The United States government could be headed towards a shutdown this weekend after two failed attempts by House Republicans in recent days to avert a stoppage.

First, Speaker Mike Johnson and his colleagues saw one bipartisan deal fall apart amid opposition from Elon Musk and President-elect Donald Trump. Then a second GOP-negotiated deal collapsed due to 38 House Republicans joining nearly all Democrats to vote no and tank that effort.

Johnson and his colleagues are still working feverishly to resolve a complex series of disputes on issues like the debt ceiling to various funding priorities but now have only hours to act to head off an array of impacts that could be felt across the country as well as economic impacts that could grow with each passing day.

“We will regroup and we will come up with another solution so stay tuned,” was all Johnson was able to offer reporters after Thursday’s latest failed vote.

For now experts are downplaying the immediate economic effects and noting that lawmakers have intense motivation to find a deal and then get home for the holidays.

“Nobody wants the optics of shutting down the government,” Stifel Chief Washington Policy Strategist Brian Gardner noted in a Yahoo Finance Live appearance on Thursday, noting noting a shutdown would include things like temporarily unpaid military personnel.

But with few options left, what could be a growing economic question for the coming days is the length of any stoppage — especially in the middle of the holiday travel season.

TSA Administrator David Pekoske tried to assuage some concerns Thursday when he noted in a post that about 59,000 of his agency’s over 62,000 employees “are considered essential and would continue working without pay in the event of a shutdown.”

But he was quick to add a warning: “please be aware that an extended shutdown could mean longer wait times at airports.”

If a shutdown begins to drag out, the bite could begin to be directly felt on Monday morning at the beginning of the workweek.

Many America’s more than 2 million federal employees (and another 2 million military personnel) could either find themselves furloughed, be working without pay, or simply dealing with shutdown related disruptions.

The effects would be felt by individuals but also many businesses that rely on the government on a day-to-day basis.

At the same time, wide swaths of the government are set to be largely unaffected — notably Social Security and Medicare.

Money for those so-called “mandatory spending” represents a majority of the government’s budget and supports programs like Social Security and Medicare. That is set to continue no matter what happens on Capitol Hill.

Here’s a rundown of just some of what is set to remain accessible and what will be on ice if the standoff on Capitol Hill isn’t resolved.

Closed: Everything from the national memorials to taxpayer assistance

The most prominent closures in any shutdown are national parks. In previous shutdowns, everything from scenic natural areas to major tourist attractions like the Lincoln Memorial in Washington have been shuttered.

A range of other government operations are also set to be rendered more difficult to access or completely inaccessible.

Many taxpayer services at the Internal Revenue Service are expected to be suspended.

The most recent contingency plan from the agency for the current fiscal year laid out scenarios where telephone helplines could go unanswered and Taxpayer Assistance Centers across the country would be likely to be deemed inessential and close.

But that could shift if a shutdown drags into early 2025 and the filing season draws closer.

Financial regulators overseeing financial markets like the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Federal Trade Commission will also be cut back to bare minimums with about 9 in 10 staffers there likely to be at home for the shutdown.

A recent SEC plan is to only keep on hand an “extremely limited number of staff members available to respond to emergency situations.”

Government economic data that is released from places like the Bureau of Labor Statistics is likewise expected to “completely cease” for the duration of a shutdown.

Getting something like a passports will likely still technically be possible during a shutdown, but could be more difficult with many government buildings closed.

Many areas of possible disruption — from airports to the presidential transition of power

A range of other government services may not shutter entirely but are likely to become more difficult to access, especially if the shutdown stretches for weeks.

Airports are often where Americans feel the impact of a shutdown directly and that could be especially true this time with the holiday travel season.

Past government shutdowns featured longer security lines as a shutdown means that TSA agents are not paid but are nonetheless asked to continue working. Those missed paychecks are then made up when the government reopens.

Nevertheless, past shutdowns have featured higher-than-normal unscheduled absences with a higher than normal number of workers calling in sick.

A shutdown also could cause a wide array for interruptions in the social safety net around programs like federal housing, food assistance, and healthcare for the poor.

Given the timing of this standoff, the ongoing transition of power from Joe Biden to Donald Trump could also be impacted with government employees who are currently charged with briefing their successors perhaps being furloughed.

A spokesperson for the government’s Office of Management and Budget warned Politico this week that such a lapse “would disrupt a wide range of activities associated with the orderly transition of power,” without laying out (yet at least) exactly how.

Open for business: Mandatory spending like Social Security, as well as the post office

But even amid the disruptions, huge swathes of the federal government will be largely unaffected. Mandatory spending by the government — which does not have to be approved by Congress each year — makes up about $7 of every $10 that the government spends.

Social Security and Medicare are the most prominent mandatory programs and are expected to largely continue as normal.

Social Security checks will keep flowing to seniors even as some members of the agency may face furloughs making things like customer service less available.

