Fed/Liquidity Shift: The Fed cut rates 25 bps and ended QT, signaling a shift toward easier funding conditions even if not full QE yet.
Dollar & Yields: Higher-for-longer U.S. yields are supporting a stronger dollar, affecting risk assets and non-yielding commodities tactically.
Gold: Gold surged back above $4,000, aided by easing liquidity, central bank buying, and record demand trends per the World Gold Council.
Silver: Silver rebounded with the gold-silver ratio near 82, eying the $50 level as a key psychological threshold.
Agnico Eagle (AEM): Q3 production of ~866k oz with AISC ~$1,373/oz and strong margins; royalty costs rise with higher gold prices, pushing 2025 costs toward the top of guidance.
Semiconductors: Nvidia (NVDA) moved on headlines around China export discussions and Blackwell GPUs; policy outcomes could materially impact revenue drivers.
AI: The discussion highlighted AI/tech as a strategic U.S. advantage, with chip export policy central to maintaining leadership.
Trade/Tariffs: Asia trip headlines and a tentative China truce influence goods inflation and tech flows, with rare earths and energy deals in focus.
Transcript
Hello and welcome back to an SF weekly wrap-up episode. My name is Kai Hoffen. I'm the host of SOR financially and it's my pleasure to sort of guide you through what has happened this week. Uh I've taken a ton of notes, probably way too many. Thought way too hard about this weekly episode, but a lot has happened this week. uh the Fed finally cut or no not finally but cut for the second time this year uh the interest rate by 25 basis points but also announce the end of QT and we we'll we'll get into that what that means in a few minutes here but uh that is quite interesting because it means it's a complete change in the liquidity regime and we'll have to figure out what that means what could the impact be is QE back we'll take a look at that at the same time President Trump has been touring Asia um lots of tariff news coming out of that. A lot of deal news. Uh especially the deal with China, of course, as is of interest here to us. Uh we will take a closer look at it. What does it mean? My opinion up front, it's a shaky truce. We'll have to see uh how that develops over the next 12 months. But uh we we'll dive a little deeper into that. And then of course, we'll take a look at gold. How did gold react uh to the Fed decision yesterday? Where are we trading at? As as we record this here on October 30th at about 8:37 p.m. um European time, gold is trading over $4,000 again. Uh it's shaking off uh the beating that it's received here recently and is rallying higher. We'll we'll dive into that as well. What is driving the rally now? Uh what is driving the price increase in gold back over the $4,000 mark? And then if we have some time, we'll also take a closer look at copper. Uh at least at some of the price action. do want to highlight uh the Agniko numbers that re that just came out as well uh meaning the production numbers what are they uh producing gold for what's the margin what is the trend here as well so lot lots to discuss um I'll probably speak way too fast as I always do I do apologize um but uh YouTube has a function where you can actually turn or slow down the speed uh maybe set it to 75 but I'll do my best to speak slowly uh I keep reminding myself I keep training myself to do that um before we dive in before we start here quick kindly hit that like subscribe button helps us out tremendously and we much much appreciate it. Now let let's start uh maybe with a quick overview of the calendar that um of uh yeah do I had that prepared here the economic calendar. Uh let's take a look what kind of data what were we looking at this week. Let's add it to the stage. Um it's not too much. We had the Fed interest rate decision. As you all know, the US government is still shut down. I lost track what day it is to be honest. Probably week four or five. Um it'll be interesting uh to see when the government does come back. Are we missing them right now? Is anybody missing them? The only comment we've gotten is we'll talk about when we talk about the Fed is that it's driving that the Fed is driving right now like they're driving in fog. Meaning they don't have data to navigate. uh they have private sector data that they're using, but of course they're missing the official statistics. Um we had the Fed interest rate decision here on Wednesday. Uh Germany and Europe put some GDP numbers out as well. Um actually like GDP growth rate quarter over quarter in Germany uh flat uh year-over-year 3% uh year Eurozone um or the economic area there in Europe 1.3% slowing down it was 1.5% actually. Okay, so it's not looking too great. And then US president and you can see it at the bottom here. I'll scroll down just a second here. Uh you can see that US President Trump and China President Xi meeting of course uh today as well or this morning on Thursday morning which was quite important. Uh tomorrow we'll get some core PCE price index numbers, inflation rate uh year-over-year flash numbers out of Europe as well. But again, not nothing too crazy. Let's let's focus on the Fed decision. What uh what did Jerome Powell say yesterday? We watched of course the press the press conference for you so you don't have to sit through it. Although I find them quite entertaining these days. I find them quite interesting. Um let's take a look. >> The Federal Open Market Committee decided to lower our policy interest rate by a quarter percentage point. We also decided to conclude the reduction of our aggregate securities holdings as of December 1. >> So there we go. That's that that one is that that second part is almost more important than the 25 basis point cut. Um lots of interesting things were said actually at this uh Fed meeting. Uh it wasn't overhyped but the end of QT that is really really interesting and I've taken quite a few notes on that topic because I was trying to understand like what does that mean and how can I really translate it so that it makes sense when we're looking at it. Um we have to understand that QT the Fed was running only a QT of like five billion and keep in mind their their balance sheet is trillions uh is trillions and trillions of dollars. So even five billion uh in QT meaning and and just liquidity tightening just doesn't really was a drop in the bucket here quite honestly. But um they they tried or they were shrinking the balance sheet. They're done with that now. So uh liquidity they they stopped tightening. Is this QE yet? No. But it's a step in that direction. Let's uh um it is not QE just yet. I've got a couple things prepared um to to show you. Um one is of course Crossber Capital. Our good friend Michael Howell over there is absolutely the king of liquidity. Um and he shared before stop sharing what? Oh, sorry. I got to remove the video. There we go. Um he also questions is this the start of QE? It is not yet. Although they will be reinvesting some of the money that becomes free from expiring um mortgage bonds and everything else they own uh they hold into short-term treasury bills. So that's interesting, but it's not QE yet. And uh there the funding conditions are of course easing, but I'm not sure how much of a token amount that is. Um we will have to see what that exactly means. It's not QE yet. I think that's the key message though um that we're taking away from here, right? Um what what are some of the effects? Of course, bank reserves will stop falling. Um the funding stress eases a little bit in the repo markets. As we know, the repo facilities uh the the pool of repo facilities has has shrunk quite a bit. Um the dollar may weaken slightly, although we're not seeing that right now. Actually, as we record this, the dollar is actually fairly strong. The Dixie ticking back up over 99 