Gold prices soared to new highs on Wednesday, as the U.S. government entered its first shutdown in almost seven years after lawmakers failed to reach a deal on government funding.

Spot gold hit a record of $3,894.63 an ounce, while U.S. gold futures for December delivery extended gains to hit a high of $3,922.70.

While the impact of government shutdowns on markets is usually minimal, the timing of this one is significant. Critical U.S. jobs data due to be published on Friday will be delayed, clouding the outlook for the Federal Reserve just weeks ahead of its next meeting. President Donald Trump has also threatened to use the shutdown to cut “a lot” of federal employees, who are ordinarily furloughed during a shutdown and brought back to work once it ends.

With no clear path toward a deal, it’s also unclear how long the shutdown will last. During Trump’s first term in office, a 34-day partial shutdown took hold — the longest in history.

Amid the uncertainty, risk assets lost ground, while gold — typically viewed as a safe haven asset in times of economic or geopolitical turbulence — continued its bumper rally to hit its 39th record high this year.

$4,000 gold?

“Gold’s status as a safe haven is well publicized, but the inexorable rise in the gold price over the last few years has been truly astounding, with the metal hitting fresh highs today,” Michael Field, chief equity strategist at Morningstar, told CNBC in an email on Wednesday.

While he noted that the driver behind Wednesday’s rally was the U.S. government shutdown, Field argued that it was “just the straw that broke the camel’s back.”

“Two major ongoing conflicts, political instability in France, newly announced tariffs, all of this is combining to create a very unstable picture for investors,” he said. “And when the going gets tough, gold gets a boost.”

Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, has long held the view that gold can cross the $4,000 mark — and he now believes the metal can go even higher.

“Gold is fast closing in on the 4000 target that we put forward … about a year and a half ago,” he said. “Back then, the move was solely driven by central bank buying while investors were net sellers of the yellow metal, [but] since the beginning of the year, investors have come on board which has clearly accelerated the move to the upside.”

He argued that amid ongoing uncertainty and volatility, and an environment of sticky inflation across the globe, investors were broadly taking the view that they should diversify away from the classic 60/40 portfolio strategy “with hard assets” like gold.

“Still, we are still very early in the game as gold, and gold related investments are barely 2% of an average investment portfolio worldwide,” Gijsels added. “To say it in baseball terms, we are only in the second or third inning. $4,000 [will not be] the endpoint — just the start of the strongest bull market in precious metals the world has ever seen.”

In a note to clients on Wednesday morning, UBS Strategist Joni Teves also argued that gold remains under-owned.

“We expect gold’s bull run to continue over the coming quarters, driven by rising investor positions and a continued broadening in gold’s investor base. With the Fed easing cycle under way, dollar weakness and declining real rates should be bullish for the gold price,” she said.

Teves noted that UBS expected the rally to taper off toward the end of 2026, in anticipation of the end of the Fed’s easing cycle and improving economic conditions.

“That said, given the structural shift in gold’s role to becoming a core part of strategic asset allocations, we expect the correction to ultimately be contained and for prices to stabilise at historically higher levels over the long run,” she added.

Read the full article HERE.

Key Points

Government shutdowns are rarely big enough events to cause lasting damage to the U.S. economy. But that doesn’t mean the latest congressional impasse over spending couldn’t affect growth and monetary policy.

If congressional leaders can’t agree to pass even a short-term funding measure by 12.01 a.m. Eastern on Wednesday, the government will shut down. That deadline is particularly problematic for the publication of economic data, especially the jobs report for September, which is scheduled to be released by the Bureau of Labor Statistics on Friday. The last time a shutdown held back a jobs report was in October 2013.

Delays in that report and other data could create challenges for Federal Reserve officials. The bank is always reliant on economic statistics in making its calls on monetary policy, but the numbers are especially important now because the risks of higher inflation and a weakening job market are so closely balanced.

“An increasingly data dependent Federal Reserve with limited visibility into the September data increases the probability of an October pause,” writes Mike Reid, senior U.S. economist for the Royal Bank of Canada.

President Donald Trump is set to meet with congressional leaders on Monday afternoon, but BNP Paribas Securities senior economist Andrew Husby writes that the odds of a shutdown are “effectively a coin-flip” at this point. There are no indications about how long a shutdown might last.

While the longest U.S. federal government shutdown took place during Trump’s first term in office, starting in December 2018 and lasting 35 days, most are much shorter. Of the 20 government shutdowns since 1977, only seven have exceeded the average length of eight days.