Likewise, Medicare payments are set to continue to doctors, hospitals, and beneficiaries while the overall Department of Health and Human Services expects to furlough about 45% of its workforce.

The nation’s public schools — funded at the local level — will also remain open, although some federally funded programs like Head Start may shutter.

Finally, the mail will still be delivered, as the US Postal Service is generally self-funded through methods like the sale of stamps and other products.

President-elect Trump has recently floated the idea of making the mail delivery service private but that issue won’t be address until 2025 if he tries to follow through once he’s in office..

Read the full article HERE.

The 25-basis-point cut to interest rates marks the Fed’s second consecutive cut of that size

The Federal Reserve on Wednesday announced its third straight interest rate cut, lowering the benchmark rate by 25 basis points amid economic data showing that inflation remains above the central bank’s target rate.

With the 25-basis-point cut, the benchmark federal funds rate will sit at a range of 4.25% to 4.5%. The Fed’s move follows a 25-basis-point cut in November and a larger-than-normal cut of 50 basis points at its September meeting, which was the first reduction in rates since March 2020 and brought them down from a range of 5.25% to 5.5% — the highest level since 2001.

The Federal Open Market Committee (FOMC), the group within the Fed responsible for setting monetary policy, said in a statement that “labor market conditions have generally eased, and the unemployment rate has moved up but remains low” and while inflation has progressed toward the 2% objective, it “remains somewhat elevated.”

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate,” the FOMC added.

One member of the FOMC, Cleveland Fed President Beth Hammack, dissented from the decision to cut rates and preferred to hold the benchmark rate at a range of 4.5% to 4.75%.

The FOMC also released a summary of economic projections, which reflected two rate cuts in 2025, two cuts in 2026 and one cut in 2027. It had previously projected four cuts in 2025 in its most recent projection from September.

The summary shows the median of the federal funds rate at 4.4% at the end of 2024, before declining to 3.9% in 2025, 3.4% in 2026 and 3.1% in 2027. Those forward-looking projections are higher than the Fed’s September projections, with the 2025 and 2026 medians each a half-point higher and the 2027 figure 0.2 percentage points higher.

It also projects that the personal consumption expenditures (PCE) index, which is the Fed’s favored inflation gauge, will finish this year at 2.4% and will be 2.5% in 2025 — up from 2.1% in the previous projection released in September. PCE would then decline to 2.1% in 2026 before reaching 2% in 2027 and over the longer run.

“Today was a closer call, but we decided that it was the right call because we thought it was the best decision to foster achievement of both of our goals, maximum employment and price stability,” Fed Chair Jerome Powell said at a press conference.

“We see the risks two-sided — moving too slowly and needlessly undermine economic activity and the labor market, or move too quickly and needlessly undermine our progress on inflation. So we’re trying to steer between those two risks, so we decided to move ahead with a further cut,” he explained. 

Powell said downside risks to the labor market have diminished, but noted that the labor market is looser than it was before the pandemic and is continuing to cool, which isn’t needed to get inflation to the 2% target. He also noted that the pace of the decline in inflation has flattened over the last year in part because housing services inflation is falling at a slower pace than hoped, with some “bumpiness” in prices for goods.

“We coupled this decision today with the extent and timing language in the post-meeting statement that signals that we are at or near a point at which it will be appropriate to slow the pace of further adjustments,” Powell said.

The Fed chair responded to a question about what policymakers will consider in future rate cut decisions heading into the new year, given the signal sent by the Fed’s economic projections about fewer rate cuts in 2025 than were previously forecast.

“We’re significantly closer to neutral at 4.3% and change, we believe policy is still meaningfully restrictive, but as for additional cuts, we’re going to be looking for further progress on inflation as well as continued strength in the labor market,” he explained. “And as long as the economy and labor market are solid, we can be cautious as we consider further cuts and all of that is reflected… in the December SEP, which showed a median forecast of about two cuts next year compared to four in September.” 

“The U.S. economy is just performing very, very well — substantially better than our global peer group — and there’s no reason to think a downturn is more likely than it usually is. So the outlook is pretty bright for our economy. We have to stay on task, though, and continue to have restrictive policies so that we can get inflation down to 2%. We’re also going to be looking out for the labor market pretty close to where it is,” Powell said.

The chair also discussed the impact of inflation in recent years on American consumers. Prices are roughly 20% higher than they were four years ago, despite inflation easing from a 40-year high of 9.1% in June 2022 to 2.7% in November 2024.

“What I think people are feeling right now is the effect of high prices, not high inflation. We understand very well that prices went up a great deal, and people really feel that and it’s prices of food and transportation and heating your home and things like that. So there’s tremendous pain in that burst of inflation that was very global,” Powell said.

Markets fell in response to the Fed’s decision, with the S&P 500 down over 1.7% in the final hour of trading and the Dow down over 1.4%. The probability of the Fed pausing its rate-cutting when it meets on Jan. 28-29 was largely unchanged in response to the Fed’s decision, with a 96.5% chance of rates being held at the new 4.25% to 4.5% range next month, little changed from Tuesday, according to the CME FedWatch tool.