points. Um gold and silver are supposed to benefit as well. Increased liquidity could be a hint at increased inflation. So, we're seeing gold benefit and I think that's what the market is sniffing out today as well. Maybe one one of the reasons gold is rallying uh as we speak here. Silver is doing okay as well. Uh gold silver ratio about 82 and a half. We'll take a closer look in a minute here as well. Um well, Powell is pivoting but he's really not admitting to it. It's it's not QE but it's also not tightening anymore. So, we'll see what the next steps are. We'll have to see what the government shutdowns uh sort of brings for us in terms of data and we we'll have to pay attention to that of course. So um how did the markets react? Let's take a quick look. I have queued up um the gold chart which of course is interesting. Let's take a look at the 5day. Let me share here. Um so yesterday of course during Jerome Powell's speech, where are we at? There we go. Um the dollar the the gold price dropped. We had actually had a really positive g day yesterday. Gold wanted to run and we ran up to 4029 4027 yesterday intraday but then the press conference happened and Jerome Powell was saying well we don't know yet. It's not a foregone conclusion uh that uh we will be cutting again at the next session and gold started to drop uh because we all know gold doesn't pay a dividend. Higher yields higher fed funds rate means higher yields in the US and gold doesn't pay a yield as we all know. So, the gold price here um uh let me [snorts] Oh, I'm so good with this quite honestly. Um ah here trend line. That's what sort of what I wanted to show you yesterday. Just uh so you you see what I'm talking about. Um gold is back up 4025 as we speak. But back to Jerome Powell here real quick. Let me go and uh cue up another clip that I've prepared for you as well. >> Decided to conclude the reduction of our aggregate securities holdings as of December 1. >> Oh, which is quite important actually because the he he's giving the market fair warning um that he's done tightening and to giving another month to do so. Um what I wanted to mention actually is probably then this clip here >> the policy rate of December meeting is not a foregone conclusion. That's a foregone conclusion. He's really taking the wind out of the sales of the market. Uh because we'll take a look at the Fed watch here and because Jer Powell says like, well, we don't know what we're doing yet. It's not a foregone conclusion that we're going to cut again. Uh he said it a few times during this press conference. So, he's really pumping the brakes. And if we look at the I hope this is showing up. Um let me remove this here. Let me add this to the stage. If we take a look, only 68.8% 8% uh of the market participants expect a cut uh at the next meeting which is by the way happening on December 10th we have 40 days and 22 hours so let's say 41 days until the next Fed session 31% say well we we might stay put here uh this this year let's let's see how it goes uh what I always find interesting is the probability overview one week ago it was 91% said they will see uh another cut at least uh or even two cuts Actually, if I look at this target range, um, and that was one week ago. There we go. So, really, really interesting. Um, how how Jerome Powell pumped the brakes because the market is reacting to that. Uh, let me show you the S&P 500. Um, well, it is down. The market had priced in another cut and now Jerome Powell is telling them, well, the second cut might not be happening. and uh the the market is now selling off. Also, I think the conversations in Asia during the tariff tariff deal weren't too um exciting for Nvidia. Let's take a quick look at the Nvidia shares as well. I wanted to mention those later. Um, speaking about the tariff deals that President Trump has been able to negotiate, but Nvidia down as well after it rallied quite a bit based on news that Blackwell chips might be on the table for discussion with China. Uh, which would be of course a huge revenue driver for the company. Are they still over 5 trillion in market cap? No, they're not. They're down below 5 trillion. Again, it was the first company in history to reach that 5 trillion market cap level, which is absolutely astonishing. Absolutely insane. um to to see those numbers. But good on them. Good on them and good on the investors um that have put in money with them, of course. Um well, we talked about the rate cut, we talked about uh you know, persistent uh or a foreground conclusion, end of QT, and uh maybe I have one last clip queued up here. Let me show you that one as well um with Jerome Powell. And that is in regard to the tariffs, which is a good segue uh to our next topic, meaning the Asia trip by President Trump. basically um you've seen goods prices increasing and that's really due to tariffs and that's due that's in compared to a longer run trend of very very mild deflation in goods. So that's moving inflation up. >> So you hear him say well the tariffs are to blame uh for some of the inflation. We're sitting at 3%. Um let me bring that up real quick as well. Of course inflation is trending higher. uh we're seeing that here ever since April where we reached an inflation like that's all the official inflation data okay please don't crucify me that's the official inflation data that we're being served by the Bureau of Labor Statistics and for September we got 3% okay uh 2.3% back in April we had a liberation date turmoil and now tariffs are at 3% and as as you just heard Jerome Powell say well part of that is of course um good goods inflation that we're seeing due to tariffs And he said without the tariff inflation, we'd probably be closer to their 2% target. Hey, if you want to believe that, sure thing, but uh sounds a bit unrealistic to me if you ask me. But hey, what do I know? I'm just a stupid podcaster commentating on these things. So, um so yeah, uh couple things uh as well. Maybe as a um as a response to the uh tariff news um sorry not tariffs fed news yesterday the Dixie is trending higher uh looking at the maybe let's take a look at the three months it is back over 99.5 why why is the dollar higher like why does it make any sense uh we're not getting a lot of data out of the US and yet the dollar is rallying especially here uh let's take a look at the 5day it's it's rallying quite a bit uh almost point 100 basis point move here or 100 points um moving higher up to the 100 level. But why? Well, yields are staying higher and they might stay higher for longer which is good for the currency. That means other currencies are losing versus the dollar because you get higher yield in the US if you uh if you park your money there. Why would you go to Europe for 2.15% if you can get four in the US? That's twice the yield. You could do the math, right? maybe at a neutral rate, meaning matching the the two-year, then we'd be maybe at 3 3.5, but uh we're still not there. So, it's still the least dirty short in the laundry. That's why money is flowing in that direction. You can see it here yesterday as well. Um the second Jerome Powell like it already started moving in the afternoon but the second Jerome Powell started the press conference here or the FOMC statement and then the press conference the dollar just shot up and stayed elevated. So really interesting development because it sounds illogical but if you think about it it makes sense because well you get higher yield right? All right that's the Fed um and the Fed topic sort of wrapped up part one. I've got four pages prepared for you so bear with me here. Uh this is going to be a longer episode. Uh lot lots of notes because lots of ground to cover as I mentioned. Um so we had the Trump Asia Trump uh really interesting numerous stops along the way. Uh he stopped