Economic data continued to be published during the 2018-2019 shutdown because budgets for agencies including the Department of Labor had already been enacted. The disruption this time would be more “extensive” because Congress hasn’t passed appropriations bills for more agencies, write economists from the Wells Fargo Investment Institute.

“In the event of a federal government shutdown, the Bureau of Labor Statistics (BLS) will suspend data collection, processing, and dissemination,” an agency spokesperson told Barron’s via email on Monday. “Once funding is restored, BLS will resume normal operations and notify the public of any changes to the news release schedule on the BLS release calendar.”

The Metropolitan Area Employment and Unemployment release for August would be published on Wednesday as part of the agency’s shutdown process, it said.

The delay of economic releases would likely last slightly longer than the shutdown. A prolonged government closure could also jeopardize the Oct. 15 release of the latest consumer price index data and the September retail sales report from the U.S. Census Bureau.

If there is just a short, technical funding lapse that ends within a day, the September payroll report could still be released as scheduled, on the first Friday in October, Husby writes. When the government shut down for 16 days starting on Oct. 1, 2013, a Thursday, the BLS released the employment report on Oct. 22, he said. Husby only sees a “small likelihood” that a shutdown would last long enough to prevent the report’s release before the Federal Open Market Committee’s next meeting on Oct. 28-29.

If the BLS doesn’t publish its employment data on Friday, the ADP National Employment Report, scheduled for release on Wednesday, will likely gain outsize significance in the interim. The ADP report would be the only gauge of conditions in the broader labor market for September.

There are also potential implications for employment and growth. About 900,000 federal employees—about 40% of the workforce—would be furloughed if the government shuts down on Wednesday, estimate Goldman Sachs economists Alec Phillips and Ronnie Walker. Paychecks for all federal employees would be delayed until after Congress votes to restore funding or passes a continuing resolution, though in past government shutdowns, furloughed workers were still counted as employed in the monthly establishment survey.

Many government contractors, however, may be forced to simply go without pay for the duration of the shutdown with no reimbursement.

“The overall fiscal effect of a shutdown would be small, as benefit and interest payments would continue along with tax collections and other revenue functions,” the Goldman economists note. “That said, the administration has some flexibility in determining how to operate during a shutdown and could differ from the approach prior administrations have taken.”

Phillips and Walker expect that October payrolls will be largely unaffected, but that depending on the duration, the unemployment rate could be pushed up by 0.1 to 0.2 percentage points. If a shutdown does last more than a couple of weeks, other October economic data and releases could be affected as well.

Initial claims for unemployment benefits could also rise. And based on past shutdowns, Nomura’s chief economist, David Seif, calculates that there would be a drag of 0.1 to 0.2 percentage point per week on inflation-adjusted growth in gross domestic product for the fourth quarter.

In addition, Seif says, the Trump administration’s threat to lay off federal workers in the event of a shutdown could have a “more severe near-term impact” on public-sector employment in the October payroll data. Economists are already expecting a significant loss of public-sector jobs as a result of deferred resignations earlier in the year.

The Office of Management and Budget released a memo last week instructing agencies to prepare to permanently reduce their workforces. While those terminations would likely be challenged in the courts and some people would be rehired after the government reopened, the layoffs could make the situation look worse for the short term.

So while the U.S. economy is unlikely to falter in the midst of a shutdown, there are still consequences. The current complicated economic situation likely would become even more complex.

Read the full article HERE.

The US Treasury’s gold reserves have surpassed $1 trillion in value — more than 90 times what’s stated on the government’s balance sheet — as the precious metal breaks new all-time highs.

The world’s biggest gold stash passed the milestone after prices rose above $3,824.50 an ounce on Monday, in a 45% rally this year. Its official value, however, based on the $42.22-an-ounce price set by Congress in 1973, is fixed at just over $11 billion.

Bullion has broken successive records this year as investors seek safety in the face of turbulence from trade wars, geopolitical tensions and growing concerns about a potential government funding crisis in the US. The rally has also been fueled by inflows into exchange-traded funds and the resumption of interest rate cuts by the Federal Reserve.

Earlier this year, an offhand comment from Treasury Secretary Scott Bessent sparked speculation that the government’s gold hoard would be marked to market, releasing a windfall of hundreds of billions of dollars. Bessent later dismissed the suggestion and Bloomberg reported that the idea isn’t under serious consideration.

Unlike most countries, the US’s gold is held by the government directly, rather than the central bank. The Fed instead holds gold certificates corresponding to the value of the Treasury’s holdings, and credits the government with dollars in return. That means that an update of the reserves’ value in line with today’s prices would unleash roughly $990 billion into the Treasury’s coffers.

