, gold love loves that. And the tariffs, I mean, the whole world is facing recessionary trajectories. As I mentioned, China, just look at Germany. 50% of their GDP is basically exports. Um, so to me this is um if we so that's the scenario if things stay meh boring that's great then I don't know what to do but if we get just a little just a little modest pick up in volley that could set the tone for years and I'm you know unfortunately >> that's why t h t h t h t h t h t h t h t h t h t hilt over to copper looks to me very much like crude oil did in 2008 popped up to a peak in July it it hit got hit down by end of you know Q3 and then Q4 it collapsed down to 40 copper's kind of hovering there right now and you can see how it's this basically hovering with the stock market. So, copper is a great leading indicator. Um, and then you look at gold versus everything. It's basically made a new high versus broad commodities versus copper versus crude oil. And there's only one thing it's still relatively cheap against S&P 500. >> Yeah. Yeah. Wild wild there. You know, I was reading on X today, obviously, China is going into this 3-day uh national holiday and some of these markets are closing. A lot of people saying go and buy the dip on the on the, you know, on the on the gold side. Do these small moves actually make an indication where you're sitting? >> No. I in fact I try to I put up my DI list to deliberately ignore as an ex-trader. It's so nice to be able to ignore those things as I remember getting stopped out in the wrong side a lot of that stuff and having clients getting it can really um cause a little disconcert mentally and physically and taxing on your time treasure and talent. I look at the macro big picture and gold's in a raging bull market. It's just getting overbought. That's what happens in bull markets. And you know, last year was below 3,000. That was probably, you know, a time to be overweight. And it's proven that this year, but getting near 4,000, it's probably not the place to get overweight. But that's typically what investors do. They pile on their peaks. And I just look at 4,000 such significant resistance that if I'm right about this um volatility potentially picking up in the stock market and volat and stock and gold being so expensive the next big potential trade has been one of the most beat up markets on the planet and that's good old US treasury bonds >> good old treasuries I mean still uh still interesting what 4% I mean it's not bad returns on that front I mean gold's not really giving you any any residual back on that front. Well, that's the thing. It's it's what is gold telling us? Is is it a faint? Is it is it a false move? Unlikely. If it really collapses by then and state trades below 3,400, it might indicate that. But I think it's more likely. It's just going to be like this. US 10 to 414 is going to just do kind of follow what we have in China right now. 1.87 and just reminds me of trading JGBs 30 years ago. That's what happened. JGBs collapsed. It took a while. Japanese government bonds I should measure. And then it was just a matter of time the rest of the world caught up. Um, and now that's kind of tilting the other way a little bit. >> Yeah. All right, Mike McClen with Bloomberg Intelligence joining us today. Appreciate it. I mean, I this could go right out of the window if we stop pressing record and we have a somebody coming in and preventing this government shutdown, but right now obviously an interesting macro backdrop, huh? Thanks for this. >> Yeah, thank you. >> All right, thank you for your time and insights. Of course, we're going to let you know you can follow Mike on X and we'll have a link in our description. Now, that's all the time we have. Stay tuned to Kicko News for continuing coverage of this shutdown and the impacts on the markets outside the mainstream narrative. I'm Jeremy Saffron. We'll see you next time. [Music] Heat. Heat. [Music]
Bloomberg Strategist: Gold is "Getting Very Scary" at These Levels, It's a Warning for Q4
Summary
Transcript
[Music] Hey everyone, welcome back. I'm Jerry Saffron. It's a volatile day in the markets as Washington cares towards a government shutdown. So far, the president says it's likely, but of course, this developing story will continue to follow. And you can see the reaction right here in the price of gold. A sharp spike this morning as investors run for safety. Now, pulling back a little bit as traders digest the news. But this isn't just about gold. The market is sending a very clear and conflicted signal today. While gold is up, industrial metals, a lifeblood of the real economy, like silver, platinum, and palladium, they're all under pressure. And it's as if the market is betting on monetary chaos, but is deeply worried about a genuine economic slowdown. Now, this all comes against a deeply conflicted backdrop on the economy here. We just learned consumer confidence has hit a 5-month low with people worried about their jobs. And that's no surprise when you look at the latest Jolts report showing hiring is declining, confirming the trend from last month's dismal jobs report. And of course to help us break through all of this noise, we're joined by Mike Mcclo, senior macro strategist over at