in Japan, South Korea of course uh as well and announcing a ton of trade deals. $350 billion deal with Japan. Uh $200 billion supposed to be invested in cash, but $150 billion ship building corporation uh cooperation being announced there as well. And uh a bit symbolical, but really really interesting and fun. Uh let's where is it? I had it all queued up. Let me find it. There we go. Uh in South Korea, President Trump um got a symbolic or replica of a crown by South by South Korean President Mung on Wednesday. I thought that's actually hilarious that they they're giving him and I know Trump likes poking at the No Kings protesters as well. Uh all in good fun. Everybody has a right to protest. Uh let's let's keep that peaceful as well. But uh really really uh I I like the humor. I really like that humor. Let's let's look at some of the details real quick. Uh let me see the numbers. I was looking at them. So 350 billion trade deal with the US. Fantastic. Uh 350 billion consisting of 200 in cash investment, 115 in ship building cooperation. Personally, I don't know how the ship building part works because I thought there's private enterprises are running that. I'm not sure how the Korean government is going to push them to do that. But it is positive. That's another victory for President Trump, I have to admit. Um when it comes to those tariff deals, he had 650 billion out of the EU, as you remember, for energy purchases. And uh it seems like he's getting a similar or not a similar deal, but he's getting an energy deal out of China as well. There's discussion of China buying oil out of Alaska, oil and gas from Alaska. Uh which which is interesting. Um there was one one more thing I wanted to show you in this article that I'm just scrolling down on. And uh where is it? There's too many words in this article. Who reads all this? Um where is it? Where is it? There was one interesting thing. It was about gold and I wanted to show it to you. Now I can't find it. I should have bookmarked it better. I do apologize. Uh too many words. Too many words in this article cuz it was about the golden crown and how President Trump loves gold. But uh oh well, we'll take it. Um still fun. Uh but let's talk about the deal with China. It it is an interesting one cuz personally, and I've said it in the in the intro, I think it's a very shaky truce. It's only a 12 month 12 month yeah 12 month uh tariff sort of truce here. Um Trump shaving off 10% uh in a deal on fentinel and rare earths. Uh as you remember the Chinese flex their muscles just ahead of this meeting when saying hey well we're adding export curbs and restrictions on on rare earths and of course that was just to flex and play the game. They're great at poker aren't they? But uh he says he's cutting tariffs on China down to from 57 to 47%. Uh he said well she has done great on the fentinel trade. So he's giving them a bit of credit. Um we're still lacking some details here on this uh truth and the CNBC actually shares that sentiment as well. It's it's vague in in quite a few key areas. Trump said, "Well, they're buying some some soybeans from us, some other agricultural items, but we're still lacking on um sort of commitments here on the um like as as I hinted at the large amount of oil and gas from Alaska. It's still that a deal needs to be reached here. That's what it says." And then of course um the president said he discussed the export of Nvidia chips with Xi and we'll speak with CEO Jansen Wong about it. That's the CEO of Nvidia, of course. But the discussions did not include the Blackwell graphics processing unit, the GPUs, which is really interesting because before the meeting, apparently he brought that up that Blackwell might be on the table. Maybe he did not have to play that card. Uh maybe kept that ace up his sleeve for the next conversation. So, we'll have to see cuz those Blackwell graphic GPUs are the most advanced, of course. And there was discussion that um uh maybe a down downscaled version could be sold to the Chinese here. Uh it it is an interesting topic the whole AI and tech uh debate that is going on. I had a discussion with Daniel Akay here on our channel about that and um it gave me the idea that the US like while in the past used to reign supreme globally due to its military strength might now choose the same path for AI and tech supremacy which is an interesting one that's hence uh talking about the US dollar and whether the US dollar might lose uh any or the dolization trend might lose any steam here and the dollar might stick around for longer than we might anticipate here. We've been calling for the the death of the dollar for for a while now, but it hasn't happened. So, that's just my two cents on that topic. It's something I want to explore with my future guests as well, how the AI and tech revolution is really keeping the US relevant for a lack of better term and maybe keeping them at the forefront of global initiatives when it comes to that roll out. It's an interesting uh topic that we'll discuss moving forward. Uh, one thing side note, I couldn't find a lot of notes on it, but the Russian oil sanctions are interesting because but they they were seemingly not discussed with shei there uh in in South Korea. So, we will I'll keep an eye on that and uh we'll update you when I see anything that is of relevance. Now, that's topic number two. Trump's Asia trip done. All right, let's talk gold. Let's talk precious metals. The World Gold Council recently or just yesterday, I believe, let me check the date. uh today October 30th released their gold tren demand trends for Q3 2025. Um I definitely want to share that with you because uh it has some interesting statistics in it. Let's uh let's share this tab. Let's make sure this is on screen as well. And uh let's bring it here. There we go. Demand trends for Q3 2025. Sounds sounds huge. But it is of course as expected gold demand increased over the counter 3% year-over-year. Okay, great. 1313 tons, highest quarterly total in in their in their data series. I'm not sure how far dating back that is, but uh it is uh significant. What I wanted to highlight, of course, a few things. Gold price hit 13 new all-time highs in Q3. That is impressive. [laughter] Um that is fantastic. a 16% increase in Q3. Uh gold supply rose 3% year-over-year. Okay, great. Um I want to touch on recycled gold here in a second, but uh the investment demand of course for gold is is really really something we should touch on. So that's the executive summary done here. Um I'm trying to think what what the best order is. Yeah, let's let's go take a look at supply because I got a couple interesting things here. So mine production uh has has grown 2% year-over-year or 8% quarter over quarter uh which is which is also record. So, of course, higher prices um probably push push supply, but it's not that easy on the mining side. As you know, it takes forever to bring mines online. And here are some interesting like mine production overview statistics like where is the growth coming from in supply? And and please keep in mind supply and demand on the gold set does not necessarily push prices. As you can see, Canada's production has increased 20% year-over-year. Yet, the gold price in Canada is the same as everywhere else in US dollar terms. So, um, the supply doesn't really make a difference here, although it was a bit of a a rubbish statement, but you you you know what I'm trying to say here. Um, really interesting. Of course, four mines went into production. Big mines went into production. Blackwater, Cotay, and Greenstone. Uh, I think Greenstone is the second largest mine in Canada if I'm not mistaken now. And Blackwater is also producing at a very low end and sustaining cost. Uh, Ghana 9%, Australia 6% year-over-year. Uh, even Russia increased year-over-year