Are You Ready For A Bull Market For Gold And Silver Miners, New Mine Developers With High-Quality Projects And Explorers With Important Discoveries?
It is going to be an interesting week with President Trump picking a fight with the Fed, demanding that they cut rates aggressively as they are about to pause their rate cutting cycle. I would love to listen in on the conversations happening between President Trump’s people and the Fed, as well as be a fly on the wall at the Fed meetings.
President Trump wants much lower rates, so he can spend, spend, spend. Meanwhile the Fed is worried about the economy slowing down and their inflation models falling apart as it looks like inflation is going to pick up.
The Fed likes to say they are data dependent, but there is something brewing that will make them need to try to predict the future instead of waiting for the dots to plot. Since President Trump was inaugurated, the deportations have started, and it is causing migrants to start getting out of the country and avoiding work and shopping at retailers.
This will have a significant impact on the economy at a time when it is already coming in softer than the Fed is comfortable with. They can talk about the farcical economic numbers suggesting that the economy is strong. But, in their December meeting when asking the committee members for their forecasts on economic growth in 2025, they predicted that it will be much less than inflation.
They are predicting stagflation in 2025, and the fact of the matter is that in the real world outside of the manipulated government statistics, it is already here. The voters live in the real world and showed up at the polls to say they aren’t happy with the jobs market, the economy and inflation.
President Trump’s deportation efforts are having an immediate impact with migrants being deported, not showing up for work in fear of meeting ICE agents and staying home from shopping. This will have an immediate impact on the economy.
It will cause a slowdown that will happen in real time, it will also cause inflation as businesses will have to increase wages, if they can find workers. It will put pressure on businesses that rely on low-wage migrant workers and retailers.
At the same time, trade wars using tariffs will also drive inflation higher and put added pressure on businesses. Be careful what you ask for because you will get it as President Trump forges ahead with deportations and tariffs. And it isn’t a good thing for the economy and inflation.
Stagflation is not just an American problem, it is a worldwide problem. Astute investors see the writing on the wall and drove gold to a series of record highs in 2024. Silver is about to join in because stagflation is extremely bullish for both gold and silver.
Also driving gold to several records in 2025 is the Death Spiral of Debt. That won’t get better because President Trump is not coming forward with concrete plans to cut spending, while the debt ceiling has been passed. If anything he wants the debt ceiling eliminated so he can spend more than he did in his last term.
In his last go-around, not only was his spending out of control, but he did it with extremely low interest rates. This time the debt is so high, and with the current interest rates where they are, it has made the cost of servicing the debt a major problem.
The government and Fed can play the smoke and mirror games with the highly manipulated government statistics, but that doesn’t change what is happening in the real world. The economy is soft and will likely get weaker very quickly due to deportations and the threat of it that will drive migrants out of the country. Plus, tariffs will have the same effect.
The reality is that the debt is extremely high, as is the cost of servicing the debt. Inflation was a growing problem even before President Trump got into office as witnessed by the bond vigilantes driving up yields. They are going to have a lot more inflation to worry about as a second wave comes to a theatre near you very quickly.
President Trump is and will continue to fight with the Fed and demand lower rates. They are between a rock and a hard place. They are worried about the economy slowing and inflation picking up, as they should be.
They are caught in a damned if they do and damned if they don’t predicament. Keep cutting rates to spur economic growth, which will also encourage spending like drunken sailors by the politicians and further increase inflation. Or don’t and throw the economy and workers under the bus.
I’m sure Fed Chairman Powell will have a spin for his press conference after they decide to pause the rate cutting. But, I have a feeling market participants in the currency market and stock market may take his pitch as a sign the Fed is behind the curve on inflation, jobs and the economy, while dithering as they await dots to plot.
In the real world, the Death Spiral of Debt, and costs of servicing the debt, plus the stagflation problems are all very bullish for gold and silver.
What is lost on practically every generalist investor is that not only are gold and silver going much higher in 2025. The price of gold and silver in the ground, as witnessed by the valuations of miners, new mine developers with high-quality projects and explorers with important discoveries are at record lows.
Gold is perfectly positioned to set a new series of record highs in 2025. Silver is a coiled spring that is ready to go much higher in 2025. But, what will shock generalist investors is how quickly gold and silver miners, developers and explorers can come out of their funk and leave their historically low valuations in the rear view mirror.
All the best,
Allan Barry Laboucan
