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Cannot stop talking about the precious metals right, So we're seeing some signs of moderating here this morning. But the size of the losses that we have seen in precious metals and silver, gold, copper is one really for the history books. So let's talk more about it and where things might be headed with James Steele, chief Precious Metals analyst at HSBC. He joins us live in our Bloomberg Studios. James, good to see you. Happy Monday morning to.
You, Thank you, good morning.
So is this just really about this gold and silver trade being too crowded and people were just trying to try to get out or is there something else going on here?
Well, I think you've effectively hit the head on the nail for the immediate reason. I mean, any commodity that has this parabolic rally that gold and silver had and the new entrance into the market, which way they were flooding in and have been for many, many months now.
It really does invite a volatility and be profit taking stroke liquidation on any news or developments that run counter to gold, and we had a couple of them within a few days, and it really did give us a big and deserved, I think correction in both gold and silver.
James, you've been at this precious metal game for decades now. Just put into context the volatility both on the upside and then the downside. On Friday, there's handful of daysaw, just extraordinary volatility.
Just put that into context.
Well, yes, you're right, and uh it's extraordinary and a bit so and so was a rally. Yep. You know, we were talking about gold made a fifty four I think new highs last night, and people were talking about a new high and new high and I always cautioned everybody. I said, look, it's not a new high until we go above in real terms what it was in nineteen eighty.
In January of nineteen eighty, gold hit eight hundred and fifty dollars an ounce, and that's about thirty four hundred dollars in today's There you go, And they did that in April last year, and then I said, Okay, now we can genuinely talk about a new high. We can genuinely talk about a real rally. And the difference between now and seventy nine was a limited number of buyers at that time, a hunt Brothers, especially in silver, but also a much more broad based church this time, a
lot of lot a lot in it. But the volatility, nonetheless, and to look at it this way, we had a swing in a couple of days that was equal to the absolute number that gold was trading at when I started covering it.
Wow, that put it in perspective, right, So you know, it's just when you look at where we've come. I mean, gold top fifty five hundred dollars announced last week, it's now at about forty seven to fifty. I guess spot gold. Silver wiped out thirty percent of its value in just three days. Do you have a target for gold by the end of this year, because for many who had their target at fifty five hundred, well, it already blew past that in just the first month.
Yeah, are high for the rest of the year is fifty five. We have an average which is almost where it is now, and we're expecting a very wide range. A good news could take us down closer to the four thousand dollars level. But what we think will likely the research view is that we have a moderately softer dollar this year according to our effects people who've been aready bang on on that. And also we would I think very likely see a resumption in a greater central
bank buying. I mean, they are the ones that kicked off the genesis of this rally back in twenty twenty two. If you look at it this way, in twenty two, twenty three, twenty four, almost one out of every three ounces of gold that came out of the ground went into a central bank vault, double or triple the average for the previous ten years.
That's incredible.
Yeah, truly.
So I think about a commodity.
Let's just take oil prices spike up, they start drilling holes in Texas.
What happens when you see gold just spike up?
I mean they don't start digging more mind No, well not in the near term.
You know.
Again, when I first started covering the markets, by the time a group of geologists said I think there's some gold here, to the time when it went round your finger, your neck, it was about ten years wow, exploration, permitting, et cetera, et cetera. It's closer to twenty now. It takes a very long time. You know, it's highly capital intensive and the low hanging fruit has been picked. So
we're going into into different regions and areas. What is flexible is recycling because gold, unlike oil and grain, is never consumed. It's stored somewhere. It's either around your bank or on your neck in a central bank vault and a vault some other place, and a bar and a coin, and that's what can be mobilized at fairly short Now. What we've noticed is that we haven't seen the response on the recycling side. It is higher, there's not as high as I would have expected. And it's rather like
owning a home. If the market keeps going up, you may refrain from putting your flat on the market, but when it comes down a bit, you might then say, okay, maybe we've hit the high I should sell now. So we may see a pickup in recycling.
You know, I just wonder, I mean, outside of just of investors, what is the larger impact on the economy, the fact that we have gold prices and we do use gold in different ways every day. Gold and silver prices being as high as they are, even despite the pullback we saw recently, they're still relatively high. What is that impact on the broader economy.
Well, it has been good for jewelry, simply put. A jewelry is often about fifty percent of physical gold demand. We calculate that last year it was only thirty five percent. It's been down double digit. Also there's a reduction in coin demand. But generally speaking, gold does not have huge macroeconomic impacts. It reacts to macroecerdomics. It doesn't set It's not like oil. It doesn't set the stage. It reacts
to the stage. And that's why you know, you've got to pay attention because the gold price, let's tell you that there are geopolitical or economic risks. It doesn't they may not materialize, but right, you know, the geopolitical risk index is fairly high and persistently high.