That would cover about half of the $1.973 trillion total US budget gap for the fiscal year through August, a deficit level that was only surpassed in 2020 and 2021, a senior Treasury official said when the numbers were released earlier this month.

While it might seem tempting to change the way gold reserves are booked given the government’s debt-ceiling constraints, it would have far-reaching implications for the financial system, boosting liquidity and prolonging the Fed’s balance-sheet unwind.

The US would not be the first country to do so, though. Germany, Italy and South Africa all have taken the decision to revalue their reserves in recent decades, as an August note from an economist at the Federal Reserve noted.

Just over half of the US gold reserves are held in deep storage in a vault beside the US Army base of Fort Knox, Kentucky, where gold was transferred from New York and Philadelphia in the 1930s, in part to make it less vulnerable to foreign military attacks via the Atlantic. The rest is spread between depositories in West Point, Denver, and a vault 80 feet (24 meters) below the Fed’s building in lower Manhattan

The US gold hoard totals about 261.5 million ounces, according to Treasury data.

Conspiracy theories circulated in February, encouraged by comments by President Donald Trump and billionaire Elon Musk, that the gold held in Fort Knox might not in fact be there.

“We’re going to go to Fort Knox — the fabled Fort Knox — to make sure the gold is there,” Trump said at the time. “If the gold isn’t there, we’re going to be very upset,” he added.

Spot gold traded 1.5% higher at $3,814.82 an ounce as of 1:35 p.m. in London, paring some of its earlier gains.

Read the full article HERE.

Key Points

There may have only been one official dissent vote at the Federal Reserve’s policy meeting last week, but recent comments from policymakers show there are wide and differing viewpoints on where the economy is heading and what potential pitfalls need to be prioritized.

The Federal Open Market Committee opted to lower interest rates by a quarter of a percentage point on Sept. 17, pushing the target fed funds range down to between 4% and 4.25%. Only newly minted Federal Reserve governor Stephen Miran dissented, contending that a half percentage point cut was warranted. On Monday, he noted that monetary policy was “very restrictive” and keeping it elevated risked “unnecessary layoffs and higher unemployment.”

But while Fed officials were more in step with their vote than perhaps expected, there’s little consensus around what lies ahead at this point and which part of the Fed’s dual mandate of maximum employment and price stability needs more attention right now.

Some, like Fed governor Michelle Bowman, continue to warn that materially weaker labor conditions call for a more neutral stance on rates. But others, including Atlanta Fed President Raphael Bostic, are concerned about the risks of higher inflation and call for a more cautious approach to lowering rates lest it spur more price growth.

Bowman, who dissented at the July meeting in favor of a rate cut, said in a speech Tuesday that recent data have revealed a “materially more fragile labor market.” Yet when it came to inflation, she was less worried, noting that price growth continued to hover not far above the Fed’s 2% target.

“I am also more confident that, as trade policy has become more certain, tariffs will have only a small and short-lived effect on inflation going forward,” Bowman said, adding that she was pleased Fed officials have finally begun lowering rates given this shift in labor market conditions.

In August, employers only added about 22,000 nonfarm positions and unemployment ticked up to 4.3%. Additionally, updated estimates of previous monthly payrolls revealed that the economy lost 13,000 jobs in June.

She added that it was “appropriate to begin the process of moving policy toward a more neutral stance” at the September meeting, and that it was important policymakers signaled that additional adjustments were in the offing. In the Fed’s latest summary of economic projections, the median forecast for rates signaled there would be two additional quarter-point cuts this year.

“If the statement had not included a reference to additional cuts, it would have signaled to markets that the committee would not be responsive to weakening labor market conditions,” Bowman said.

But while labor conditions have softened, not all committee members are convinced that these conditions call for significant cuts. The Atlanta Fed’s Bostic said Tuesday that the central bank hasn’t been at target for inflation for four and a half years, so that remains something “we definitely need to be concerned about.”

Policymakers expect the personal consumption expenditures index will top out at 3% this year, not returning to the 2% target until 2028, according to their latest economic projections. Economists surveyed by FactSet are forecasting that the latest PCE inflation reading—due out on Friday—will show prices rose 2.9% in August from a year earlier.

“There’s been a lot of discussion and debate about whether one would expect that tariffs would have an impact on inflation initially and to date, it’s been much more muted, I think, than many expected,” Bostic acknowledged.

But he says it’s still up in the air on whether the changes in tariff policy will ultimately result in a one time shifts or structural changes. Bostic noted that business leaders are telling the Atlanta Fed they are feeling the cost pressures from higher tariffs, and it is becoming increasingly difficult to prevent those from flowing into prices that are faced by consumers.