“The Fed has been able to maneuver 100 basis points of cuts so far in this cycle, but given the trajectory of the economy and the recent uptick of inflation, it is going to be more difficult for the Fed to provide basis to continue cutting rates at the same pace,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. 

“The other reality is Powell and company cannot afford to be wrong on inflation again as upside risks continue to persist,” he said. “Therefore, we see the bar being raised for rate cuts going forward from here and given this Fed is operating on a data-dependent level, any meaningful upticks of inflation raise the risk that additional rate cuts, if any, will be few and far between.”

“In many ways, today’s cut and the release of updated expectations for 2025 signals a strong vote of confidence in the current state of the economy and job market. And that optimism may trickle down to business leaders waiting for a firm signal to ramp up hiring,” said Cory Stahle, economist at the Indeed Hiring Lab. 

“There is still a lot of uncertainty around the impact of any new policies enacted by the incoming administration, and there is no guarantee that the current market momentum can or will endure over the medium or longer term. But absent any big surprises, the labor market looks poised to enter 2025 with solid momentum and wind in its sails,” Stahle added.

Read the full article HERE.

The Dow Jones Industrial Average (^DJI) is on its worst losing streak in nearly 50 years.

The major index has fallen for nine straight trading days, its largest stretch of consecutive declines since 1978. The move lower in the Dow comes as large-cap tech has largely been holding up the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) throughout December.

The Dow’s losses amount to roughly 3%, or more than 1,500 points, in the past nine trading sessions. The index has fallen from a record close of 45,014 on Dec. 4 to 43,499 as of Tuesday’s close. In that same time frame, the S&P 500 is down about 0.6%, while the Nasdaq Composite is up almost 2%.

Given the Dow’s construction, it’s not benefitting from the tech rally. Of the Dow’s 30 stocks, just four — Amazon (AMZN), Microsoft (MSFT), Apple (AAPL), and Nvidia (NVDA) — are members of the “Magnificent Seven” tech stocks. This means the Dow, unlike the S&P 500 and Nasdaq, hasn’t benefitted from massive rallies in Tesla (TSLA), which is up more than 37% in the past 10 days, or Alphabet (GOOGL,GOOG), which has risen 14% in the same time period.

Instead, the Dow has been pulled down, partly due to the recent sell-off in Nvidia stock. The blue-chip index added Nvidia on Nov. 8. Since then, one of the hottest stocks in the market has cooled off, with shares down nearly 12%.

“It’s really the tech leadership versus everything else, value versus growth,” WisdomTree global chief investment officer Jeremy Schwartz told Yahoo Finance.

A sell-off in healthcare stocks has also weighed on the Dow. UnitedHealth (UNH) is down about 20% in the past 10 days following the murder of its CEO Brian Thompson on Dec. 4. Other healthcare stocks have also lagged, with Johnson & Johnson (JNJ) and Amgen (AMGN) both down more than 4% in the past 10 trading sessions.

Schwartz said the Dow’s decline hasn’t been surprising given the run-up in stocks this year, though.

“We are still optimistic for next year. We think stocks versus bonds is still [the place] to be in the markets,” he said. “But there was so much strong positioning for this rally and for this seasonal rally that it’s not actually a surprise to see this pullback.”

Read the full article HERE.

When investors are wildly optimistic, it is much harder for the market to rise and much easier for it to fall on any hint that they might be wrong

The market feels toppy. There is no science to this and readers will have to judge for themselves. But here are a bunch of things that make me think trouble might be imminent for stocks—perhaps a correction, perhaps the start of something bigger, but at least a bump in the road.

Bulls are everywhere. Bears are hard to find. This shows up in sentiment, in surveys and in the capitulation of the permabears.

Sentiment is euphoric, according to Citigroup’s Levkovich indicator. This index combines lots of measures and suggests investors have only been more positive twice, in the postpandemic SPAC/cannabis/green bubble and in the dot-com bubble of 1999-2000.

When investors are wildly optimistic, it is much harder for the market to rise—everyone’s already got a lot of stocks—and much easier for it to fall on any hint that they might be wrong. I don’t know what the trigger might be, but it doesn’t need to be much.

Other signs of optimism. Investment newsletter writers have rarely been more bullish or less bearish, according to the weekly survey by Investors Intelligence. Households have never been so confident that stocks will rise over the next year, according to the Conference Board’s monthly survey.

And fund managers shifted after the election to be more overweight U.S. stocks than any time since 2013, pretty much as all-in on the U.S. as they have ever been, according to Bank of America’s survey. Money is pouring into funds at an exceptionally high rate too, close to new highs.