All right, folks.
G LCO that is the function of the day, gives you all the global commodities. You click on the metals and then it breaks it down between base metals, ferris metals, and precious metals.
So there you go.
That's the function you need to be on top of what's happening in the world of commodities.
James Steel, thank you so much. We appreciate it.
James's chief Precious Metals analyst at HSBC. Whatever we see big moves in precious metals by far. The first phone call we go out to is to James Steele, and he's kind of to give us some of his time there.
Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay, Android Auto with the Bloomberg Business Up, or watch us live on YouTube.
The alexis Christopher sitting in for Tom Keena Paul Sweeneyer live here in our Bloomberg Interactive Brokers studio, streaming live on YouTube as well. I can see one of the other networks that Polsted Tiny Field. The Beast is out, so I just I'm not sure if the Beast has seen its shadow or not. We'll bring that to you as that news breaks. Let's get back to these markets here today. Madison Faller joins US Global investment strategists at
JP Morgan Private Bank, located in London Madison. Twenty twenty five great year for equity markets. The US equity markets did really well. A lot of markets outside of the US did even better. How are you thinking about global equity stock.
Price performance in twenty twenty six?
Sure so, I think you know. Of course, twenty twenty five was an incredibly strong year for markets broadly and also for XUS, outperforming the US, which is not something that we always see. As we look forward into this year, I think it's another store where we are very much focused on being globally diversified.
We still do believe that the US should.
Remain the core of portfolios, given the access to growth in technology and potential productivity gains that it can provide. But at the same time, we are also seeing a world where national champions across different regions are also growing in increased focus, especially as it's underpinned by fiscal stimulus efforts, and that's also starting to show through into the earnings
momentum as well. So I expect a continued narrowing of the gap between the US and the rest of the world, especially when it comes to earnings growth.
Heading into this.
Year in Madison, we keep talking about broader market participation with our guests and we're seeing more and more of it. Which sectors regions are sort of your top pick outside of the usual big tech names.
So when we look across the market, there are a few different things that I would call out, and I think that different regions are showcasing that they have different strengths that.
They can offer.
So in the US, yes, you mentioned we do like big tech, but I do think that there's a broadening out beyond that where we want to be focused on the entire AI ecosystem, so not just the hyper scalers, but the entire AI value chain, from the hardware to the software, to power to data center infrastructure. But you're also seeing support within the US around financials and a catchup from healthcare, for instance.
In Europe, I think it's very.
Much a focus on energy security, on defense, we do know that spending continues to become unlocked in that area.
When it comes to emerging markets.
You know em can't be I think painted with one broad brushstroke, but there's certainly a lot of opportunity there where it be broad broad India, which is a focus of ours in addition to China Tech, and I would also call out Taiwan and Korea as well in terms of areas of focus within Asia.
Breaking news here Hawks of Tony Phil predict six more weeks of winters to be no surprise, although two of my offspringer in California and they both are texting me like from the.
Beach, from the golf course.
Well that's just NaSTA, this is me, Yeah, Madison, talk to us about the bond market again. Fix income results in twenty twenty five for were really really solid.
How do you think about opportunities to fixing come in twenty twenty six.
What I think about fixed income, I think what I would be looking for are carry like returns. I think that now that we have most developed world central banks that are wrapping up their easing cycles, I do expect that bond yields will stabilize around these more elevated levels. And as a result of that, I think that we can expect to you know, clip that carry as we
move along. Of course, if we were to be in a more downside growth scenario, bonds could offer protection, but I think at the you know, the flip side of that is that if we do see more inflation volatility, bonds might not be enough, which is why we're very much focused on complementing that with real assets like infrastructure and commodities like gold.
Especially on the pullback.
What are you doing with this gold trade right now? That, I mean, it went up so fast? I guess we shouldn't be too surprised, Paul, right that it's violently the violent move to the downside. But do you if you have gold, do you stick with it right now? Do you just hold if you're not in it, do you forget the fomo and stay out for now?
What do you do with gold?
We're buyers here.
I think that this pullback offers another you know, re entry point for investors, especially if they aren't allocated already. For those that are allocated, we we'd certainly be holding those positions.
Uh.
And I think you mentioned mentioned it.
Uh.
You know, I think there's a you know a little bit of a sentiment driven effect that's you know driven driven prices lower over the course of the last few trading days. But I think the you know, structural drivers very much remain in place, whether that be this continued uncertainty premium, whether that's debt fiscal whether it's you know, do youolitically driven, But at the same time, we know
that there's a lot of central bank buying. Retail buying is also not I think, to elevate it and remains below twenty twenty highs that we saw during COVID, So I think the seeds are still there. We'd certainly be buyers, and we actually just recently moved our targets higher north of six thousand Madison.