Bloomberg Intelligence. Also commodities, I must say. Mike, good to have you with us. Thanks again for joining. >> Oh, thanks for having me back. >> Let's talk about this uh you know this great divergence that we're seeing today. Gold is up. Copper and crude oil are weak. Now you've called this a signal of a profound reversion cycle. Unpack this for our audience a bit. What's the market telling you right now? Gold is getting really scary. Approaching $4,000 an ounce, up 46% on the year. The best year since 1979. I was only 15. I remember that one. Yeah. Well, I wasn't trading then. >> But it's just a significance how much it's doing. But it's it's basically virtually all risk assets, most nobody stock market are underperforming gold this year. And you mentioned some other ones, all the industrial precious metals. Remember there's four precious metals, gold, silver, platinum, platinum. Now they're catching up versus gold. But the signals are quite disconcerting. And the key thing I like to point out is we're seeing this record run in gold nearing that major threshold. Might think it's just a matter of time it prints that 4,000 markets might round numbers, but it's happening in an environment with volatility in the stock market about as complacent as it's been in 5 years on a 60-day basis. That's very rare. So, when you get volatility that low, the lowest 60-day volatility S&P 500, it's running below 9%. Again, it's worse before COVID. There's little room for it to go up, particularly as we enter that volatile time of year and we're just ending the the slow period time of year. And gold might be run front running a little bit of some issues. So, what I'm just looking at happening is gold right now, I think, is stuck between 4,000 and 3500. 4,000 is significant resistance. I just went back and looked at decades, years, even, you know, depending on what days. It's such a stretch from more any normal moving averages for head heading higher that for it to get above that level. It's similar to a lot of peaks in past. The most most like I really like to compare to was when we hit 2000 in 2020. That peak lasted for four years and then it's got that good level of support down 3500. That was April's low. So I think it stuck between this level for a while and by in Q4 it can test both >> and really not matter too much. But the big picture is what the stock market does. >> Yeah. Yeah. And let's talk about that thesis because it seems to hinge on that key catalyst, right? A stock market correction. I mean, you said gold might need a that that little blimp to really kind of take off. Right now, you see it. I mean, the S&P 500 is resilient, fueled by this AI narrative. The S&P 60-day volatility is near its lowest since before the pandemic. What if the stock market doesn't roll over? If we get a soft landing and equities continue to grind higher, I mean, does that create the major headwinds you're talking about for $4,000 gold? What? >> Well, it's if if the stock market doesn't roll over, stays resilient, volatility stays low, we do the same old stuff, >> easily, gold could 8 to 10% get right back down to that 35 3,400 level. It's still up a lot in the year. I mean, that's well over a third, which puts in the top the top like eight of the last hundred years on an annual basis. And that's just how far stretched it is. But what's really happening significantly lately is this major shift to inflows and gold ETF inflows. gold ETF total inflows. Now, our measure on the Bloommer says they're up almost 20% this year. To put that in context, the last four years there were outflows. So, that's switched very positive. The last time we had a really good inflow year was 2020 and they increased almost 30%. So, we're on a pace is 2020. But what happened in 2020 is a major shift in the global world order. We had COVID kick in the biggest money pump in history and volatility spiked. Now, it's the opposite. We're getting okay, another shutdown. kind of getting used to that. In the States, >> we have a The thing I want to mention, I think most notable is that gold just loves President Trump. His his nuances are wonderful and gold, every time he says something, I think gold smiles. >> You know, you've also noted that from a positioning standpoint, I mean, the gold trade isn't credited. You just kind of talked about it. Managed money net longs are still well before that peak. I mean, uh, couldn't that be interpreted differently? Instead of maybe seeing it as room to run, could it be a sign that the smart money isn't fully buying into the rally yet? perhaps waiting for a deeper pullback before committing. >> That's a good point. So you I'm glad you managed man managed money net positions. Their total right now about as far as comics open interest is about a third maybe 33% of total open interest last near last year's big runup when we first started getting towards that 2600 level. They got up to 45% of open interest. That's about as high as it gets. So those overweight longs are way curtailed and it's shifting more to long-term investors. But there that's just a good way to measure. I think managed money positions are just a good way to measure where you might get excessive bullishness or where you might hit stops if the market