Some of the best-known bears have given up. Economist and fund manager Nouriel Roubini used to revel in the moniker of “Dr. Doom,” but he told Bloomberg TV “I’m not Dr. Doom, I’m Dr. Realist,” while talking up the prospects for the U.S. economy. David Rosenberg of Rosenberg Research didn’t actually say the fateful words “this time is different” but he did write that “traditional valuations, at the least, are not that helpful right now.”

This time will be different. Rosenberg thinks investors have shifted away from the standard metric of price against one-year forward earnings to look further out, because of the prospects for an AI-driven productivity boom. Even those who think markets will eventually return to something like normal, such as Goldman Sachs, don’t expect issues soon.

Almost everyone agrees AI and the U.S. economy are great. Wei Li, chief investment strategist of the BlackRock Investment Institute, says spending on artificial intelligence will be “of a magnitude similar to previous industrial revolutions, but happening so much faster.” She argues that “U.S. exceptionalism has been years in the making.”

The widespread agreement shows up in prices. The biggest AI-linked stocks dominated the market this year, while the U.S. market outperformed the rest of the world by almost 22 percentage points in the year to the end of November, the most over an 11-month period since 1998.

No one cares about valuation. It isn’t just that people think AI and the U.S. will do well. They don’t seem to care about the price, even though price is the starting point for future returns. Cheap, or value, stocks have been underperforming for years, but just had their longest-ever consecutive daily decline, falling every day for the past 11 days. These are almost by definition bad companies, but the disconnect from the excitement about growth stocks is extreme.

The same goes for stocks against bonds, with the earnings yield—the inverse of the PE ratio—barely above the 10-year Treasury yield, the lowest reward on this measure for the risk of holding stocks since the aftermath of the dot-com bubble. It isn’t just that people want to buy good companies, they seem to want them at any price.

Inside trades. The one group not buying into the story are corporate executives, who ought to be best-placed to see the potential for a new golden era for American profits. They have been selling more stock than they buy, according to regulatory filings, suggesting they think prices are too high.

None of these points are proof that the market must fall, let alone that it will happen soon. None have a perfect record and on some measures—such as the American Association of Individual Investors’s survey—things aren’t so extreme. But I don’t want to be part of a crowd buying into a narrow story when prices, valuations and hope are already extremely high, and insiders aren’t willing to back it with their money. 

This feels like a good time to take some money off the table.

Read the full article HERE.

Gold’s break out of a 13-year cup and handle pattern is likely the start of a new secular bull market.

However, as we wrote last week, a new secular bull market in the entire precious metals sector cannot begin until Gold breaks out against the conventional 60/40 investment portfolio.

Some are concerned that the weak relative performance indicates the bull market is over or that precious metals are dead money forever.

The reality is the secular bull market in precious metals has yet to start.

There are two key indicators to watch.

The first is Gold breaking out against the 60/40 portfolio, while the other is the S&P 500, after years of an uptrend, losing its 40-month moving average.

We plot the S&P 500, Gold against the 60/40 portfolio, and Gold. 

The last two secular bull markets in Gold and precious metals ended 11 years after the S&P 500 reached its secular peak or 10 years after the S&P 500 lost its 40-month moving average (late 1969 and 2001).

Gold and precious metals peaked 9 years and 10 years after the Gold to 60/40 Portfolio ratio began its advance to the breakout.

At present, precious metals are trending higher, as they did with the stock market in the mid 1960s. That is the best historical comparison.

Even if in 2025, we get these bullish signals for precious metals (S&P 500 peaks, Gold breaks out against the 60/40 Portfolio), the secular bull market could last midway through the next decade. If the secular bull in the stock market continues for another 13 months, we could see a precious metals peak in 2036-2037. 

When Gold begins to outperform the 60/40 Portfolio and stock market in earnest, Gold, Silver, and other leveraged plays will soar as fresh capital moves into the sector. 

For now, it is best to position in the quality companies that will lead in the current macro environment. 

Read the full article HERE.

The “King of Bonds” sees the risk of a debt restructuring with global repercussions

IN “THE SUN ALSO RISES”, Ernest Hemingway’s first novel, Mike Campbell, a jaded war veteran and inveterate drunk, is asked how he went bankrupt. “Two ways,” he replies. “Gradually and then suddenly”. America’s government—like Mike, no stranger to serial binges and futile wars—is on its own way to bankruptcy. We have lived through the gradual part. Under the next few presidential administrations, the national debt will mushroom beyond the government’s ability to service it, perhaps even beyond the credulity of the country’s creditors. In the coming years expect dollar debasement, debt restructuring or both.

