Key Points:

After years of narrowing wage inequality, the workplace has become a tale of two economies again. This time, unlike in the postpandemic period, trends favor the top 25% of the U.S. workforce, whose wages are rising by 4.6% a year. That compares with annual wage gains of only 3.6% a year for the lowest quarter of the workforce, or roughly half the pace in 2022, according to the Federal Reserve Bank of Atlanta.

The reversal in fortunes has popularized the notion of a K-shaped economy, in which, like the letter, the upper arm rises while the lower arm droops. Fresh data about wages, spending, and credit conditions from banks, economists, and the Fed show the divergence widening this year. The U.S. economy is still expanding—gross domestic product is expected to grow by about 1.7% in 2025—but its health depends increasingly on more affluent households.

Bank of America data show that 29% of lower-income households are now living paycheck to paycheck, up from 27% in 2023. “Wages for lower-income earners have been easing relative to their higher-income counterparts since the beginning of 2025,” says Joe Wadford, a Bank of America economist.

Financial stress is also mounting among the less well off. Cox Automotive reported 1.7 million vehicle repossessions in 2024, up 43% from two years earlier and the highest level since 2009. This year is likely to be worse: The number of subprime borrowers at least 60 days behind on their auto loans rose to nearly 6.7% in October, the highest level on record, according to Fitch Ratings data.

TransUnion reports that more borrowers now cluster at credit score extremes: either superprime, with scores above 780, or subprime, below 600. “We are seeing a divergence in consumer credit risk, with more individuals moving toward either end of the credit-risk spectrum,” says Jason Laky, TransUnion’s executive vice president and head of financial services.

Mark Zandi, Moody’s chief economist, says spending among the bottom 80% of households, those earning less than $175,000, has kept pace with inflation since the pandemic. But the top 20% have done far better, and the wealthiest 3% “much, much, much better.”

Those high-income consumers are now powering growth. “As long as they keep spending, the economy should avoid recession,” Zandi wrote. “But if they turn more cautious, for whatever reason, the economy has a big problem.”

In a recent speech, Federal Reserve Governor Christopher Waller put more numbers around the growing imbalance. The top 10% of households account for 22% of all personal consumption, and the top 20% contribute 35%, he said in October citing Fed and Bureau of Labor Statistics data. The bottom 60% represent 45% of consumption. “This group has been affected by higher prices this year and is already changing its spending plans to find better value,” he said.

The K-shaped pattern changes the economy’s resilience. When wage gains cluster in the top income strata, growth becomes more sensitive to changes in the financial markets and less anchored to ordinary income.

Affluent households, which also control the greatest share of wealth, may keep spending, but their behavior is likely to swing with asset prices, exposing the economic expansion to greater volatility. According to Jared Bernstein, chair of the Council of Economic Advisers under President Joe Biden, the decline of a dollar in stock market wealth translates to two to three cents less in spending.

An increasingly unbalanced economy also changes the way economic weakness is reflected in data. Growing stress among lower-income households manifests in rising delinquency rates, shrinking buffers, and reductions in discretionary spending, which then hurt businesses that depend on widespread demand rather than high-margin customers. While the economy can continue to grow for some time while its foundations erode, policymakers are left with a clouded picture of its underlying condition.

Inflation is a particular drag for lower-income households, even if headline inflation has fallen to 3% or so from a high of around 9% in June 2022, as measured by the consumer price index. Joe Brusuelas, an economist at RSM, notes that shelter costs have risen 3.6% over the past year, utilities 5.8%, and beef nearly 15%.

Bank of America has found that inflation is outpacing after-tax wage growth for both middle- and lower-income earners. Tariffs are compounding the problem: Yale’s Budget Lab estimates an average effective tariff rate of 17.9%, the highest since 1934, which has lifted prices about 1.3% and cost the typical household $1,800 so far.

Federal Reserve officials have begun to speak more openly about the K-shaped economy, even if they don’t invoke the alphabet to describe it. Philadelphia Fed President Anna Paulson has said that nearly all net job growth this year has come from healthcare and social assistance. With lower-income consumers under strain, she warned, the economy is increasingly reliant on spending by affluent consumers, much of it tied to a narrow stock market rally driven by AI-linked companies.

“The relatively narrow base of support for the labor market, the importance of high-income consumers, together with the prominence of the narrative around AI for equities, adds up to a relatively narrow base of support for growth,” Paulson said. “Indeed, some business contacts are wondering where future demand will come from. This is something to watch closely.”