rolls over a little bit. But the bottom line is the deepest pockets in planet are still buying and that's central banks and they're a lot harder to measure. Um particularly as you see the war escalating and wars escalating in Europe. Um and things like Mr. Trump are saying that we might, you know, encourage Ukraine to take back some of their land. This is just it's almost a perfect storm for gold. But I I point out long-term, you know, all those indications I have, you go 4,000 anytime soon, that's such an overbought level, um, it's not a level for most investors to be laying into new longs, but I'm concerned of what it means for the macro and that's potential, you know, just a potential. Here's here's the key thing I'm worried about. Just a little bit of minor reversion in S&P 500 volatility. So, right now, the VIX volatility index is running 16%. The average for the year is right below 20. Let's say we pop up to near 20 kind of means nothing in the big picture. And the thing is, do we stay above it by the end of year? And that's why I think the fourth quarter this year is going to be significantly telling for what might happen for the next few decades. >> Yeah. Wild, wild years, I should say. >> Yeah. Next couple of years. I mean, looking at those some of those charts, have you seen this type of volatility? I mean, even on the gold front watching this uh as a little people waiting for maybe a little breath here. >> Yeah. So, we're we're overdue for that. What's the spark? And like I said, typically I go to manage money net positions and I look at the ratios, Jeremy. It's really kind of scary. Look at the there's right now it takes 61 ounces of WT sorry G um barrels of WT WTI crude oil per 1 ounce of gold. The highest close ever at the end of the year was 39. And those two years were 1933 and 2020. Not really good years for markets. So things like crude oil going down and gold going up on a global macro basis that's a very scary indication and that's it just shows not there's no demand pull. There's no demand pool for the world's most significant commodity yet there is for the ancient store value. And then what's stuck in in between there is most of the other metals particularly copper. The question I'm really watching is can copper stay strong into the end of end of the year yet it's kind of being pumped up for I like to say the wrong reasons potential side supply disruptions and actually actual supply disruptions. >> Yeah. And some of those fundamentals I mean you know you've been bearish calling recent strength kind of a spike to sell and warning that it could follow oil lower. But Mike, I mean, there's a powerful bull case as you mentioned, right? That massive supply disruption at the Grassburg mine in Indonesia. It almost feels like it's completely flipped the market dynamic. I mean, Goldman Sachs just shifted their forecast from a surplus to a deficit for next year because of it. Bank of America is now forecasting a 350 ton deficit and prices above 13,000 by 2027. Uh, are you concerned that your recessionary demand forecast is kind of underweighing that could be a historical supply squeeze in in copper? Could Dr. or copper be wrong this time. >> Uh that's the thing. It's making its relevance as an economic indicator less significant. But these kind of um these kind of supply disruptions usually are temporary. My colleague Grant Spor um who covers this stuff more depthly out of London points out typically get a 5% issue on in copper supply disruptions. This this year it's closer to 10%. But I like to talk about the elephant in the room in terms of copper. Copper is known as the uh you know economic sensitive commodity and on the year it's up about 20%. And the S&P 500's up 15%. You see it's riding that wave. It copper was up for a while almost a third. It dropped back you know the tariffs and now it's just riding that wave of beta. So that's the key thing is beta has to stay strong. So the alpha in the room I think for copper crude oil is already tilting lower is stock market has to stay resilient. And then I point out well the risks are they might just have a little bit of a back and fill by the end of the year. That means all the dominoes tum. that would just be filing things like crude oil and then there's key things about really indication for copper and that's 1.87% eight 7% that's 10 year note yield in China severe deflationary forces and you look at the price of iron ore it's heading lower those are typical companions with copper to go higher but they're heading lower so my point is if this volatile in US by the end of the year just kind of picks up a little US stock market the dominoes tumble and and copper is the number one to watch for potentially just dropping with crude oil iron ore and bond yields in China >> yeah interesting okay let's talk about the other side of that divergence you've been very bullish on your call for crude oil we I mean we've had you on the show we've talked about it saying could revert towards that $40 a barrel. I mean, obviously a little bit of a drop here. It has been on the the downward. I mean, what makes you so confident in that deflationary outcome for energy when you know, OPEC plus is actively cutting supply and and we see these