America’s sovereign-debt spiral has been building since Washington embarked on large budget deficits in the 1980s. As the tab rose from about 30% of GDP towards 100% in the 21st century, the Treasury continued to find willing creditors. The dollar still rules as the world’s reserve currency. Inflation and bond yields tracked lower for decades. And since 2008, under the anaesthetic appellation “quantitative easing”, the Federal Reserve has shown its readiness to print more dollars to monetise away government debt. So why can’t the band play on?

n interplay of forces is going to break the bank. Yields on Treasury bonds fell and fell for nearly 40 years, with the 10-year yield hitting all-time lows in 2020. America has since entered a secular environment of rising interest rates, so the costs of servicing the national debt are rising rapidly. As securities issued at interest rates as low as 0.5% mature, the principal is being rolled into the higher rates of the spot market, at the moment 3.7 percentage points higher. Higher interest expenses feed into deeper deficits, sparking more borrowing, driving heavier debt loads. This is how the debt spiral spirals—unless, that is, lower rates are engineered by the Federal Reserve, which would cause inflation. There will be no road left to kick the can down.

A recession would propel this debt spiral into crisis. The government is running annual deficits approaching $2trn, more than 6% of GDP, even with positive growth and four years of low unemployment. This breaks with the Keynesian bargain which prevailed from the end of the second world war until the middle of the past decade: run large deficits to offset economic weakness, shrink them in times of robust growth. With the deficit at recessionary levels already, the hit to tax revenues in an actual recession would drive America yet further into the red.

As in the past, a recession—or fear of it—should drive investors towards perceived safe havens, including Treasury bonds: a rate-lowering movement that may already have played out. Once confronted with a recessionary decline in tax revenue, the government’s probable reflex would be a return to money-printing. Politicians would borrow more to fund the wider gap, taking for granted debt monetisation by their central bank. The scale of money-printing, however, would dwarf that of past bouts of Fed bond buying. Yields would rise to discount repayment in a depreciated currency.

Let’s run the numbers. Projections to 2034 from the Congressional Budget Office (CBO) assume no recessions, an average primary deficit of 2.6% of GDP, plus 3.6% from debt expense (the latter assuming an effective interest rate on government debt of 3.5%). In the next ten years, under those assumptions, America’s debt-to-GDP ratio would rise from 99% to 122%.

But those assumptions are optimistic. America’s economic expansions after the second world war have lasted an average of 21.8 quarters; the current one has spanned 17. Timing economic cycles is difficult but for the sake of argument, let us accept the CBO’s recession-free outlook. The 2.6% primary-deficit premise, though, is another matter. Since the financial crisis of 2007-2009, it has averaged 4.9%. As for the effective rate, consider 3.5% a rosy view. Rates of 6% are certainly within the experience of the past 30 years; for a world breaking with past inflation norms, 9% is not unimaginable.

In either case our debt-spiral model, assuming nominal growth stays the same, shows this situation compounding into fiscal catastrophe. By 2034 debt service at 6% rates would consume 45% of all tax revenue; at 9% rates it would eat up 83%. The budget deficit would balloon from 6% of GDP to 11% or 18%, respectively. These numbers imply debt-to-GDP ratios of 147-184%. The Penn Wharton Budget Model has shown that debt loads of 175-200% would be sustainable only under the most favourable assumptions, and a belief that Washington will prevent the debt burden from rising further. “Once financial markets believe otherwise,” says the research group, “financial markets can unravel at smaller debt-GDP ratios.”

Something will surely give before such hypothetical nightmares play out. Earlier this year, the CBO itself and the International Monetary Fund issued their own explicit warnings. Phillip Swagel, the head of the CBO, even warned that the “unprecedented” escalation of America’s debt bender risked a kind of market reckoning that curtailed the government of Liz Truss, briefly Britain’s prime minister.

President-elect Donald Trump’s plan for a Department of Government Efficiency (DOGE) led by Elon Musk and Vivek Ramaswamy is the most encouraging sign I have seen of a fiscal awakening in Washington. I doubt DOGE will touch the entitlements, where much of the imbalance lies, but let us hope this begins a trend in the right direction.

When external pressure at last forces America’s leadership into hard choices, I believe the first move will be dollar debasement. Congress may one day impose taxes on assets—ineffective but gratifying to some. And there is the real possibility of a quasi-default by the Treasury, through debt restructuring beyond what today’s consensus would dare to contemplate. In the upheaval to come, few are likely to be spared.

Read the full article HERE.

–The economy is doing “exceptionally well” as President-elect Donald Trump gets ready to enter the White House, said Moody’s Analytics chief economist Mark Zandi.

–But, Zandi added, “I do think there are some potential storms coming.”

The economy is doing “exceptionally well” as President-elect Donald Trump gets ready to enter the White House, according to Moody’s Analytics chief economist Mark Zandi.

Zandi, speaking at the Consumer Federation of America’s financial services conference on Wednesday, noted some of the glowing areas: Gross domestic product has been growing at around 3%, productivity and business formation rates are strong and the stock market is up.

“The economy can weather a lot of storms,” Zandi said.

But, he added, “I do think there are some potential storms coming” next year under the new administration.

Immigration policy, tariffs could affect economy

Zandi expects Trump to act quickly on deporting immigrants and implementing tariffs, two moves that could have profound impacts on the U.S. economy.