“I actually think there’s still more to come,” Bostic said. “I’m still worried about it…I don’t think we’re at target today, and given that the forces and the pressures are likely to move us away from that in the short and medium term, I really think we need to pay very close attention to the consumer psyche and to what businesses plan based on what they’re expecting the future to have.”

He added that he has been worried from the “very beginning” that once people have an experience with high inflation they’ll expect that moving forward.

Employment conditions are important as well, Bostic said, though he noted that labor supply and demand are both softer and that could help provide some balance. He also noted that he’s still hearing from businesses that while they’re not hiring, they’re also reluctant to fire anyone.

Keeping the options open and remaining flexible to respond to the changing economic landscape, however, are things policymakers can agree on. “If something happens, we will be responsive and as forcefully as possible,” Bostic added.

Read the full article HERE.

Federal Reserve Governor Stephen Miran said the US central bank risks damage to the economy by not moving rapidly to lower interest rates.

“I don’t think the economy is about to crater. I don’t think the labor market is about to fall off a cliff,” Miran said Thursday on Bloomberg Surveillance.

But given the risks, “I would rather act proactively and lower rates as a result ahead of time, rather than wait for some giant catastrophe to occur,” he said.

Miran, a new Fed board member who was appointed by President Donald Trump, is an outlier among the central bank’s policymakers in calling for immediate, aggressive rate cuts. He argued the Fed’s current policy rate, which is in a range of 4% to 4.25%, is highly restrictive because it’s well above his estimate of the so-called “neutral” level — where policy neither boosts nor restrains the economy.

“The neutral rate is drifting down, and as a result of that, it’s incumbent upon policy to adjust in response,” Miran said. “If policy stays excessively restrictive for too long, then you do get to a situation in which you have a meaningful increase in the unemployment rate.”

Miran spoke just before data released Thursday morning showed second-quarter growth in gross domestic product accelerated to the fastest pace in nearly two years, underscoring the US economy’s resilience. Separate data published simultaneously showed weekly initial filings for unemployment insurance fell to the lowest level since July.

Fed officials voted to lower interest rates at their meeting last week by a quarter percentage point, the first cut of 2025. Miran dissented against the decision, instead favoring a half-point cut.

Several policymakers, including Fed Chair Jerome Powell, have approached rate cuts cautiously, amid concerns Trump’s tariff policies might persistently boost inflation. Powell has said that possibility, along with signs of a weakening labor market, poses a challenge for the Fed’s decision-making in the months ahead.

Kansas City Fed President Jeff Schmid, in remarks prepared for an event Thursday in Dallas, said he supported the recent rate cut but hinted he may not back another reduction any time soon.

“I viewed the 25-basis point cut in the policy rate last week as a reasonable risk-management strategy,” Schmid said. “That said, my view is that inflation remains too high while the labor market, though cooling, still remains largely in balance.”

Speaking earlier Thursday on the Fox Business network, Miran said officials can quickly implement several larger cuts to reach the neutral level, rather than moving slowly over the course of the year.

“My view is that we can get there in a very short series of 50-basis-point cuts, readjust monetary policy, and then move more gingerly once we’re there,” he said.

Read the full article HERE.

Bets that the Federal Reserve will continue cutting interest rates have fueled a rally in one of the riskiest corners of the technology sector, raising concerns about a potential reversal in the stocks.

A basket of unprofitable tech companies tracked by UBS Group AG has jumped 22% since the end of July, compared with a 2.5% advance for its profitable counterpart and the Nasdaq 100 Index’s 5.9% advance. The run-up has sent the group, which includes lesser-known companies like SoundHound AI Inc. and Unity Software Inc., near its highest since late 2021, when rock-bottom interest rates were fueling a bubble in speculative assets that popped the following year.

The basket of loss-making tech firms rose 0.7% Wednesday, while the profitable equivalent rose 0.4%.

The potential of a hard landing for the stocks was highlighted on Tuesday, when the group sank 2.1%, underperforming the market after Fed Chair Jerome Powell reiterated his view that policymakers face a difficult road ahead as they weigh further rate changes. Even if the central bank follows through with two more cuts this year, the benchmark rate will likely remain above 3%, a far cry from the zero-interest-rate policies during the pandemic that fueled equities.

The move in unprofitable tech stocks marks “a phase of speculative over-exuberance because the expected rate-cut cycle is leading to animal spirits being revived,” said Ted Mortonson, a tech strategist at Robert W. Baird & Co. “The rally looks extremely frothy and risky, and all the speculation from the Reddit and Robinhood crowds makes it feel like a casino, which makes me think this will end with disillusionment.”