geopolitical risks everywhere. >> Well, that's the key thing. Crude oil and the grains are in the same bucket. They're in the low price cure trajectory after pumping up too high to those spikes in 202022. That's usually what happens to commodities. Commodities go down towards low price cures after they go up too much. They're in the same bucket and there's not really much to stop it right now. Also in the middle of this significant technology revolution. I mean, why does the UF US under the Biden administration have to institute 100% tariffs on EVs out of China? Because there's massive supply of these wonderful vehicles that use no use no um petroleum and are use electricity and are just shifting the world order. And there's a key little fact about crude oil. The last 20 years there's been three lows around 40. Um, and that's since the peak in 2008. Copper kind of looks similar as 2008's peak. And I just like to point out it's not profound to look for a normal reversion in in a commodity to go below it its break even cost to offset excess supply and demand which we have in crude oil right now. In the last few years, it's been around 40. But we're also seeing that major shift. And that's why I think everything tilts on. What's holding crude oil up at like $62 a barrel right now WTI, which is below last year's low at 65. If you see the bent there is the resilience in US stock market. So that's why I point out is that we get a little volatility pick up in Q4 in in stocks. The Dow was already tumbling in commodos commodities. Look at crude oil and that's where copper's in all in the same space. So um the difference is um crude oil is just more significant but it's also being replaced by technology. Part of the technology is a demand pull for copper. But when I think of like electrification, yeah, let's talk about the most most, you know, the best conductor of electricity of all commodities. That's silver. >> Yeah. Well, let's talk about it. I mean, our audience is watching silver, as you know, very very carefully. We watched a little bit of this dip today while gold's up. But you've been less optimistic on silver, expecting it to kind of lag. Gold in a recession due to its industrial side, right? I mean, it just hit its 14-year high. Where are we at? Well, so that that's the key fact. Remember, silver is known as a devil's metal for a reason because it trades two times the volatility of gold. When so on a one to two-year basis, it's up a little more than gold, 60% and one-year basis. Gold's up 50% or so on a one-year basis. Um, that's a bad sign. When you get the same almost the same performance at double the risk, it's not a good sign. So, so I look at silver and still below silver. I think it's probably putting a pretty good support level around 40. It's probably going to make a new high around 50. just a matter of time. But it's in a similar bucket every day that goes by. It's much more industrial in a similar bucket as copper and platinum and platium. They're all following in that space in precious metals. Remember, there's four. Um they're all following beta and gold. And central banks aren't buying anything other than gold, but they're catching up. It's a question how far. And they also face competition from things like cryptocurrencies. But the difference is I like to point out most of these precious metals, a basket of these precious metals on the year up almost 50%. And you look at a basket of cryptoscurrencies are up maybe 10 20% yet they trade 60 times the volatility. So what you're seeing there I think is gold leading all the precious metals higher. There's only four of them. And then you've seen Bitcoin leading some of the cryptocies higher but there's millions of those and there's so unlimited supply is going to always pressure the prices. >> Hey with silver I mean you know silver hitting that 14-year high. I mean is it is it possible when we kind of come back its monetary charact characteristics could kind of dominate? I mean in a true crisis do you think do you think silver's higher volatility mean it actually outperforms gold to the upside as in retail investors rush in >> in a dep demand pull economy when you have a a country like China who creates most of the silver panels and are really expanding economically or not you know they are completely pumping their system to stay afloat. There's that to GDP is running 300%. Money supply is running $45 trillion almost more than double the US. So it's a severe deflationary force there. And silver is just reflecting that potential global tilt towards um a recession that you're seeing in crude oil. And then you have to ask yourself when's the last time we see some substantial upward revisions in global GD GDP estimate growth. So right now they're still f facing this, you know, paradigm shift of tariffs from the world's largest goods um importer, the US. And so silver's stuck in the middle there. It's it's in the same bucket as copper. And I think that's why I'm worried that if we get a pick up in volatility, all the all the metals on the planet that are much more industrial than gold will suffer continue to compared to gold. And they're only really rallying because gold's making them go higher. Again, they're substitutes. I mean, silver's