“I believe President Trump is going to do what he said he’ll do on the campaign trail,” Zandi said. “He’s going to be quite aggressive in pursuing the policies.”

Immigration has played a big role in the economy’s strength, Zandi said.

Others agree. “Recent immigrants have flowed disproportionately into the parts of the labor force that were particularly tight in 2022, contributing to labor supply in places where it was most badly needed,” Goldman Sachs analysts wrote in a note to clients in May.

Meanwhile, tariffs create “a whole lot of uncertainty for businesses,” Zandi said. As a result, they could lead to job losses.

Tariffs are also likely to impact people’s spending, he said.

“It’s going to mean higher costs for consumers, it’s a tax increase,” Zandi said.

Trump’s universal tariff proposals could cause prices to skyrocket on clothing, toys, furniture, household appliances, footwear and travel goods, according to a recent report from the National Retail Federation.

Trump has said he would impose a 10% or 20% tariff on all imports across the board.

The NRF found that the impact of the tariffs would be “dramatic” double-digit percentage price spikes in nearly all six retail categories that the trade group examined.

For example, the cost of clothing could rise between 12.5% and 20.6%, the analysis found. That means an $80 pair of men’s jeans would instead cost between $90 and $96.

These new prices would squeeze consumer budgets, especially for low-income households that spend triple as much of their monthly budgets on apparel as high-income households spend, according to the Bureau of Labor Statistics.

Read the full article HERE.

Gold could extend its record run into 2025 as further interest rate cuts from major central banks and the prospect of a weaker dollar will boost demand for the safe-haven asset, Heraeus Precious Metals said on Tuesday.

Heraeus expects gold prices to range from $2,450 to $2,950 per ounce in 2025, influenced by continued buying by major central banks, albeit in lesser quantities than in 2024, geopolitical risks in Ukraine and the Middle East.

Gold, often used as a safe store of value during times of political and financial uncertainty, tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding the non-yielding asset.

“If the Chinese government’s economic stimulus measures boost the economy, China and India could provide a solid basis for gold demand in 2025,” the company said in a report.

China’s central bank resumed buying gold for its reserves in November after a six-month pause, official data by the People’s Bank of China (PBOC) showed on Saturday.

“With the return of Donald Trump as US president, there is likely to be more uncertainty regarding trade and tariffs, which should also support the gold price,” said Steffen Metzger and Stefan Staubach, who have been leading the precious metals division of Heraeus.

Gold has surged more than 29% this year and is on track for its best annual performance since 2010, driven by central bank interest rate cuts and growing geopolitical tensions.

Heraeus further noted that industrial demand for silver is expected to surge, propelled by the continued growth in solar photovoltaic demand.

The current gold-silver ratio indicates silver’s undervaluation compared to gold, suggesting that silver may outperform gold in late bull markets, with expected prices between $28 and $40 an ounce, the report said.

The platinum market is projected to remain in a deficit in 2025, the report said. Despite rising demand from the automotive and industrial sectors, Heraeus anticipates that platinum prices will remain within the $850 to $1,220 per ounce range.

However, the report underscores that demand for palladium, which is heavily dependent on the automotive industry, might decline as internal combustion engines lose market share to electric vehicles.

This shift could exert downward pressure on palladium prices, with Heraeus projecting a price range of $800 to $1,200 per ounce.

Read the full article HERE.

A Geopolitical Commentary

Gold has long been considered a crisis hedge and a store of value in the face of global volatility, market uncertainty, and economic distress. As we move toward year-end, a confluence of geopolitical factors has aligned to increase gold’s risk-off appeal creating an ideal buying opportunity for the world’s favorite safe haven.

Geopolitical Futures defines geopolitical risk as.

“… the potential political, economic, military, and social risks that can emerge from a nation’s involvement in international affairs. Typically, they emerge whenever there is a major shift in power, a conflict, or a crisis. These risks can have far-reaching implications for both the country itself and the global community at large. There are many factors that can contribute to geopolitical risks, such as a nation’s economic stability, its political relations with other countries, and its military strength.”

The Russia and Ukraine War

On February 24, 2022, Russia invaded Ukraine in a major escalation of Russia-Ukrainian War which started in 2014. Global aid to Ukraine has now reached a staggering $278 billion. As of the end of September, nearly $183 billion had been appropriated by the United States.[1] Meanwhile, the war has cost Russia about $211 billion[2] along with 200,000 casualties and half a million wounded.[3]

The war has also contributed to global instability and worldwide inflation by disrupting supply chains, damaging agriculture, and destroying infrastructure. According to the International Monetary Fund, the war has specifically undermined efforts to address extreme poverty, food insecurity and environmental degradation.[4]

The war has also resulted in an historic shift in the global energy markets.