Fed Chair Jerome Powell has also expressed worries. “If you listen to the earnings calls or the reports of big, public consumer-facing companies, many of them are saying that there’s a bifurcated economy,” Powell said after last month’s Fed policy meeting. “Consumers at the lower end are struggling and buying less and shifting to lower-cost products. But at the top, people are spending.”

Business leaders are taking note. “We continue to see a bifurcated consumer base,” said McDonald’s CEO Christopher Kempczinski on the company’s most recent earnings call.

Traffic from lower-income consumers declined by nearly double digits in the third quarter, he said, “a trend that’s persisted for nearly two years.” Traffic growth among higher-income consumers, in contrast, “remained strong, increasing nearly double digits in the quarter,” he said.

Henrique Braun, chief operating officer of Coca-Cola, said on a recent analyst call that the company had leaned into “mini-cans” to appeal to cash-strapped consumers. “When we look from a consumer point of view, we continue to see divergency in spending between the income groups,” he said. “The pressure on middle- and low-end income consumers is still there.”

The bifurcation creates policy challenges for the Fed, which faces conflicting signals. The softening labor market argues for continued rate cuts to prevent further deterioration, while inflation that has run consistently above the central bank’s 2% annual target for the past five years argues for caution.

The Fed’s tool kit isn’t designed to address distributional problems. It can try to support the labor market broadly, but it can’t target specific wage groups. It can ease financial conditions, but that primarily benefits asset owners.

Brusuelas described September’s CPI report, which showed prices rising by a less-than-expected 3% on an annual basis, as “the perfect depiction of the K-shaped economy.”

Beneath the headline numbers, he said, “middle-class and down-market households experiencing slowing wage growth are having difficulty adjusting to persisting increases in the cost of living. For those households, it is about food, fuel, and utilities.”

Households exposed to assets will continue to prosper as rate cuts bolster equity prices, he wrote. Upper-income households with rising incomes and appreciating assets can capitalize on current conditions. “The upper spur of the Big K is a good place to be,” he wrote.

But the “Big K” itself is a troubling look for the broader U.S. economy.

Read the full article HERE.

Gold rose as traders weighed the US fiscal outlook following the end of the longest government shutdown in history.

Bullion climbed for a fifth session to trade near $4,230 an ounce, after US President Donald Trump signed legislation to end the longest government shutdown on record. However, the White House has warned that official jobs and inflation data for October are unlikely to be released.

The data void throughout the shutdown has caused investors to fly blind or rely on private statistics for a temperature check on the world’s largest economy. Gold has rallied in that environment, boosted by a string of weak private data releases. The October jobs and consumer price index reports may well never be published, even after the government shutdown.

“This data ‘blackout’ should continue to boost demand for safe haven assets like Treasuries and precious metals,” analysts at BMO Capital Markets wrote in a note.

There’s also the prospect of the Federal Reserve injecting further liquidity into the financial system, and a pivot to looser monetary policy that could benefit precious metals. The US central bank “won’t have to wait long” before purchasing assets to sustain desired liquidity levels, the Federal Reserve Bank of New York’s Roberto Perli said on Wednesday.

Last month, Fed officials announced they would stop shrinking their balance sheet — which drains liquidity — starting Dec. 1, amid volatility in short-term funding markets.

Combined with elevated US fiscal deficits, and further spending suggestions from President Donald Trump, that could bolster the so-called “debasement trade” theme — the retreat from sovereign debt and the currencies they are denominated in — over fears their value will be eroded over time.

That concern has helped power gold’s 60% rally this year, as investors and central banks step up purchases to hedge against growing fiscal unease in some of the world’s biggest economies. The precious metal remains on track for its best annual performance since 1979.

Though gold has yet to regain last month’s record above $4,380, several investors are forecasting another advance to $5,000 and beyond next year. China has been a leader among central-bank buyers, supporting its aim of building a world less dependent on US-centric financial markets.

Gold rose 0.8% to $4,227.96 an ounce as of 11:09 a.m. London time. The Bloomberg Dollar Spot Index fell 0.2%. Silver climbed toward a record high, while platinum and palladium also rallied.

Read the full article HERE.

Professional forecasters learned to sleep past 5 a.m. and ask their plumber for clues about the U.S. economy; ‘It’s a little sad.’

This past Friday, labor economist Guy Berger got to sleep in for the second month in a row. He wasn’t happy about it. 

The government shutdown meant there was no jobs report from the Bureau of Labor Statistics. So instead of waking in the dark at 5 a.m. in California to be ready for the release of the report, Berger got up a few hours later and spent the morning drinking coffee and eating yogurt.