for jewelry, platinum plating can be used for jewelry. So when you get the price of platinum to the lowest versus um gold in I think it was May ever and the gold to silver ratio got to 105 in April. That was really high. Now we're down in the lower end of the range around 82. Um that's just they're all in the back of gold right now. All the all the almost all the metals. >> Yeah. Yeah. Let's look at the bigger picture. Sure. I mean, you compared the current setup, record high stock valuations relative to GBP, GDP, kind of diverging commodities to a major historical peaks like what 29 in the US or 89 in Japan. Uh, obviously a little bit of a warning here, Mike. I mean, what does a profound reversion cycle actually look like for the average investor? Are we talking about a sharp painful crash or a long grinding deflationary period like Japan's last decades? >> The answer is yes. I I'm I don't know, but I'm waiting for indications of that and that's why I think fourth quarter. So going to be so telling Jeremy, we basically need stock market volat volatility stay at a 5year low. Okay, first for that to keep this you know the the wealth creation machine going and that's for gold's warning there's a problem. So I think the risks are that one thing that's really striking me if you look at things like the the ratio of gold in terms of US treasury prices. Now, for bond prices, we can always go back 40 years, but if you look at an aggregate measure of treasury prices, you have to go back to 1983, the last time that treasuries were this low versus gold. Um, that's pretty extreme. And this a little reversion. On the other side of that, you look at the stock market cap, the GDP in this country, it's the highest since 1929. So, a little bit of reversion there is maybe what gold's figuring out. It's this question of how it happens and when. And to me, that's what I see. I see gold as just plain scary at these levels. It's telling us there's something there something might be going on but and also it's getting really expensive. So good example 2008 gold >> rallied basically 30% in 2007. It pumped up a lot in 2008 and then when we hit you know things really collapsed in 2008. Gold dropped 20% initially and then recovered. So it's, you know, that's why I'm worried that um there is a it's just it's maybe you live in interesting times and markets are so extreme that you have to be careful like just talking about 4,000 gold up almost 50% in one year with the stock market fine is kind of and with inflation still kind of you know lot high 3%. So a good example is the last time we had this kind of rally in in gold in 1979 inflation was running 10%. And this year it's running below about 3%. That's CPI. Yeah. Yeah. Yeah. It's going to be interesting. Uh all this while Bitcoin's sliding a little bit, it's almost been reinforcing its status as a risk on asset correlated to the NASDAQ as you've called it. But the bull case for for Bitcoin is is, you know, it is a hedge against this very fiscal and monetary excess that you're describing. Why do you think Bitcoin's failing that test right now? And what would it take for Bitcoin to finally decorrelate from risk assets? >> Um lower prices. Bitcoin. Unfortunately, I I fully expected it when it was around 10,000 in 2020 when you know there was a lot of crying in that space to go to underground. Granted added a zero. Now that there's a lot of yelling should expect selling. It's just classic indication of a market that's gone too far. But remember its correlation in cryptos to the stock market is the highest ever. I look at 48 months because it's a 4-year cycle. It's around 6. In 2020 it was negative. So it's clearly the whole crypto space is clearly a risk on space and golds are clearly a risk off space. Yet the stock market's still up 15% of the year. So my point is if we just give back some of those gains, you're going to see the truth about unlimited supply, massive hub and speculative accesses that makes me look reminds me of the you know internet bubble in 1999 and 2000 just many times more. And the key thing I like to point out is when you track a number on the screen that shows you the price of gold or futures, it tracks spikes the price of gold. It tracks a basis. You can always trade that number if it's futures against the actual physical gold. There's a basis there. In vast majority of cryptocurrencies, there's no basis except about 300 million and 300 billion that is in crypto dollars or stable coins. everything all over when we're just, you know, full faith and and and and a number on the screen that things like um Dogecoin that trade 40 value right now is 28 billion. At least that's coming down a little bit. I'm sorry, Dogecoin is 34 billion. That tracks nothing. It's just full faith. And that's my point is when you start seeing a little backup in the excessive valuations of maybe US equities, first place to get hit, first place to get probably might be cryptos. >> Yeah. Well, speaking of those evaluations, I mean, Nvidia is incredible run today. It's in record territory. Officially became the first company in history to hit $4.5 trillion in market cap. I mean, >> Q4 is going to be interesting. It comes back to this thesis. Let's bring it kind of