“Any American around at the time will likely remember the 1973 oil embargo. That’s when Arab oil producers cut exports to the U.S. and other nations in retaliation for support of Israel during the Yom Kippur War. Gas stations ran dry. Prices skyrocketed. And the U.S. economy flattened. It also created a profound and permanent shift in energy markets as nations looked for new suppliers beyond the Middle East. Now, Russia’s invasion of Ukraine has created another major shift in energy.”[5]

This shift has injected extreme uncertainty into the energy market and increased price volatility. And according to Control Risks, a global risk consultancy, “greater disruption to both oil product and crude oil markets is credible if Ukraine further improves its drone capabilities and Russia fails to boost its air defences.”[6]

The Israel and Hamas Conflict

The U.S. has spent an estimated $23 billion on the Israel-Hamas conflict which started on October 7, 2023 after Hamas attacked Israel killing some 1200 Israelis and taking hostages. $17.9 billion has been to support Israeli military operations.[7] Israel has spent over $26 billion to fund the war against the terrorist group.[8] The cost of the war has caused Israel’s economic output to plummet 5.6%, the worst of any of the 38 countries in the Organization for Economic Cooperation and Development.[9]

The Associated Press reports the following:

Israel-Hamas War Statistics

Internationally, the war has resulted in economic disruption, political realignment, new military vulnerabilities and a host of strategic challenges for the region reminiscent of the painful challenges of the past with Iraq and Afghanistan.[11]

And according to the Congressional Research service, the humanitarian toll has been simply staggering:

“About 90% of Gaza’s some 2.1 million residents have been displaced, with most facing unsanitary, overcrowded conditions alongside acute shortages of food, water, medical care, and other essential supplies and services. Obstacles to transporting aid through crossings and Israeli checkpoints and then safely delivering it have contributed to high levels of food insecurity.”

South Korean Martial Law

On December 3, 2024, the president of South Korea, Yoon Suk Yeol, declared martial law citing a threat from “anti-state” forces. It was the first time martial law had been declared in the East Asian country in over 40 years when a coup was carried out after the assassination of President Park Chung-hee back in 1979.[12]

The move plunged the nation of almost 52 million people into a national crisis. The martial law declaration by President Yoon was met with fierce backlash, condemnation and calls for reversal. Yoon did reverse the edict after just six-hours but then faced immediate calls for impeachment. While the vote for his removal from office failed, South Korean authorities have opened an investigation and are weighing possible insurrection charges against Yoon. According to CNN World, the president’s future is precarious at best

“While Yoon survived an impeachment vote in an opposition-led parliament on Saturday, his political survival now hangs in tatters. The travel ban on the country’s embattled leader was confirmed by the Corruption Investigation Office on Monday. His party previously said they will seek Yoon’s resignation and urged the president to be suspended from duties to protect the country from ‘grave danger.’”

The crisis has caused stocks on the Kospi (The Korea Composite Stock Price Index) and the South Korean won to collapse to levels not seen since 2009. As officials in Seoul are working frantically to prevent a market meltdown, the country is confronting deep political uncertainty and a period of prolonged volatility.

South Korea’s sudden instability threaten global tech supply chains, particularly for critical technology exports.

“As a major producer of memory chips, displays, and other critical tech components, South Korea plays an essential role in global supply chains for products ranging from smartphones to data centers …  South Korea’s semiconductor ecosystem, driven by industry leaders like Samsung and SK Hynix, is a cornerstone of global technology supply chains. Its dominance in critical areas like memory chips makes it indispensable to industries worldwide.”[13]

The Toppling of the Syrian Government

After ruling Syria for 50 years, the Assad regime was toppled on December 8, 2024. After just two weeks of fighting, rebels converged on Damascus and seized control of the capital virtually unopposed — as Syrian leader Bashar al-Assad fled to Moscow. 

The Assad Regime Ended on December 8, 2024

“Three decades after his rise to prominence and almost a quarter century of rule, Bashar is gone and so is the Assad dynasty. Almost incomprehensively swept away over a two-week period during which the Islamist rebel group Ha’yat Tahrir al-Sham (HTS) and its partner, the Turkish-backed Syrian National Army (SNA), swept out of Idlib province to seize the country from Bashar who barely managed to put up a fight after his Russian and Iranian allies abandoned him.”[14]

But the sudden, collapse of the Assad regime raises fears of a power vacuum in Syria and the possibility that the country could fall into the hands of terror groups. Indeed, Abu Mohammed al-Golani, the leader of the largest of the rebel factions is a former al-Qaeda commander.

According to The Hill:

“al-Golani is promoting himself as a pragmatic, political leader and extending assurances for Syria’s multiethnic and religious populations. These promises run in direct contrast to the violence and human rights abuses carried out by the Islamist groups he aligned with in the past, such as ISIS and al Qaeda.”[15]

The collapse of the Syrian government has thrust the Middle East into even greater uncertainty. While Bashar al-Assad was a notoriously brutal dictator, the rapid collapse of his regime has left little time to for the country to chart a path forward. Syria’s economy contracted by 85% during its civil war, (which started back in March of 2011) and most of the country’s infrastructure has been destroyed. Inflation in Syria is in the triple digits and their economic recovery will require significant and ongoing support from the rest of the world.[16]

With war still raging in Europe, ongoing conflicts in the Middle East, and a new leadership crisis in South Korea and Syria — the world order seems to be fraying before our very eyes.