production by 3%. Um and then of course Indonesia dropped 37% as a result of the the suspension of operations at Grasburg. You can see that here we had that massive collapse with a fatal incident unfortunately um that is really pushing down production. Uh supply there was one interesting topic I wanted to say in terms of supply and that is the recycled gold part. A lot of arguments I've been hearing lately is like well gold is so high and what about recycling? Is that picking up at all? Of course it has. 6% year-over-year, but uh the response is is surprisingly muted according to this report. Um I'm not surprised like a lot of people are still waiting out for higher gold prices. Um recycling volumes were actually down 1%. So that is interesting despite a 16% rise in gold price. So you you can see people are holding on uh to to their gold. And uh there's one other line I need to work out on how to bookmark this a little better. There was one interesting sentence and uh where is it now? Why don't I see it? Recycle gold. Hold on. There was one word I was looking for. And of course it's not in this slide. Let me see if it it's in the executive summary. I do apologize. Um of course now I can't find it. It was such a great sentence. I apologize for that. Hate to apologizing the whole time, but uh there was a great sentence in there cuz it was talking about the supply and the recycling uh the setback here in recycling being a healthy. Let me read this real quick. Okay, I uh I apologize. I I can't find it anymore. I had such a great part bookmarked but the recycling um okay uh encouraged restraint in recycling activity and anticipation of further gains but uh it's holding back from liquidating their assets. This is a healthy move according to to this report. Maybe it was in the PDF not in the text. I do apologize for that. I've read that here. But it it just shows that the restraint on this on the recycling is is a positive move in the current environment that we're in. Investors and people that hold gold are holding on to their gold before recycling it. Uh and one last thing I want to show you from this report as well, of course, is central banks. Big topic that we've been discussing. They've jumparted this rally. Um year-over-year change in terms of central bank buying, of course, up 10%. uh a lot of countries like Poland have me have mentioned that they want to increase uh their purchases. Central Bank of Brazil is a first-time purchaser since July 2021. Uh fantastic new new player at the table. Please welcome. Thanks for joining us. Um and this this graphic I showed it last time and I still haven't figured out why Germany is a net seller here in this graphic. It's blowing my mind. So, um, we talked about the Fed reaction to the gold or the gold price reacting to the Fed. Let's take a closer look here at this chart real quick. I still have this in here. We I had it up earlier and uh gold is rallying back here now. Let's take a look at the year to date. Uh, yeah, we we had a nice runup or nice. It was an insane rally if you ask me. Uh, in in a good way, using that term. Uh, a correction here was healthy. Um, we've seen it. It's bouncing back. We'll see if it's a deadcat bounce or if there's more to it. I'm not a tech, as I said before, I'm not a technical analyst, so bear with me there. Um, let's take a very quick look at silver as well. Uh, it is right here. Gold silver ratio, as you can see, is at 82.75. So, it is coming down again real quick. Silver also bouncing back here. Same same level, same move as we've seen in gold. 80 uh 48 48.90 right now. uh looking it's looking like it's making its run back to 50 um to that important $50 mark. It's just a mental hurdle, but uh it is an important one, right? Um so we all know what that means mentally for us if if we reach that level. So we talked about gold, we talked about the the Q3 results, we talked about the Fed reaction or the reaction to the Fed, of course. Now um at the end I quickly want to highlight the the numbers produced by Agnika Eagle in Q3. Uh this is the guidance. I had this down here. I was looking at the guidance because I was looking for something. But in Q3 so gold production 866,000 they sold about $870,000. Um production cost total cash cost $994 on sustaining cost 1373. Um if you look at the nine months ended we're trading a little higher and the costs have oh escalate is the wrong word but they're they're definitely higher and it is interesting because it is due to the gold price costs have exploded or not exploded I'm using strong language here the costs have increased at ao they're still absolute uh top tier in in the cost category they're still about $200 lower than um Newmont for example in their all in sustaining cost but due to the higher gold price their royalty costs have increased uh quite significantly and uh I think that is something worth mentioning because well um with a higher gold price they got to pay higher royalties and that's why we have to look at it here. Also um they're all in sustained cost as I said we're 1373 and u they're selling gold at about 3,400 and uh where's the number again? Too many numbers. Who who puts out press releases like this? You can't even read this. Um, I think it was 3473. It was about $50 to $60 lower than actually what that Nico achieved. Oh, $3476. There we go. 3476. Of course, $1,000 higher than in in Q3 2024. Uh, another $250 higher than um on average in uh the whole nine months here, but uh still about 50 $60 lower than what Numad achieved in the same quarter. They might have to change metal traders. But um my point is this is fantastic. This is great. The only thing I it's tough to point something out something negative out here. This is the guidance for 2025 and due to the higher gold price. Um they will probably be exceeding their cost guidance on or on the downside meaning uh we we've just seen it. They're already $100 higher on the oil and sustaining cost per ounce. So they might actually have higher higher oil and sustaining costs and they've been saying that here as well that uh uh there's a whole if gold prices remain elevated for the remainder of 2025 total cash cost per ounce and all in sustaining cost per ounce and 25 are expected to trend towards the top end of the guided range and uh the top end is 1300 but uh I think we'll probably be higher at the end of the year if we remain above 4,000. It's a positive problem to have. Like I'm not mocking them. Um but uh they might not be able to meet guidance here. Sounds crazy if you think about it because they're still producing over $2,000 in margin. So now that that was that and uh I've run out of topics. I think I've written Yeah. No, that's that's it. I've run out of topics and I really appreciate everybody watching. I hope this was insightful. Lots to chew through. Hope lots of content to put around and 30-minute monologue. Wow. Um, if you appreciate this, if it was useful to you. Please hit that like and subscribe button. It means a lot to us. Um, I'm trying to put these together while I'm on the road. I'm currently on my way to New Orleans for the uh, New Orleans Investment Conference hosted by our good friend Brian London. We're media partners there. Looking forward to interviewing a lot of exciting keynote speakers. Rick, Rick Rule, Jim Biano, Danielle D. Martino, Booth are just a few top of my head that I'll be chatting with in person that I'm really really looking forward to seeing again and can't wait to interview them. get them in front of the camera for you to get the latest reaction, especially from Danielle, for example, on the Fed decision. What does it mean? Where are we headed? Is QE coming back? So, thanks so much for tuning in. Hit that like and subscribe button as I said, and we appreciate that. Take care out there. Bye-bye.