With inflation still a problem and artificial intelligence weighing on the labor market, it’s “extremely tricky” to analyze the value of money-losing companies based on what the Fed may or may not do, Mortonson added. Lower borrowing costs are crucial for money-losing firms that need to finance fast-growing operations at valuations based on profit expectations that might take years to hit.

Of course, there are plenty of other areas of the stock market where speculation is running rampant amid prospects for lower rates. Riskier biotech plays are surging and the Russell 2000 Index of small caps recently hit its first record since 2021. However, the move in tech has been pronounced.

A similar unprofitable basket tracked by Goldman Sachs has nearly doubled from an April low, and recently hit its highest since February 2022.

Notable winners include OpenDoor Technologies Inc., a so-called meme stock championed by Canadian hedge-fund manager Eric Jackson, which has soared by more than 280% since the end of July. IonQ Inc., a quantum-computing company, is up more than 80% over the same period, while SoundHound AI, Xometry Inc. and Lemonade Inc. have gained more than 50%.

Despite the rally, the moves still pale in comparison with the start of the decade. Goldman’s basket soared more than 420% from March 2020 to February 2021 before giving most of the gains over the following 15 months.

Still, some investors see validity in the recent move higher, especially since the scope of the so-called dash for trash is smaller than in the previous rate-cutting cycle. Goldman’s basket for example remains about 50% below its 2021 peak.

“I don’t think the exuberance is unfounded, since growth has been decent, there’s more visibility on tech earnings than other industries, AI is a unique secular tailwind, and the rate backdrop looks favorable,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial Services Inc. He said “it isn’t a stretch to see more risk taking in speculative areas, which is where you find the untapped sources for upside.”

Despite that, Saglimbene stressed that the rally in unprofitable tech stocks could turn easily, with shares in the group likely to face more pressure than their high-quality counterparts in the event of a broader economic downturn.

“The Fed is likely to remain guarded with its rate path, and if it starts to cut more aggressively, that’s probably because something is breaking in the economy, which won’t be positive for risky or unprofitable tech assets,” he said. “We’re in a risk-on mode right now, but if you live by the sword, you might die by it.”

Meanwhile, Alibaba Group Holding Ltd.’s shares surged to their highest in nearly four years after the company revealed plans to ramp up its AI spending past an original $50 billion-plus target, joining tech leaders pledging ever-greater sums toward the race for technological breakthroughs.

Top Tech Stories

Read the full article HERE.

China aims to become custodian of foreign sovereign gold reserves in a bid to strengthen its standing in the global bullion market, according to people familiar with the matter.

The People’s Bank of China is using the Shanghai Gold Exchange to court central banks in friendly countries to buy bullion and store it within the country’s borders, said the people, who spoke on condition of anonymity as the discussions aren’t public. The effort has taken place over recent months and has attracted interest from at least one country, in Southeast Asia, the people said.

The move would enhance Beijing’s role in the global financial system, furthering its goal of establishing a world that’s less dependent on the dollar and Western centers like the US, the UK and Switzerland. Countries have been snapping up gold as a hedge against mounting geopolitical risks, creating the opportunity for the PBOC to offer a haven for an asset deemed crucial as a buffer to economic shocks.

The PBOC and SGE didn’t respond to requests for comment.

Demand from central banks has been a key pillar in the precious metal’s recent ascent to record highs, and the PBOC itself has been on a buying spree for ten straight months.

Spot gold rose as much as 1.2% to a fresh record after the news, before easing slightly to $3,784.74 an ounce as of 9:42 a.m. New York time.

“Markets may be speculating that China’s bid to host foreign gold reserves signals a long-term push to elevate its role in the global monetary system,” said Wael Makarem, financial markets strategists lead at Exness. “Investors could be interpreting this as incremental de-dollarization momentum, which could support gold.”

The reserves would be held in custodian warehouses linked to the SGE’s International Board, which falls under the PBOC and was set up by the central bank in 2014 as the main venue for foreigners to trade gold with Chinese counterparts. The bullion would be made up of new purchases that count toward the foreign country’s reserves, rather than being relocated from existing stockpiles, the people said.

While China’s move marks another step toward building its role in global bullion trading, it remains some way from challenging established hubs such as the UK. The Bank of England’s vaults hold over 5,000 tons of the world’s reserves, worth nearly $600 billion and anchoring the city’s role as the leading marketplace for the precious metal. Custodian services, which safeguard assets on behalf of clients, are key for a gold center, helping to boost credibility and attract more trading.