Gold is a Global Crisis Hedge

Gold thrives in a chaotic world as prices have historically increased during times of pronounced global uncertainty. As the world economy becomes increasingly more fragile, physical gold will become increasingly more attractive and look for prices to rise on unprecedented safe haven demand.

Thor Metals Group, was voted the “Best Overall Gold IRA Company” of 2024. For more information on acquiring gold or any other investment grade metal, call 1-844-944-THOR to speak to a precious metals expert.

[1] https://www.ukraineoversight.gov/Funding/

[2] https://www.defensenews.com/pentagon/2024/02/16/ukraine-war-has-cost-russia-up-to-211-billion-pentagon-says/

[3] https://www.economist.com/briefing/2024/11/28/the-war-in-ukraine-is-straining-russias-economy-and-society

[4] https://www.imf.org/en/Publications/fandd/issues/2022/03/the-long-lasting-economic-shock-of-war

[5] https://www.npr.org/2023/02/28/1160157753/how-russias-war-in-ukraine-is-changing-the-worlds-oil-markets

[6] https://www.controlrisks.com/our-thinking/insights/ukraine-war-remains-potential-disruption-to-energy-markets

[7] https://watson.brown.edu/costsofwar/papers/2024/USspendingIsrael

[8] https://www.timesofisrael.com/a-year-of-war-saps-israels-borrowing-strength-while-costs-balloon/

[9] https://apnews.com/article/israel-hamas-hezbollah-war-cost-military-spending-32a53a86d946418022ca636539a83f4f

[10] https://apnews.com/article/israel-palestinians-hamas-war-anniversary-statistics-e61765035c725b3c8d4840e2bab565cd

[11] https://www.wilsoncenter.org/article/five-global-dangers-gaza-war

[12] https://www.csis.org/analysis/yoon-declares-martial-law-south-korea

[13] https://www.cio.com/article/3617847/south-koreas-political-unrest-threatens-the-stability-of-global-tech-supply-chains.html

[14] https://www.cfr.org/expert-brief/after-fall-assad-dynasty-syrias-risky-new-moment

[15] https://thehill.com/policy/international/5030921-who-is-abu-mohammed-al-golani-leader-syrian-rebels-who-toppled-assad/

[16] https://www.dw.com/en/syria-after-assad-whats-next-for-the-devastated-economy/a-71003751

Gold rose after China’s central bank added bullion to its reserves for the first time in seven months, and the collapse of Syria’s ruling dynasty further destabilized the Middle East.

Bullion climbed as much as 1%, after the People’s Bank of China said Saturday it bought 160,000 fine troy ounces last month. That was the first addition since April, which was the end of an 18-month run of purchases that had helped underpin prices.

The resumption of buying shows the PBOC is still keen to diversify its reserves and guard against currency depreciation, even with bullion near record high levels. Still, the volume it bought — about five tons — was relatively small compared with monthly additions earlier this year.

Market watchers also tend to be skeptical about the accuracy of declared Chinese central bank gold purchases.

“I take the Chinese six-month ‘pause’ with a pinch of salt,” said Rhona O’Connell, head of market analysis EMEA & Asia at StoneX Group Inc. “It is public knowledge that the PBOC has a history of reporting no purchases and then declaring a massive quantum leap in recorded holdings.”

Traders were also monitoring developments in Syria, after President Bashar al-Assad fled as rebel troops captured the capital Damascus. US airstrikes hit dozens of Islamic State targets in the central part of the country on Sunday as President Joe Biden cautioned that Assad’s downfall could lead to a resurgence of Islamic extremism.

“The government’s collapse in Syria could see haven demand flowing in,” according to ANZ Group Holdings Ltd. “The latest November nonfarm payroll confirms that rebalancing continued in the US, which will continue to support the Fed’s easing bias.”

Markets are focusing on the US consumer and producer-price reports due later this week, which are expected to show little increase in inflation pressures. The figures are among the last key indicators before the Federal Reserve’s meeting next week — its final policy decision before Donald Trump takes office in January. Treasury yields have drifted down as traders boosted wagers on another rate cut — a scenario that tends to benefit gold as it does not pay interest.

Gold soared to an all-time high above $2,790 an ounce in October, supported by the Fed’s pivot to monetary easing, as well as increasing haven demand on heightened tensions in the Middle East and Ukraine. Prices have eased since then, but remain 29% higher this year.

Spot gold rose 0.9% to $2,656.72 an ounce as of 12:19 p.m. in London, following a 0.4% decline last week. The Bloomberg Dollar Spot Index was steady, while silver, platinum and palladium all posted strong gains.

Read full article HERE.