Why Gold Is OVER $4,000 AGAIN!
Summary
Transcript
Hello and welcome back to an SF weekly wrap-up episode. My name is Kai Hoffen. I'm the host of SOR financially and it's my pleasure to sort of guide you through what has happened this week. Uh I've taken a ton of notes, probably way too many. Thought way too hard about this weekly episode, but a lot has happened this week. uh the Fed finally cut or no not finally but cut for the second time this year uh the interest rate by 25 basis points but also announce the end of QT and we we'll we'll get into that what that means in a few minutes here but uh that is quite interesting because it means it's a complete change in the liquidity regime and we'll have to figure out what that means what could the impact be is QE back we'll take a look at that at the same time President Trump has been touring Asia um lots of tariff news coming out of that. A lot of deal news. Uh especially the deal with China, of course, as is of interest here to us. Uh we will take a closer look at it. What does it mean? My opinion up front, it's a shaky truce. We'll have to see uh how that develops over the next 12 months. But uh we we'll dive a little deeper into that. And then of course, we'll take a look at gold. How did gold react uh to the Fed decision yesterday? Where are we trading at? As as we record this here on October 30th at about 8:37 p.m. um European time, gold is trading over $4,000 again. Uh it's shaking off uh the beating that it's received here recently and is rallying higher. We'll we'll dive into that as well. What is driving the rally now? Uh what is driving the price increase in gold back over the $4,000 mark? And then if we have some time, we'll also take a closer look at copper. Uh at least at some of the price action. do want to highlight uh the Agniko numbers that re that just came out as well uh meaning the production numbers what are they uh producing gold for what's the margin what is the trend here as well so lot lots to discuss um I'll probably speak way too fast as I always do I do apologize um but uh YouTube has a function where you can actually turn or slow down the speed uh maybe set it to 75 but I'll do my best to speak slowly uh I keep reminding myself I keep training myself to do that um before we dive in before we start here quick kindly hit that like subscribe button helps us out tremendously and we much much appreciate it. Now let let's start uh maybe with a quick overview of the calendar that um of uh yeah do I had that prepared here the economic calendar. Uh let's take a look what kind of data what were we looking at this week. Let's add it to the stage. Um it's not too much. We had the Fed interest rate decision. As you all know, the US government is still shut down. I lost track what day it is to be honest. Probably week four or five. Um it'll be interesting uh to see when the government does come back. Are we missing them right now? Is anybody missing them? The only comment we've gotten is we'll talk about when we talk about the Fed is that it's driving that the Fed is driving right now like they're driving in fog. Meaning they don't have data to navigate. uh they have private sector data that they're using, but of course they're missing the official statistics. Um we had the Fed interest rate decision here on Wednesday. Uh Germany and Europe put some GDP numbers out as well. Um actually like GDP growth rate quarter over quarter in Germany uh flat uh year-over-year 3% uh year Eurozone um or the economic area there in Europe 1.3% slowing down it was 1.5% actually. Okay, so it's not looking too great. And then US president and you can see it at the bottom here. I'll scroll down just a second here. Uh you can see that US President Trump and China President Xi meeting of course uh today as well or this morning on Thursday morning which was quite important. Uh tomorrow we'll get some core PCE price index numbers, inflation rate uh year-over-year flash numbers out of Europe as well. But again, not nothing too crazy. Let's let's focus on the Fed decision. What uh what did Jerome Powell say yesterday? We watched of course the press the press conference for you so you don't have to sit through it. Although I find them quite entertaining these days. I find them quite interesting. Um let's take a look. >> The Federal Open Market Committee decided to lower our policy interest rate by a quarter percentage point. We also decided to conclude the reduction of our aggregate securities holdings as of December 1. >> So there we go. That's that that one is that that second part is almost more important than the 25 basis point cut. Um lots of interesting things were said actually at this uh Fed meeting. Uh it wasn't overhyped but the end of QT that is really really interesting and I've taken quite a few notes on that topic because I was trying to understand like what does that mean and how can I really translate it so that it makes sense when we're looking at it. Um we have to understand that QT the Fed was running only a QT of like five billion and keep in mind their their balance sheet is trillions uh is trillions and trillions of dollars. So even five billion uh in QT meaning and and just liquidity tightening just doesn't really was a drop in the bucket here quite honestly. But um they they tried or they were shrinking the balance sheet. They're done with that now. So uh liquidity they they stopped tightening. Is this QE yet? No. But it's a step in that direction. Let's uh um it is not QE just yet. I've got a couple things prepared um to to show you. Um one is of course Crossber Capital. Our good friend Michael Howell over there is absolutely the king of liquidity. Um and he shared before stop sharing what? Oh, sorry. I got to remove the video. There we go. Um he also questions is this the start of QE? It is not yet. Although they will be reinvesting some of the money that becomes free from expiring um mortgage bonds and everything else they own uh they hold into short-term treasury bills. So that's interesting, but it's not QE yet. And uh there the funding conditions are of course easing, but I'm not sure how much of a token amount that is. Um we will have to see what that exactly means. It's not QE yet. I think that's the key message though um that we're taking away from here, right? Um what what are some of the effects? Of course, bank reserves will stop falling. Um the funding stress eases a little bit in the repo markets. As we know, the repo facilities uh the the pool of repo facilities has has shrunk quite a bit. Um the dollar may weaken slightly, although we're not seeing that right now. Actually, as we record this, the dollar is actually fairly strong. The Dixie ticking back up over 99 points. Um gold and silver are supposed to benefit as well. Increased liquidity could be a hint at increased inflation. So, we're seeing gold benefit and I think that's what the market is sniffing out today as well. Maybe one one of the reasons gold is rallying uh as we speak here. Silver is doing okay as well. Uh gold silver ratio about 82 and a half. We'll take a closer look in a minute here as well. Um well, Powell is pivoting but he's really not admitting to it. It's it's not QE but it's also not tightening anymore. So, we'll see what the next steps are. We'll have to see what the government shutdowns uh sort of brings for us in terms of data and we we'll have to pay attention to that of course. So um how did the markets react? Let's take a quick look. I have queued up um the gold chart which of course is