“It’s a little sad,” Berger said of the missing jobs data. “I will be very happy when the BLS data comes back.” 

He may get his wish soon. Senators on Monday passed a spending package to end the record-long government shutdown. The package now moves to the House for a final vote as soon as Wednesday.

For the past six weeks, Berger and his peers have searched for meaning wherever they could find it. For some, that’s meant tracking obscure metrics like visits to the Statue of Liberty. Others used the shutdown to dust off esoteric research projects. One economist said he asked his plumber how tariffs are affecting his business when he came to do work in his home.

Economists have long planned their professional and personal lives around the regular morning government data releases that occur throughout a typical month. Though private-sector economists have continued to be paid as usual, unlike the federal workers who missed paychecks, they say it’s been hard to decipher the direction of the economy. 

“My assembly line of data that comes through just is getting thinner and thinner. So that’s why in desperation, I have gone out and looked at indicators that I would not normally spend too much time on,” said Torsten Slok, chief economist at Apollo Global Management.

It’s not just the monthly jobs report they’ve been missing. The government puts out regular data on everything from exports of excavating machinery to sales at shoe stores. 

“The data dogs are howling because we’re not getting our usual supply of information,” Chicago Fed President Austan Goolsbee, who has used the canine term to refer to himself in the past, said in a radio interview that aired Oct. 1. 

Like others, Goolsbee has looked for new sources. “One of the key rules of the data dogs is, sniff every piece of data that hits the floor, because it might be food,” he said. The Chicago Fed continued to publish its own labor market data during the shutdown. Economists have also long followed some private sources of data like payroll firm ADP’s jobs figures.  

Fed Chair Jerome Powell said in late October that the dearth of comprehensive statistics—along with piecemeal surveys and anecdotes showing no major deterioration in the outlook—could make the central bank more cautious about further rate cuts. “What do you do if you’re driving in the fog? You slow down.” he said.

A few days after the government closed, Slok and two colleagues sent clients a 75-page document titled “Alternative Data During the Shutdown.” It included slides on visits to the Statue of Liberty and Broadway show attendance, metrics they believe could reflect discretionary spending. There’s a slide on movie attendance sourced to Boxofficemojo.com.

“It is like circumstantial evidence in a Sherlock Holmes mystery,” said Slok. “I do not know whether things have been getting better or not, but I have a lot of small pieces of evidence that I find on my way as I walk forward.”

Economist Don Rissmiller of Strategas hasn’t missed an inflation or jobs report in nearly three decades. He closely follows the other, more minor releases, too. “You have a hole between 6:30 a.m. and 10:30 a.m. every day. It’s hard to fill completely,” Rissmiller said.  

He’s wary of turning to anecdotal data, like his own personal observations or even the Fed’s Beige Book that compiles feedback from local businesses and others. “You’re at the mall, does it look busy? You’re asking the taxi driver, ‘Is there anything going on in town?’” he said. “It’s easy to get carried away with a few negative anecdotes.” 

His team has been dusting off some research that they may not have gotten to without the shutdown. His colleague Maria Cabella sent clients a note about stablecoins that began with a Latin proverb and a first-person recollection about her college roommate.   

Much of the data for the September jobs report was collected before the shutdown, so it could be released relatively quickly if the government reopens, Berger said. 

Even if the government reopens soon, the jobs report may not go back to normal until the December report, scheduled for release in early January. The data were never collected for the October report—and an important portion of the data for the November report was supposed to be collected this week. The shutdown itself could skew the employment figures too.  

The bill headed to the House would fund the government through Jan 30. “Assuming nothing crazy happens, by early January we’ll have a pretty good idea about the job market. Then there’s the question of if we’ll have another shutdown,” Berger said.

Read the full article HERE.

Key Points

The recent correction in gold may not be the start of a deeper bear market for the shiny yellow metal. In fact, some on Wall Street see even brighter days ahead.

Gold prices have already rebounded to back above $4,100 an ounce after falling below $4,000 in late October. Gold is still down about 5% from the record high of just under $4,350 an ounce that it hit a few weeks ago. But strategists at UBS said in a report Monday that they think gold could hit a new all-time high of $5,000 at some point in 2026 or 2027.

“Core positions are becoming more resilient. Gold is increasingly viewed as a long-term strategic asset and a core part of asset allocation,” the UBS strategists wrote.

They argue that “there has been an acceleration in the broadening of gold’s investor base,” adding that “gold stands to benefit from a growing number of investors reallocating” from stocks, bonds, the dollar and other assets and that, “given the relative size of the gold market
to other asset classes, even a small shift can have a large impact if it is broad-based.”