together for the audience as we go into that fourth quarter with this whole government shutdown looming, you know, the stock market that feels complacent and these major divergences in the commodity space. Uh just how important is Q4? I mean, what's the single most important chart or ratio that investors should be watching right now to know where things are going or if they're going to break? >> Well, one of my favorite ratios I've watched for over a decade is um Bitcoin to gold. The amount ounces of of gold equal to one Bitcoin. Right now, it's 29.5. The high when President Trump got elected was 40. >> The low this year is 25. To me the risks are that this goes back below 25 as we find out that um this has been a great leading indicator for the stock market and risk assets. So to me that's a top ratio um to watch and it was way too expensive. It got to 35 recently you know back in July when the VIX was very low and now it's trickling back down as we head into fourth quarter. So um it would be wonderful if we can end this year and say the VIX at 16 is still around 16. Um I'm worried it's going to go back above 20. It'd be wonderful if we can keep those trends going, but we're heading towards the reality of um late cycle things. And then the discombobulation of Mr. Trump. Um the um pushing back on the Fed, gold love loves that. And the tariffs, I mean, the whole world is facing recessionary trajectories. As I mentioned, China, just look at Germany. 50% of their GDP is basically exports. Um, so to me this is um if we so that's the scenario if things stay meh boring that's great then I don't know what to do but if we get just a little just a little modest pick up in volley that could set the tone for years and I'm you know unfortunately >> that's why t h t h t h t h t h t h t h t h t h t hilt over to copper looks to me very much like crude oil did in 2008 popped up to a peak in July it it hit got hit down by end of you know Q3 and then Q4 it collapsed down to 40 copper's kind of hovering there right now and you can see how it's this basically hovering with the stock market. So, copper is a great leading indicator. Um, and then you look at gold versus everything. It's basically made a new high versus broad commodities versus copper versus crude oil. And there's only one thing it's still relatively cheap against S&P 500. >> Yeah. Yeah. Wild wild there. You know, I was reading on X today, obviously, China is going into this 3-day uh national holiday and some of these markets are closing. A lot of people saying go and buy the dip on the on the, you know, on the on the gold side. Do these small moves actually make an indication where you're sitting? >> No. I in fact I try to I put up my DI list to deliberately ignore as an ex-trader. It's so nice to be able to ignore those things as I remember getting stopped out in the wrong side a lot of that stuff and having clients getting it can really um cause a little disconcert mentally and physically and taxing on your time treasure and talent. I look at the macro big picture and gold's in a raging bull market. It's just getting overbought. That's what happens in bull markets. And you know, last year was below 3,000. That was probably, you know, a time to be overweight. And it's proven that this year, but getting near 4,000, it's probably not the place to get overweight. But that's typically what investors do. They pile on their peaks. And I just look at 4,000 such significant resistance that if I'm right about this um volatility potentially picking up in the stock market and volat and stock and gold being so expensive the next big potential trade has been one of the most beat up markets on the planet and that's good old US treasury bonds >> good old treasuries I mean still uh still interesting what 4% I mean it's not bad returns on that front I mean gold's not really giving you any any residual back on that front. Well, that's the thing. It's it's what is gold telling us? Is is it a faint? Is it is it a false move? Unlikely. If it really collapses by then and state trades below 3,400, it might indicate that. But I think it's more likely. It's just going to be like this. US 10 to 414 is going to just do kind of follow what we have in China right now. 1.87 and just reminds me of trading JGBs 30 years ago. That's what happened. JGBs collapsed. It took a while. Japanese government bonds I should measure. And then it was just a matter of time the rest of the world caught up. Um, and now that's kind of tilting the other way a little bit. >> Yeah. All right, Mike McClen with Bloomberg Intelligence joining us today. Appreciate it. I mean, I this could go right out of the window if we stop pressing record and we have a somebody coming in and preventing this government shutdown, but right now obviously an interesting macro backdrop, huh? Thanks for this. >> Yeah, thank you. >> All right, thank you for your time and insights. Of course, we're going to let you know you can follow Mike on X and we'll have a link in our description. Now, that's all the time we have. Stay tuned to Kicko News for continuing coverage of this shutdown and the impacts on the markets outside the mainstream narrative. I'm Jeremy Saffron. We'll see you next time. [Music] Heat. Heat. [Music]