interesting. Let's take a look at the 5day. Let me share here. Um so yesterday of course during Jerome Powell's speech, where are we at? There we go. Um the dollar the the gold price dropped. We had actually had a really positive g day yesterday. Gold wanted to run and we ran up to 4029 4027 yesterday intraday but then the press conference happened and Jerome Powell was saying well we don't know yet. It's not a foregone conclusion uh that uh we will be cutting again at the next session and gold started to drop uh because we all know gold doesn't pay a dividend. Higher yields higher fed funds rate means higher yields in the US and gold doesn't pay a yield as we all know. So, the gold price here um uh let me [snorts] Oh, I'm so good with this quite honestly. Um ah here trend line. That's what sort of what I wanted to show you yesterday. Just uh so you you see what I'm talking about. Um gold is back up 4025 as we speak. But back to Jerome Powell here real quick. Let me go and uh cue up another clip that I've prepared for you as well. >> Decided to conclude the reduction of our aggregate securities holdings as of December 1. >> Oh, which is quite important actually because the he he's giving the market fair warning um that he's done tightening and to giving another month to do so. Um what I wanted to mention actually is probably then this clip here >> the policy rate of December meeting is not a foregone conclusion. That's a foregone conclusion. He's really taking the wind out of the sales of the market. Uh because we'll take a look at the Fed watch here and because Jer Powell says like, well, we don't know what we're doing yet. It's not a foregone conclusion that we're going to cut again. Uh he said it a few times during this press conference. So, he's really pumping the brakes. And if we look at the I hope this is showing up. Um let me remove this here. Let me add this to the stage. If we take a look, only 68.8% 8% uh of the market participants expect a cut uh at the next meeting which is by the way happening on December 10th we have 40 days and 22 hours so let's say 41 days until the next Fed session 31% say well we we might stay put here uh this this year let's let's see how it goes uh what I always find interesting is the probability overview one week ago it was 91% said they will see uh another cut at least uh or even two cuts Actually, if I look at this target range, um, and that was one week ago. There we go. So, really, really interesting. Um, how how Jerome Powell pumped the brakes because the market is reacting to that. Uh, let me show you the S&P 500. Um, well, it is down. The market had priced in another cut and now Jerome Powell is telling them, well, the second cut might not be happening. and uh the the market is now selling off. Also, I think the conversations in Asia during the tariff tariff deal weren't too um exciting for Nvidia. Let's take a quick look at the Nvidia shares as well. I wanted to mention those later. Um, speaking about the tariff deals that President Trump has been able to negotiate, but Nvidia down as well after it rallied quite a bit based on news that Blackwell chips might be on the table for discussion with China. Uh, which would be of course a huge revenue driver for the company. Are they still over 5 trillion in market cap? No, they're not. They're down below 5 trillion. Again, it was the first company in history to reach that 5 trillion market cap level, which is absolutely astonishing. Absolutely insane. um to to see those numbers. But good on them. Good on them and good on the investors um that have put in money with them, of course. Um well, we talked about the rate cut, we talked about uh you know, persistent uh or a foreground conclusion, end of QT, and uh maybe I have one last clip queued up here. Let me show you that one as well um with Jerome Powell. And that is in regard to the tariffs, which is a good segue uh to our next topic, meaning the Asia trip by President Trump. basically um you've seen goods prices increasing and that's really due to tariffs and that's due that's in compared to a longer run trend of very very mild deflation in goods. So that's moving inflation up. >> So you hear him say well the tariffs are to blame uh for some of the inflation. We're sitting at 3%. Um let me bring that up real quick as well. Of course inflation is trending higher. uh we're seeing that here ever since April where we reached an inflation like that's all the official inflation data okay please don't crucify me that's the official inflation data that we're being served by the Bureau of Labor Statistics and for September we got 3% okay uh 2.3% back in April we had a liberation date turmoil and now tariffs are at 3% and as as you just heard Jerome Powell say well part of that is of course um good goods inflation that we're seeing due to tariffs And he said without the tariff inflation, we'd probably be closer to their 2% target. Hey, if you want to believe that, sure thing, but uh sounds a bit unrealistic to me if you ask me. But hey, what do I know? I'm just a stupid podcaster commentating on these things. So, um so yeah, uh couple things uh as well. Maybe as a um as a response to the uh tariff news um sorry not tariffs fed news yesterday the Dixie is trending higher uh looking at the maybe let's take a look at the three months it is back over 99.5 why why is the dollar higher like why does it make any sense uh we're not getting a lot of data out of the US and yet the dollar is rallying especially here uh let's take a look at the 5day it's it's rallying quite a bit uh almost point 100 basis point move here or 100 points um moving higher up to the 100 level. But why? Well, yields are staying higher and they might stay higher for longer which is good for the currency. That means other currencies are losing versus the dollar because you get higher yield in the US if you uh if you park your money there. Why would you go to Europe for 2.15% if you can get four in the US? That's twice the yield. You could do the math, right? maybe at a neutral rate, meaning matching the the two-year, then we'd be maybe at 3 3.5, but uh we're still not there. So, it's still the least dirty short in the laundry. That's why money is flowing in that direction. You can see it here yesterday as well. Um the second Jerome Powell like it already started moving in the afternoon but the second Jerome Powell started the press conference here or the FOMC statement and then the press conference the dollar just shot up and stayed elevated. So really interesting development because it sounds illogical but if you think about it it makes sense because well you get higher yield right? All right that's the Fed um and the Fed topic sort of wrapped up part one. I've got four pages prepared for you so bear with me here. Uh this is going to be a longer episode. Uh lot lots of notes because lots of ground to cover as I mentioned. Um so we had the Trump Asia Trump uh really interesting numerous stops along the way. Uh he stopped in Japan, South Korea of course uh as well and announcing a ton of trade deals. $350 billion deal with Japan. Uh $200 billion supposed to be invested in cash, but $150 billion ship building corporation uh cooperation being announced there as well. And uh a bit symbolical, but really really interesting and fun. Uh let's where is it? I had it all queued up. Let me find it. There we go. Uh in South Korea, President Trump um got a symbolic or replica of a crown by South by South Korean President Mung on Wednesday. I thought that's actually hilarious