The combination of more gold-buying by central banks looking to diversify their holdings away from the U.S. dollar, and a flock of retail investors buying the metal through exchange-traded funds, could catapult gold even higher again.

Jeff Jacobson, managing director and head of derivatives strategy for 22V Research, said in a report last week that he’s still bullish on gold as well.

He pointed to the fact that the metal has remained above its 50-day moving average, a key technical level, despite its recent slide. That’s a good sign.

“The fact that even after such a sharp decline gold remains in a very clear uptrend suggests you want to continue to add on such pullbacks,” Jacobson wrote.

He also noted that recent moves higher in both the U.S. dollar and long-term bond yields appear to have stalled. Jacobson expects the greenback and 10-year U.S. Treasury to slip back again. That should boost gold, which tends to do better during times of dollar weakness and lower interest rates.

Strategists at Pictet Asset Management also think that not much has changed for gold in the past few weeks—other than its price. Many of the bullish arguments that have lifted gold prices by more than 55% this year remain just as compelling today.

“Though we note the precious metal’s steep climb takes its valuation to lofty levels, the fundamentals continue to be supportive: real yields are coming down, the dollar continues to weaken and there’s the real risk of significant expansions in public sector deficits across the developed world,” the Pictet team wrote.

The rebound in gold—the price was up 2.8% at around $4112 in late afternoon trading Monday—is good news for gold mining stocks, too. Just look at some of the leading miners. Newmont Mining, one of the top-performing stocks in the S&P 500 this year and a recent Barron’s stock pick, is up nearly 15% since Oct. 27 on the back of gold’s comeback. Another miner, Barrick Mining, soared more than 5% Monday after reporting earnings and announcing that it was boosting its dividend and share-buyback program.

Yes, gold will likely continue to be volatile in the near term. Austin Pickle, an investment strategy analyst with the Wells Fargo Investment Institute, said in a report Monday that “gold was historically stretched” and that “the most recent pullback has been a much needed and healthy consolidation.” He conceded that it could take some time for some of the excesses in the market to be wrung out and that gold could be choppy over the next few months.

But it looks like conditions are in place to push it on toward the next milestone of $5,000 an ounce before long.

Read the full article HERE.

Student loan delinquencies hit 9.4% as lower-income Americans face mounting financial pressure

American households’ debt burdens increased to the highest level on record in the third quarter of 2025, according to a new report by the Federal Reserve Bank of New York.

The New York Fed’s Center for Microeconomic Data released its quarterly report on household debt and credit this week, which showed that household debt rose by $197 billion in the third quarter to a record of $18.59 trillion.

Mortgage balances grew by $137 billion in the quarter to a total of $13.07 trillion at the end of September, while credit card balances rose $24 billion to a total of $1.23 trillion at the end of the quarter. Auto loan balances were steady at $1.66 trillion, while student loan balances increased $15 billion to a total of $1.65 trillion.

“Household debt balances are growing at a moderate pace, with delinquency rates stabilizing,” said Donghoon Lee, economic research advisor at the New York Fed. “The relatively low mortgage delinquency rates reflect the housing market’s resilience, driven by ample home equity and tight underwriting standards.”

Overall delinquency rates remained elevated in the third quarter of 2025, with 4.5% of outstanding debt in some stage of delinquency. 

The New York Fed noted that transitions into early delinquency were mixed with credit card debt and student loans increasing, while all other debt types saw decreases. 

Transitions into serious delinquencies, defined as 90 days or more delinquent, were largely stable for auto loans, credit cards and mortgages. Overall debt flow into serious delinquency was 3.03% in the third quarter of 2025, up from 1.68% in the same quarter last year.

Missed payments on federal student loans weren’t reported to credit bureaus from the second quarter of 2020 to the four quarter of 2024, and the resumption of those reports caused student delinquencies to rise sharply in the first half of 2025.

The New York Fed found that in the third quarter of 2025, 9.4% of aggregate student debt was reported as 90+ days delinquent or in default, compared with 7.8% in the first quarter and 10.2% in the second quarter.

The Federal Reserve cut interest rates for the second consecutive meeting in October despite elevated inflation amid signs of a weakening labor market. 

Policymakers have cautioned that while economic growth has been solid overall, there are signs it’s being driven by higher income consumers while less affluent households are struggling.

Federal Reserve Chairman Jerome Powell said at his press conference following the rate cut decision that there is a “bifurcated economy” and that “consumers at the lower end are struggling and buying less and shifting to lower-cost products, but that at the top, people are spending at the higher end of income and wealth.”