The PBOC’s reported reserves are less than half that, putting it at No. 5 in the global ranking of central bank holders, according to the World Gold Council. However, China’s domestic market for gold, whether as jewelry or in bars and coins for investment, is the world’s largest.

Boosting local trading even further should help Beijing accelerate its campaign to reduce reliance on the dollar and internationalize the yuan. Bullion has nearly doubled in value to over $3,700 an ounce in the past two years, and recently eclipsed its inflation-adjusted record set in 1980. The blistering rally may have more room to run, with Goldman Sachs Group Inc. predicting it could hit $5,000 if just 1% of privately-held Treasury holdings shifted to gold.

China has already taken a number of steps to open up its gold market. The SGE launched its first offshore vault and contracts in Hong Kong this year, a move designed to increase transaction volumes in the yuan. The PBOC has also recently eased restrictions on gold imports.

For prospective clients, Chinese vaults could be an attractive option to build reserves and help bypass the risk of being cut off from the world’s financial markets. Central bank buying of gold accelerated after the US and its allies froze Russia’s foreign exchange reserves in 2022 after the invasion of Ukraine.

But there are trade-offs, too. “If countries chose to store their gold in China, they will forgo the ease and liquidity in London,” said Nicholas Frappell, Head of Institutional Market at ABC Refinery.

Read the full article HERE.

Citigroup cast doubt on gold’s run in June

Gold was headed for a fresh record on Monday and silver hit a more than decade high, with Citigroup strategists predicting the rally for the precious metals to continue and carry other metals.

Gold jumped $44.40, or 1.2%, to $3,750 an ounce early Monday, putting it on the path for a fresh closing high, potentially its 36th this year. The contract also set a new intraday high, reaching $3,753 an ounce, according to Dow Jones Market Data.

Silver. meanwhile, rose over 2% to $43.86 an ounce, reaching an intraday level of $44.10, not seen since Aug. 2011. Investors are now watching to see if silver at long last reaches a new settlement high — the last was $48.70 an ounce, reached in January 1980.

Citigroup strategists told clients in a note that they are bullish on those precious metals, as well as two others.

“We see the gold and silver bull market broadening and eventually shifting into copper and aluminum during 2026, driven by the prospect of new dovish Fed leadership (by May/June 2026) and related lower U.S. real interest rates and downward pressure on the dollar,” wrote a team led by Maximilian Layton, global head of commodities.

Driving the upside will be cyclical factors — continued weak labor market, tariff-driven U.S. and global growth worries — and structural ones such as worries about U.S. debt and a weakening dollar.

“In addition, we see stimulus from the [One Big Beautiful Bill Act] reaching households and building capex investment momentum during 1H26, driving an improvement in U.S. and global growth and sentiment,” much like late 2007, early 2008,” they said.

Noting that “just about everything is going right for the gold bull market at the moment,” Layton and his team suggest buying any dips in gold prices, targeting $3,800 an ounce in the next three months, but seeing it peak in the first quarter of next year. Their bull case sees gold reaching $4,000 in the coming months in a scenario of stagflation and growing Fed independence concerns. A bear case projects prices to dip to $3,400, with the economy muddling through and geopolitical de-escalations.

As for aluminum, the strategists say they are “very bullish” over the next six to 36 months, saying any dips would represent “strong long-term buying opportunities.”

“Aluminum is heavily exposed to AI/datacenters, humanoid/other robots given competition for power from the same future-facing sectors, which are driving aluminum demand (aluminum supply is highly power intensive) and given China’s capacity cap,” said Layton and the team.

As for copper, they have a $12,000/ton base case for the next six to 12 months, marking 20% upside, and a bull case of $14,000/ton. “While we are neutral for 4Q25, copper is exposed to structural energy-transition and AI trends and is leveraged to a pickup in U.S. and global growth expectations from 2026, given dovish Fed prospects (especially from May 2026) and related lower U.S. real interest rates,” they said.

Citigroup warned in June that gold prices could be headed for a fall in 2026. In their latest forecasts, though, they have walked back some of that negativity.

In the first quarter they see gold at $3,700 an ounce from a previous $2,900 an ounce. By the fourth quarter of 2026, they see gold at $2,800 an ounce, slightly higher than the $2,600 they had predicted previously

Read the full article HERE.

Unemployment and inflation are starting to rise. But more troubling: how skewed the AI economy is.

The United States is entering a period that looks and feels like stagflation, the dreaded s-word that hasn’t been uttered much since the 1970s and early 1980s. It means both unemployment and inflation are climbing. So far, it has been a modest rise that is probably best described as “stagflation-lite,” but it’s still distressing because it’s almost impossible to cure both of these ills at the same time.