that they they're giving him and I know Trump likes poking at the No Kings protesters as well. Uh all in good fun. Everybody has a right to protest. Uh let's let's keep that peaceful as well. But uh really really uh I I like the humor. I really like that humor. Let's let's look at some of the details real quick. Uh let me see the numbers. I was looking at them. So 350 billion trade deal with the US. Fantastic. Uh 350 billion consisting of 200 in cash investment, 115 in ship building cooperation. Personally, I don't know how the ship building part works because I thought there's private enterprises are running that. I'm not sure how the Korean government is going to push them to do that. But it is positive. That's another victory for President Trump, I have to admit. Um when it comes to those tariff deals, he had 650 billion out of the EU, as you remember, for energy purchases. And uh it seems like he's getting a similar or not a similar deal, but he's getting an energy deal out of China as well. There's discussion of China buying oil out of Alaska, oil and gas from Alaska. Uh which which is interesting. Um there was one one more thing I wanted to show you in this article that I'm just scrolling down on. And uh where is it? There's too many words in this article. Who reads all this? Um where is it? Where is it? There was one interesting thing. It was about gold and I wanted to show it to you. Now I can't find it. I should have bookmarked it better. I do apologize. Uh too many words. Too many words in this article cuz it was about the golden crown and how President Trump loves gold. But uh oh well, we'll take it. Um still fun. Uh but let's talk about the deal with China. It it is an interesting one cuz personally, and I've said it in the in the intro, I think it's a very shaky truce. It's only a 12 month 12 month yeah 12 month uh tariff sort of truce here. Um Trump shaving off 10% uh in a deal on fentinel and rare earths. Uh as you remember the Chinese flex their muscles just ahead of this meeting when saying hey well we're adding export curbs and restrictions on on rare earths and of course that was just to flex and play the game. They're great at poker aren't they? But uh he says he's cutting tariffs on China down to from 57 to 47%. Uh he said well she has done great on the fentinel trade. So he's giving them a bit of credit. Um we're still lacking some details here on this uh truth and the CNBC actually shares that sentiment as well. It's it's vague in in quite a few key areas. Trump said, "Well, they're buying some some soybeans from us, some other agricultural items, but we're still lacking on um sort of commitments here on the um like as as I hinted at the large amount of oil and gas from Alaska. It's still that a deal needs to be reached here. That's what it says." And then of course um the president said he discussed the export of Nvidia chips with Xi and we'll speak with CEO Jansen Wong about it. That's the CEO of Nvidia, of course. But the discussions did not include the Blackwell graphics processing unit, the GPUs, which is really interesting because before the meeting, apparently he brought that up that Blackwell might be on the table. Maybe he did not have to play that card. Uh maybe kept that ace up his sleeve for the next conversation. So, we'll have to see cuz those Blackwell graphic GPUs are the most advanced, of course. And there was discussion that um uh maybe a down downscaled version could be sold to the Chinese here. Uh it it is an interesting topic the whole AI and tech uh debate that is going on. I had a discussion with Daniel Akay here on our channel about that and um it gave me the idea that the US like while in the past used to reign supreme globally due to its military strength might now choose the same path for AI and tech supremacy which is an interesting one that's hence uh talking about the US dollar and whether the US dollar might lose uh any or the dolization trend might lose any steam here and the dollar might stick around for longer than we might anticipate here. We've been calling for the the death of the dollar for for a while now, but it hasn't happened. So, that's just my two cents on that topic. It's something I want to explore with my future guests as well, how the AI and tech revolution is really keeping the US relevant for a lack of better term and maybe keeping them at the forefront of global initiatives when it comes to that roll out. It's an interesting uh topic that we'll discuss moving forward. Uh, one thing side note, I couldn't find a lot of notes on it, but the Russian oil sanctions are interesting because but they they were seemingly not discussed with shei there uh in in South Korea. So, we will I'll keep an eye on that and uh we'll update you when I see anything that is of relevance. Now, that's topic number two. Trump's Asia trip done. All right, let's talk gold. Let's talk precious metals. The World Gold Council recently or just yesterday, I believe, let me check the date. uh today October 30th released their gold tren demand trends for Q3 2025. Um I definitely want to share that with you because uh it has some interesting statistics in it. Let's uh let's share this tab. Let's make sure this is on screen as well. And uh let's bring it here. There we go. Demand trends for Q3 2025. Sounds sounds huge. But it is of course as expected gold demand increased over the counter 3% year-over-year. Okay, great. 1313 tons, highest quarterly total in in their in their data series. I'm not sure how far dating back that is, but uh it is uh significant. What I wanted to highlight, of course, a few things. Gold price hit 13 new all-time highs in Q3. That is impressive. [laughter] Um that is fantastic. a 16% increase in Q3. Uh gold supply rose 3% year-over-year. Okay, great. Um I want to touch on recycled gold here in a second, but uh the investment demand of course for gold is is really really something we should touch on. So that's the executive summary done here. Um I'm trying to think what what the best order is. Yeah, let's let's go take a look at supply because I got a couple interesting things here. So mine production uh has has grown 2% year-over-year or 8% quarter over quarter uh which is which is also record. So, of course, higher prices um probably push push supply, but it's not that easy on the mining side. As you know, it takes forever to bring mines online. And here are some interesting like mine production overview statistics like where is the growth coming from in supply? And and please keep in mind supply and demand on the gold set does not necessarily push prices. As you can see, Canada's production has increased 20% year-over-year. Yet, the gold price in Canada is the same as everywhere else in US dollar terms. So, um, the supply doesn't really make a difference here, although it was a bit of a a rubbish statement, but you you you know what I'm trying to say here. Um, really interesting. Of course, four mines went into production. Big mines went into production. Blackwater, Cotay, and Greenstone. Uh, I think Greenstone is the second largest mine in Canada if I'm not mistaken now. And Blackwater is also producing at a very low end and sustaining cost. Uh, Ghana 9%, Australia 6% year-over-year. Uh, even Russia increased year-over-year production by 3%. Um and then of course Indonesia dropped 37% as a result of the the suspension of operations at Grasburg. You can see that here we had that massive collapse with a fatal incident unfortunately um that is really pushing down production. Uh supply there