Read the full article HERE.

 Gold prices nudged higher Friday, supported by a softer U.S. dollar and growing bets on another Federal Reserve rate cut.

At 08:15 ET (13:15 GMT), Spot gold was up 0.5% at $3,996.56 an ounce and U.S. Gold Futures edged 0.3% higher to $4,003.87 per ounce.

Softer dollar, Fed easing bets support gold prices

The US Dollar Index fell 0.5% on Thursday and stayed subdued on Friday, making bullion cheaper for holders of other currencies.

The prolonged U.S. government shutdown — which has now entered its second month — has delayed the release of key economic reports, including employment and inflation data, leaving markets with limited official guidance.

The data vacuum has heightened uncertainty and prompted investors to rely on private-sector surveys for economic signals.

A private jobs report on Thursday showed signs of weakness in the labor market, adding to expectations that the Fed could ease policy rates again sooner than previously thought.

“The absence of official data is clouding the situation, but business surveys suggest the Federal Reserve will likely cut rates further despite recent hawkish messaging,” ING analysts said in a note.

Futures pricing now indicates about a 70% chance of a rate cut in December, up from roughly 60% a day ago. Lower interest rates tend to support gold, which yields no interest.

Global equity markets, meanwhile, extended sharp losses this week, with technology shares leading the slide amid renewed concerns over lofty valuations.

The broader rout pushed investors toward safer assets, such as gold and U.S. Treasuries.

Gold has long-term appeal – BCA

Gold has retreated from the all-time highs seen late last month, but BCA Research still sees it delivering strong long-term returns.

After a 10% pullback following this year’s sharp rally, BCA strategists said the correction in gold is “mostly behind us,” while maintaining that its long-term appeal remains intact.

“The network effect that has made gold the physical insurance asset of choice will generate long-term outperformance versus other commodities,” a team led by Dhaval Joshi wrote in a report released Thursday.

Gold’s value, they said, stems from its role as an “insurance asset” in the fiat money system—a function reinforced by collective investor belief and central bank behavior.

“The true value of gold comes from the network effect that makes gold the go-to insurance asset in a fiat monetary regime,” the strategists said.

The research house identified three main drivers of gold’s long-term value: global wealth levels, the share of wealth allocated to insurance assets, and the availability of alternatives.

Metal markets edge higher; Chinese exports fall unexpectedly in Oct

Other precious and industrial metals traded modestly higher on Friday as a weak dollar lent support.

Silver Futures rose 1% to $48.425 per ounce and Platinum Futures advanced 1.6% to $1,562.10/oz.

Benchmark Copper Futures on the London Metal Exchange gained 0.6% to $10,743.20 a ton, while U.S. Copper Futures were up 0.6% to $4.9955 a pound.

Data on Friday showed that Chinese exports unexpectedly shrank in October for the first time in 18 months, amid continued pressure from high U.S. trade tariffs and cooling overseas demand.

Imports also weakened, leading to a decline in the country’s trade balance.

Read the full article HERE.

US companies announced the most job cuts for any October in more than two decades as artificial intelligence reshapes industries and cost-cutting accelerates, according to data from outplacement firm Challenger, Gray & Christmas Inc.

Companies announced 153,074 job cuts last month, almost triple the number during the same month last year and driven by the technology and warehousing sectors. It’s the most for any October since 2003, when the advent of cellphones was similarly disruptive, said Andy Challenger, the company’s chief revenue officer.

“Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes,” Challenger said in the report. “Those laid off now are finding it harder to quickly secure new roles, which could further loosen the labor market.”

The numbers are weak no matter how they’re spliced. Year-to-date job cuts have exceeded 1 million, the most since the pandemic. In the same period, US-based employers have announced the fewest hiring plans since 2011. Seasonal hiring plans through October are the lowest since Challenger started tracking them in 2012.

“It’s possible with rate cuts and a strong showing in November, companies may make a late season push for employees, but at this point, we do not expect a strong seasonal hiring environment in 2025,” said Challenger.

In recent weeks, Target Corp. announced plans to eliminate 1,800 roles, or about 8% of corporate jobs in its first major restructuring in years. Amazon.com Inc. said it would slash 14,000 corporate jobs — following a warning from its CEO that AI will shrink the company’s workforce — while Paramount Skydance Corp. axed 1,000 workers. Other companies cutting corporate jobs include Starbucks Corp., Delta Air Lines Inc., CarMax Inc., Rivian Automotive Inc. and Molson Coors Beverage Co., which cut about 9% of its salaried workforce.