Federal Reserve Chair Jerome H. Powell didn’t use the s-word on Wednesday, but he repeatedly called the situation “unusual.” Fed leaders have predicted conditions will worsen in the coming months, with inflation on track tohit 3 percent(up from 2.2 percent in April) and unemployment expected tohit 4.5 percent (up from 4.2 percent in April). Powell made it clear he’s more worried about the deteriorating jobs situation. The Fed just lowered interest rates by a quarter point (and signaled more cuts are coming before the end of the year) to prevent more layoffs and avoid a recession.

Typically, when people lose their jobs, there’s a downturn, and prices tend to flatline as businesses offer deals to win back customers. But this is a strange time for the economy, mainly because of the highest tariffs in 90 years and the AI boom. These forces are skewing the economy.

Prices for many goods are rising as companies pass along the tariffs they are paying to import items and parts from overseas. At the same time, many business leaders think they over-hired in 2023. The latest job revision data showing 911,000 fewer jobs created between April 2024 and March 2025 suggest many firms slowed hiring in 2024. Now, in 2025, they are growing more cautious because of uncertainty. In the next six months, businesses are either going to pass along more of the tariff costs to consumers or they are going to cut costs by laying off workers. Or a mix of both, as the Fed seems to predict.

The nation is in for a turbulent few months as the worst of the tariff impact hits businesses’ and families’ budgets. Polling and consumer sentiment data show fear of and frustration over high and rising prices and a worsening job market. But economic growth is where things get really bizarre. The word “stagflation” comes partly from stagnation. It’s supposed to be a period of weak growth — or even contraction. Yet the U.S. economy expanded at a brisk 3.3 percent in the second quarter, and the latest estimate from the Atlanta Fed indicates the growth rate could be around 3 percent in the third quarter, too.

The key to understanding the economy is to recognize that two trends are propping up growth: spending by the rich and companies investing heavily in the AI boom. The economy is highly skewed right now toward certain big players.

So far this year, business spending on software and data centers — mainly for AI — has been a bigger contributor to the economy than consumption. That is stunning. The U.S. is widely known as a consumer economy, where the vast majority of growth typically comes from people spending on everything from burgers and fries to facials and football games. Yet suddenly, this is an AI economy.

As JPMorgan wrote in a recent report, “AI-related capital expenditures contributed 1.1% to GDP growth, outpacing the U.S. consumer as an engine of expansion.” And that spending is dominated by major tech players such as Meta, Alphabet, Microsoft, Amazon and Oracle. (Amazon founder Jeff Bezos owns The Post.)

There’s still some spending going on, but it’s mainly driven by the top 20 percent of earners: those making roughly $175,000 a year or more. As Mark Zandi, chief economist at Moody’s Analytics, points out, the bottom 80 percent of earners are basically treading water: Their spending is just keeping up with inflation. In contrast, the top 20 percent are still growing their spending far faster than inflation, probably because the rich are benefiting the most from record stock-market gains.

There’s a strong likelihood the economy keeps chugging along even as middle- and lower-income households face a big squeeze from higher prices and wages that don’t keep up (or barely do). There’s little incentive for employers to give large pay increases when it’s tough to find another job.

There has been ample discussion about how challenging a stagflation-like environment is for the Fed. As it focuses on cutting rates to stop more layoffs, it runs the risk of higher inflation or some sort of AI bubble forming, reminiscent of the dot-com era. But there’s an equally complex situation in a bifurcated “K-shaped economy” where the top is thriving and the rest are barely staying afloat. Or, in the business context, where AI-related businesses are thriving and many other sectors, such as real estate, farming and manufacturing, are struggling. Which groups are policymakers going to help?

“The fundamental challenge with a K-shaped economy is that for those at the top, you would hike rates sharply — while for those at the bottom, you would lower them dramatically,” said Peter Atwater, president of Financial Insyghts.

There are many unusual forces at play, but too often what gets lost in the conversation is this: It’s a turbulent economy for the middle class, and it would be a mistake to let their situation worsen.

Read the full article HERE.

Despite attempts by the White House to erode the central bank’s independence, Powell showed that he remains firmly in control.  

What should one take away from this week’s Federal Reserve monetary policy meeting?

First, Chair Jerome Powell is firmly in control of the interest-rate setting Federal Open Market Committee, which on Wednesday lowered its target for the federal funds rate by 25 basis points to a range of 4% to 4.25%.