was one interesting topic I wanted to say in terms of supply and that is the recycled gold part. A lot of arguments I've been hearing lately is like well gold is so high and what about recycling? Is that picking up at all? Of course it has. 6% year-over-year, but uh the response is is surprisingly muted according to this report. Um I'm not surprised like a lot of people are still waiting out for higher gold prices. Um recycling volumes were actually down 1%. So that is interesting despite a 16% rise in gold price. So you you can see people are holding on uh to to their gold. And uh there's one other line I need to work out on how to bookmark this a little better. There was one interesting sentence and uh where is it now? Why don't I see it? Recycle gold. Hold on. There was one word I was looking for. And of course it's not in this slide. Let me see if it it's in the executive summary. I do apologize. Um of course now I can't find it. It was such a great sentence. I apologize for that. Hate to apologizing the whole time, but uh there was a great sentence in there cuz it was talking about the supply and the recycling uh the setback here in recycling being a healthy. Let me read this real quick. Okay, I uh I apologize. I I can't find it anymore. I had such a great part bookmarked but the recycling um okay uh encouraged restraint in recycling activity and anticipation of further gains but uh it's holding back from liquidating their assets. This is a healthy move according to to this report. Maybe it was in the PDF not in the text. I do apologize for that. I've read that here. But it it just shows that the restraint on this on the recycling is is a positive move in the current environment that we're in. Investors and people that hold gold are holding on to their gold before recycling it. Uh and one last thing I want to show you from this report as well, of course, is central banks. Big topic that we've been discussing. They've jumparted this rally. Um year-over-year change in terms of central bank buying, of course, up 10%. uh a lot of countries like Poland have me have mentioned that they want to increase uh their purchases. Central Bank of Brazil is a first-time purchaser since July 2021. Uh fantastic new new player at the table. Please welcome. Thanks for joining us. Um and this this graphic I showed it last time and I still haven't figured out why Germany is a net seller here in this graphic. It's blowing my mind. So, um, we talked about the Fed reaction to the gold or the gold price reacting to the Fed. Let's take a closer look here at this chart real quick. I still have this in here. We I had it up earlier and uh gold is rallying back here now. Let's take a look at the year to date. Uh, yeah, we we had a nice runup or nice. It was an insane rally if you ask me. Uh, in in a good way, using that term. Uh, a correction here was healthy. Um, we've seen it. It's bouncing back. We'll see if it's a deadcat bounce or if there's more to it. I'm not a tech, as I said before, I'm not a technical analyst, so bear with me there. Um, let's take a very quick look at silver as well. Uh, it is right here. Gold silver ratio, as you can see, is at 82.75. So, it is coming down again real quick. Silver also bouncing back here. Same same level, same move as we've seen in gold. 80 uh 48 48.90 right now. uh looking it's looking like it's making its run back to 50 um to that important $50 mark. It's just a mental hurdle, but uh it is an important one, right? Um so we all know what that means mentally for us if if we reach that level. So we talked about gold, we talked about the the Q3 results, we talked about the Fed reaction or the reaction to the Fed, of course. Now um at the end I quickly want to highlight the the numbers produced by Agnika Eagle in Q3. Uh this is the guidance. I had this down here. I was looking at the guidance because I was looking for something. But in Q3 so gold production 866,000 they sold about $870,000. Um production cost total cash cost $994 on sustaining cost 1373. Um if you look at the nine months ended we're trading a little higher and the costs have oh escalate is the wrong word but they're they're definitely higher and it is interesting because it is due to the gold price costs have exploded or not exploded I'm using strong language here the costs have increased at ao they're still absolute uh top tier in in the cost category they're still about $200 lower than um Newmont for example in their all in sustaining cost but due to the higher gold price their royalty costs have increased uh quite significantly and uh I think that is something worth mentioning because well um with a higher gold price they got to pay higher royalties and that's why we have to look at it here. Also um they're all in sustained cost as I said we're 1373 and u they're selling gold at about 3,400 and uh where's the number again? Too many numbers. Who who puts out press releases like this? You can't even read this. Um, I think it was 3473. It was about $50 to $60 lower than actually what that Nico achieved. Oh, $3476. There we go. 3476. Of course, $1,000 higher than in in Q3 2024. Uh, another $250 higher than um on average in uh the whole nine months here, but uh still about 50 $60 lower than what Numad achieved in the same quarter. They might have to change metal traders. But um my point is this is fantastic. This is great. The only thing I it's tough to point something out something negative out here. This is the guidance for 2025 and due to the higher gold price. Um they will probably be exceeding their cost guidance on or on the downside meaning uh we we've just seen it. They're already $100 higher on the oil and sustaining cost per ounce. So they might actually have higher higher oil and sustaining costs and they've been saying that here as well that uh uh there's a whole if gold prices remain elevated for the remainder of 2025 total cash cost per ounce and all in sustaining cost per ounce and 25 are expected to trend towards the top end of the guided range and uh the top end is 1300 but uh I think we'll probably be higher at the end of the year if we remain above 4,000. It's a positive problem to have. Like I'm not mocking them. Um but uh they might not be able to meet guidance here. Sounds crazy if you think about it because they're still producing over $2,000 in margin. So now that that was that and uh I've run out of topics. I think I've written Yeah. No, that's that's it. I've run out of topics and I really appreciate everybody watching. I hope this was insightful. Lots to chew through. Hope lots of content to put around and 30-minute monologue. Wow. Um, if you appreciate this, if it was useful to you. Please hit that like and subscribe button. It means a lot to us. Um, I'm trying to put these together while I'm on the road. I'm currently on my way to New Orleans for the uh, New Orleans Investment Conference hosted by our good friend Brian London. We're media partners there. Looking forward to interviewing a lot of exciting keynote speakers. Rick, Rick Rule, Jim Biano, Danielle D. Martino, Booth are just a few top of my head that I'll be chatting with in person that I'm really really looking forward to seeing again and can't wait to interview them. get them in front of the camera for you to get the latest reaction, especially from Danielle, for example, on the Fed decision. What does it mean? Where are we headed? Is QE coming back? So, thanks so much for tuning in. Hit that like and subscribe button as I said, and we appreciate that. Take care out there. Bye-bye.