The companies’ reasons vary. United Parcel Service Inc. said last month that it has culled its operational workforce — which includes delivery drivers and package car handlers — by 34,000, about 70% more than it previously projected earlier this year. The package handler cited increased use of automation, which has driven up productivity.

Others are focused on removing layers of management, reducing the hangover from the pandemic-fueled hiring bloat and protecting profit margins from the added costs of tariffs. While many expected increased levies to drive up prices, many employers have absorbed the price increases and instead chosen to cut costs from labor and other parts of their businesses.

Mounting job-cut announcements risk fueling concerns about the health of the labor market just as newly unemployed Americans are facing a diminished hiring environment. The figures could also be viewed at odds with Federal Reserve Chair Jerome Powell’s recent characterization that there’s only a “very gradual cooling” in the job market.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon echoed Powell’s sentiment. He said headcount at the largest US bank will probably remain steady or rise as it continues to roll out artificial intelligence, if “we do a good job.” Dimon said the bank would redeploy workers whose jobs were impacted by the technology. AI will reduce human workloads in many roles, but “it will also create jobs,” he said in a recent interview with CNN.

Payrolls at US companies increased by 42,000 in October after two straight months of declines, signaling some stabilization while consistent with a general softening in labor demand, ADP Research data showed Wednesday.

Separate data out Thursday from Revelio Labs showed US overall employment fell about 9,000 in October, largely reflecting a decline in the government sector. Smaller decreases were noted at manufacturers, retailers and wholesalers, while education and health services led those industries increasing employment.

Data from the workforce intelligence firm also showed an increase in the number of employees who were issued layoff notices last month. Those figures are drawn from so-called WARN notices that require companies with at least 100 workers to issue advance notice of plans to lay off at least 50 employees.

Read the full article HERE.

Gold rebounded as investors sought safety following a slump in global stocks due to concerns around elevated valuations.

Spot bullion rose toward $4,000 an ounce, after falling almost 2% in the previous session as the US dollar strengthened. Treasuries also rallied, while global stocks extended their steepest drop in nearly a month in the previous session.

Gold’s drop on Tuesday came as a trio of Federal Reserve policymakers stopped short of supporting an additional interest-rate cut in December as they weighed competing risks from inflation and a softer labor market. Investors will have an opportunity to hear more viewpoints this week, including from St. Louis Fed President Alberto Musalem. Lower borrowing costs boost the appeal of gold relative to interest-bearing assets like bonds.

Gold is about 50% higher year-to-date, after prices touched a record last month before retracing some gains. The pullback — which followed a slew of signals that the ascent had been too rapid — was accompanied by withdrawals from bullion-backed exchange-traded funds. Traders are now trying to assess whether the metal’s drop has run its course.

“It should not be a big surprise to see the yellow metal consolidate in a lower, $3,800-to-$4,050-an-ounce trading range,” TD Securities strategist Bart Melek said in a note, citing factors including ambiguities over the outlook for Federal Reserve rate cuts, as well as concerns over retail buying in China.

Still, the factors that contributed to gold’s gains this year are still mostly intact, and elevated buying by global central banks and strong demand from private investors should send prices back up after the consolidation phase, he added.

“The tone during this time has shifted from exuberance to reflection, with traders reassessing how much of the 2025 narrative — rate cuts, fiscal stress, geopolitical hedging, and central bank demand — has already been priced in,” Ole Hansen, commodities strategist at Saxo Bank A/S wrote in a note.

Gold rose 0.8% to $3,965.04 an ounce as of 10:28 a.m. in London. The Bloomberg Dollar Spot Index was steady after closing at the highest level since mid-May. Silver was up 1.2%%, platinum was little changed, while palladium edged higher.

Read the full article HERE.

Key Points

One of the many great scenes in The Big Short, which fictionalizes famed investor Michael Burry’s bet against the U.S. housing market, involves a tower of wooden blocks.

During a client pitch, a trader illustrating the risk of collateralized debt obligations unveils a Jenga tower that represents the mortgage bonds stuffed inside a CDO. It inevitably collapses, of course, both on screen and in real life.

A lot of skeptical investors are waiting for a similar implosion of the artificial-intelligence investment boom. The market value of the biggest tech stocks has reached eye-watering levels. The titanic levels of spending being committed to data-center projects simply aren’t generating revenue, let alone profits, in the earliest stage of the cycle.