Going into the meeting, expectations were that there could be dissents on both sides, with some policymakers in favor of no cut and others in favor of a larger 50-basis-point reduction. And some thought Fed GovernorsChristopher Waller or Michelle Bowman — both appointed to the central bank during the first Trump administration—might join Stephen Miran, the head of the White House’s Council of Economic Advisors who was just sworn in Tuesday as a Fed governor to fill an open slot – in dissenting in favor of that larger cut.

But it wasn’t to be. Those that might have preferred to keep rates unchanged deferred to Powell. Not a surprising outcome, given that the disagreement was about timing rather than direction of rates. In such circumstances, no dissent was warranted.

For Bowman and Waller, it is more difficult to parse their motivations. But their unwillingness to dissent in favor of a larger cut shows that just because one is a Trump appointee doesn’t necessarily mean following his lead. (Recall that Trump has said rates should be closer to 1%.) Their actions demonstrate integrity, commitment to the Fed’s mission and the importance of sustaining the central bank’s independence. A very welcome development!

Second, the shift in the median Summary of Economic Projections to 75 basis points of rate cuts by year-end from the 50 basis points projected in June is not significant. Markets initially reacted positively to this development, but the gains turned out to be transitory because on closer examination it was obvious there was no clear consensus. Excluding the one forecast advocating for 150 basis points of cuts this year — which is almost certainly Miran’s projection — the rest of the FOMC was evenly split between one or two more rate cuts.

Third, at Powell’s press conference he was pressed about the apparent inconsistency between cutting the Fed’s rate target at the same time the FOMC raised its median forecast for both economic growth and inflation. I don’t think there is much tension here. The upward revisions were very small, amounting to 0.2 percentage points for both in 2026. More importantly, the motivation for the rate cut was not tied to the modal forecast, but instead was driven by the signs of labor market weakness evident in recent employment data that showed a sharp slowdown in payroll growth to just 29,000 on average over the past three months.

The rationale Powell offered for the rate cut was straightforward, which is that the downside risks to the labor market had increased and come into closer balance with the upside risks to inflation. Because he assessed monetary policy as being “clearly restrictive,” the shift in risks implied that monetary policy should be looser.

So where do we go from here?

Future Fed actions will bedata dependent. Easing will be predicated mainly on whether the downside risks to the labor market are increasing, how the Trump administration’s tariffs pass through into prices and whether the resulting stickiness in inflation pushes up long-term inflation expectations. A series of stronger employment reports, a steady unemployment rate and persistent inflation could undercut support for further easing.

As Powell explained, conducting monetary policy is very difficult right now. First, because the dual mandate objectives of the Fed – full employment and price stability – are in conflict, the Fed has to set policy to balance the risks to those two objectives. As Powell put it, there is “no risk-free path.” Second, tariff policy remains uncertain, with the timing of the tariff impact on prices dependent in part on future court rulings that will govern which tariffs increases are legal. Moreover, while the pass-through of tariffs into prices has been more modest and slower than anticipated, this doesn’t necessarily mean the full effects will be smaller. Instead, the pass-through may just be delayed, reflecting the reluctance of companies to react until they have better visibility.

What about the threat to Fed independence?

Powell was very careful not to respond to questions about allegations by the Trump administration that Fed Governor Lisa Cook lied on mortgage applications or Treasury Secretary Scott Bessent’s critique that the central bank had been guilty of mission creep and should be subject to an independent review. Powell instead pointed to what the Fed was already doing, including the recent revisions to the Fed’s monetary policy framework and the planned 10% reduction in headcount across the Federal Reserve System. Powell concluded that the Fed is always open to ways of improving its operations. He understands that Fed credibility rests on the Fed doing its job — broadly defined — well.

With respect to the third mandate of monetary policy — keeping longer-term interest rates moderate – Powell emphasized that the Fed has not historically focused on this area for a simple reason: If it does a good job in achieving its other two goals of full employment and stable prices, longer-term rates will take care of themselves.

The threat to Fed independence is still very real. While Trump administration may not succeed in removing Cook for cause and not all of Trump’s Fed appointees will necessarily do the White House’s bidding, the efforts show the intent of the President to take control of the central bank. Plus, the administration may explore or invent other options to get its way. The divergence of Miran’s rate forecast from the rest of the FOMC indicates how much monetary policy would likely change if Trump lieutenants were firmly in control. If monetary policy were to follow Miran’s dictate, the result would soon be an overheated economy and higher inflation. Let’s hope that Fed independence with respect to how it conducts monetary policy to achieve the objectives set out for it by Congress prevails.

Read the full article HERE.