Cantor Fitzgerald analysts estimate collective annual spending from the four major cloud providers: Microsoft, Google, Amazon.com and Oracle will reach $520 billion by the end of next year.

Bank of America data, meanwhile, suggests capital-spending plans of the biggest tech companies, the so-called hyperscalers, are now swallowing up nearly all of the cash their existing operations produce.

That could suggest AI companies “collectively may be reaching a limit on how much AI capex they are willing to fund purely from cash flows,” said BofA analyst Yuri Seliger.

And that could be why we are seeing a new development in AI financing that bears a striking resemblance to tools used to house a lot of the CDOs that brought the global financial system to its knees in the late 2000s: so-called special purpose vehicles.

SPVs effectively kept billions worth of housing debt off the balance sheets of the country’s biggest banks during the pre-crisis housing boom. That made it harder for investors to understand the risks involved, leaving them with little warning when it all went bad.

In October, Meta Platforms used an SPV called Beignet Investor LLC to raise around $30 billion, most of it debt, that will be used to build a data center in Louisiana. That keeps the debt raised off Meta’s balance sheet, but effectively tied to its broader business prospects.

The company didn’t immediately respond to a request for comment.

Elon Musk’s xAI is reportedly looking to raise $20 billion through an SPV-structured deal that will buy Nvidia processors and lease them back to the AI start-up. Nvidia CEO Jensen Huang said he was “delighted” to be a part of the project.

Cash flow might have been a consideration for Meta, given that around 65% of its current tally is going toward capital spending. The parent of Facebook told investors last week that it would see a “notably larger” capex increase in 2026.

Alphabet, on the other hand, reported third-quarter capex of around $24 billion, which was just under half of its operating cash flow for the period.

That healthy mix likely allowed the Google parent to tap the U.S. bond market for $15 billion on Monday. A portion of the sale matures in 50 years. A further $7 billion will be raised in Europe’s corporate debt market.

Meta has also been able to sell large amounts of debt in the traditional corporate bond market, and raised around $30 billion in October with the fifth-largest issue on record. Oracle sold $18 billion of debt in late September. Both sales drew solid demand from investors.

Dave Novosel, senior analyst at Gimme Credit, thinks the use of SPVs is likely more a reflection of the market having to cope with a big increase in new debt than concern over the health of big-tech balance sheets.

“The hyperscalers and other huge issuers of debt have incredibly strong credit profiles and therefore can easily borrow in the capital markets,” he told Barron’s.

Using an SPV, he said, not only keeps the debt separate but also isolates the risk of a particular project. It gives investors more choices in terms of where they can lend their money.

But it can also raise questions about transparency and market liquidity, given that the market for SPVS is far less active than traditional corporate bonds. Those issues appear more striking when paired with increasing concerns over megacap tech’s dominance of the equity markets, and the increasingly circular nature of AI spending among a handful of players.

OpenAI underscored the latter when it signed a $38 billion deal with Amazon to provide Nvidia chips for its computing needs on Monday.

The ChatGPT creator has now committed to spending around $1.5 trillion over the next decade. Its own estimates peg 2030 revenue at just under $175 billion.

If OpenAI opts to use off-balance sheet tools, as well as traditional debt markets, to fill that gap in financing, investors might start peeking under the hood of these vehicles to find out just how special they are.

And whether we have another Jenga tower to deal with.

Read the full article HERE.

There’s no chance for Congress to resolve the shutdown and reopen the government before crossing the historic threshold Tuesday.

Congress is on track this week to break an unflattering record: presiding over the longest government shutdown in U.S. history.

The ongoing funding lapse will hit the 35-day mark Tuesday night, eclipsing the partial shutdown that ended in early 2019 and also occurred under President Donald Trump.

Bipartisan talks among rank-and-file senators are underway, which could thaw the weekslong freeze between the two parties. Lawmakers over the weekend were confronted with the grim reality that millions of Americans could lose SNAP food aid — as well as more closures of early education centers, shortages of air traffic controllers and first glimpses of higher health care premiums as Obamacare subsidies are set to expire.

But there’s little chance members of Congress will be able to cobble together a deal to reopen the government before their partisan stalemate clears a new milestone. Even if an agreement quickly materializes in the Senate, lawmakers aren’t scheduled to return to the Capitol until Monday night, and Speaker Mike Johnson has told House members they will get 48 hours notice before they need to be back in Washington to vote on any bill.

“Shameful, utterly shameful, that the Democrats are making history in this way,” Johnson said in an interview Friday. “I honestly did not believe they would have the audacity to inflict this much pain on the people and show no regard for it whatsoever.”

Tuesday is also Election Day in several states, with both parties closely watching the outcomes in the gubernatorial races in Virginia and New Jersey, as well as the mayoral contest in New York City and a congressional redistricting referendum in California. Some Republicans are betting their Democratic colleagues will be more willing to vote for a funding patch once those major political events are behind them.

“They’re going to wait till after the election on Tuesday and get their guy in New York elected — they’re going to get New Jersey. And then they’re looking for an exit ramp,” Sen. Markwayne Mullin (R-Okla.) told reporters last week. He was referring to Zohran Mamdani, the democratic socialist vying to run New York City, and Rep. Mikie Sherrill (D-N.J.), on the ballot to be New Jersey’s governor.

“They’re going to show they put up a good fight. They don’t want to do it before Tuesday. Because if they do it before Tuesday, then their base may not show up because it looks like they caved,” Mullin added.

Senate Majority Leader John Thune agreed: “Tuesday, that seems to be another inflection point and hopefully that frees some people up to be able to vote ‘yes.’”

Democrats reject the premise that they are holding out on a deal based on a political calculation.

“Over the last 30 days, we’ve said the same thing over and over and over again: We’ll sit down with Republicans anytime, anyplace, anywhere in order to reopen the government and act on a spending agreement that actually meets the needs of the American people,” House Minority Leader Hakeem Jeffries said at a news conference last week.

But Democrats have been increasingly in the hot seat during this standoff, forced to reckon with the blowback they got from their base back in March when Senate Minority Leader Chuck Schumer led a handful of his members in advancing GOP-backed legislation to avoid a shutdown. Schumer and others are now seeking a deal on health care and a path to a bipartisan funding framework before lending their votes to reopen the government.

Many Republican lawmakers are not convinced the shutdown will end so quickly.

“What I see is no off-ramp,” Sen. John Kennedy (R-La.) said late last week. “And I’ve heard all the rhetoric and the Democrats are getting restless and they’re going to crack any minute. … Chuck’s not going to let them agree on jack shit.”

Rep. Mark Takano (D-Calif.) said in an interview that Trump will play a pivotal role in what comes next in shutdown talks.

“The Republicans all take their cue from [Trump]. And ultimately, he’s got to say, ‘I want a deal.’ So a lot’s on him to bring people together,” Takano said. “He’s got to be part of the off-ramp.”

But Trump was overseas last week, only to return to the U.S. and immediately throw a wrench into fragile member-level discussions by posting a message on Truth Social demanding Senate Republicans eliminate the legislative filibuster to bypass Democratic opposition to the House-passed funding patch.

Trump’s recommendation for ending the shutdown wasn’t the type of involvement lawmakers of either party had in mind for the president. The Senate GOP likely doesn’t currently have the votes to change the chamber’s rules.

Setting the shutdown record is likely to become another talking point for each party to scorn the other with, but it’s a superlative that neither party wants to own, which could motivate lawmakers to hasten their pursuit of a deal.

Rep. Josh Gottheimer (D-N.J.) raised some eyebrows in his caucus last week by suggesting in a television interview that Thune offered Democrats a “fair deal” in saying he would allow a vote to extend expiring Affordable Care Act subsidies if the minority party voted to end the shutdown. And Rep. Adam Smith (D-Wash.) said Friday his party might need to “recalibrate” its position if Republicans remained unmoved.

“The point of this was not to blackmail the Republicans or to score political points on one issue or another. The point of this was to get to better policy. And if what we are doing with the shutdown isn’t getting us to better policy, then yeah, we recalibrate and we have a conversation,” Smith, the top Democrat on the House Armed Services Committee, said at a Council on Foreign Relations event.

This shutdown is also proving to be more painful than past ones — not only because of its length but because Congress didn’t get any full-year spending bills signed into law before thrusting the federal government into crisis.

In late 2018, when the last record-breaking shutdown began over whether to fund Trump’s border wall, lawmakers had already locked in funding for a number of agencies, including the Pentagon. That allowed some parts of the government to operate normally and limited the full impact of a lapse in appropriations.

In the coming days, lawmakers will have to weigh the full implications of allowing the shutdown to continue. While last week was filled with warnings of pain points ahead, some members of Congress believe this is the week where reality could set in.

Rep. Glenn Ivey (D-Md.) predicted a potential lapse in SNAP benefits could be a turning point.

“I think our expectation is that things are going to blow up one way or the other,” Ivey said. “When people get up and check their EBT card, it’s got zeros on it. I don’t know, it’s unbelievable.”

Read the full story HERE.