We're just kind of right smack in the middle of earnings here. I guess to date they've been pretty solid. What are you taking away from earnings and what do you think the market needs to see from an earnings perspective here?
I think the market needs to see that corporations can continue to you know, push through a lot of the unknowns that we've seen take place. It's certainly over the course of the last year. And so I think for me it's more, you know, whether or not they can
really continue to show that resilience. We are looking at Q four looking to produce, you know, just under twelve percent year of year earnings growth, which is yet another quarter of double digit profit growth, which is really meaningful, and on top of that, we're all so seeing that profit margins are especially resilient and are historically high, so we're looking to see whether that continues to be the case.
But the second thing that I would also point out is, you know how this continues to broaden out between sectors.
So we know that the earnings growth.
Gap between you know, the big tech, you know players of the world and the rest of the market was still quite wide and twenty twenty five, even if it narrowed a bit, we're looking to see if that continues to narrow and so far that that does seem to be the case, with other sectors certainly starting to participate more.
I have exciting news. I'm looking at my weather app and it's hit double digits. So here in midtown Manhattan it is now of bolly twelve degrees. Madison, what is it like by you? Are you in London?
I'm in London and it is cold and dreary and rainy, And I must say, I'm originally from Florida, So when you're talking about the weather and you know, pictures of sunshine, that's something that I certainly miss and I see from all my family members.
You're also a graduate of the University of Notre Dame. So you're no stranger to like harsh Winters, right.
Correct, correct, I felt all the climates.
Madison, thanks so much for joining us.
Appreciate it as always, Madison follow Global Investment Strategist JP Morgan, Private Bank.
Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Apple Karplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
We're joined now by Joe Davis, Global Chief Economists at Vanguard.
Joe, I want to start with our feder Reserve.
We've had a lot of news over the last week the Federal Reserve kind of staying pat with their rates, but now we have the nomination of a new FED chair. I love to just kind of get your you know, FED thinking these days from at that thirty thousand foot level.
Well, again, I think it's really a good choice just from what I know of just pass track records, and our view was that the Federal Reserve, you know, may ease once in twenty twenty six, but it would be GDP growth that could eventually add a little bit more half to labor market, which is pretty much stalled, and so I think we'll see that over the course of this year. Again we could have surprises on the jobs front. But again overall, plaud and I think the financial markets would agree. Joe.
I want to talk a little inflation in twenty twenty six. Last week we got a backward looking number as we continue to play catch up from the government shutdown. We got the December producer price index and inflation at the wholesale level was hotter than expected. What are your expectations for inflation this year? And I wonder if the tariff passed through is now behind us, because I don't nobody's really talking about it anymore.
I know, I know, well again it was delayed, was never dead. The tariff passed through, and so we should see some moderation and inflation. So the progress should be good yet frustrating. You know again, that's not you know, that's certainly our view, it's it's others view. I think as well. It's been stubborn inflation. It's almost five years
above target. And again I applaud Kevin worse I think he's pointed to the fact that we found in our research fiscal easing or easy physical conditions have some modest boost on inflation. I think that's one of the reasons why it's been suffered.
What is your call about inflation going forward here? Because again it's been persistent sticky. One could argue that this one big, beautiful bill may result in maybe even pushing inflation a little bit higher.
How do you think about that?
Well, I think what will happen in twenty twenty six is going to be the key just you know, tension for the next three years, and that is can AI and some of this productivity events as we've seen, be a relief valve on inflation versus if we don't have those sort of dividends, you're going to have, you know, some some fiscal based price pressures. That really is the tug of war we see, not just for this year.
This year it's more modest, but is your bold enough to look out two or three years That is the tug of war. Can we get lower inflation with high growth or the inverse? That is clearly when I think the goal prices versus tech stocks point too on any given day Joe.
Growth at four percent is pretty darn solid. Is it sustainable though? For the rest of the year.
Well, I think we have some someone off. So we obviously had some trade you know, volatility that boosted the current numbers up. But our view was for twenty twenty six remains intact, and that is we could have economic upside from the US economic perspective, really driven at the margin by greater business investment and resilient consumer. You know, we were talking about, you know, the risks above two. Now we're clearly above that. We will see some moderation.
But our our thesis of economic upside despite market froth, which gives us some concerns, that that core message remains intact.
Hey, Joe, the labor market, I guess you know, one could call it resilient.
Doesn't seem to be a lot of hiring, doesn't seem to be a lot of firing. Maybe that's okay. How do you think about the labor market.
Well, again, we've had supply and demand moved down in locksteps, so clearly there's been a coin from a hiring perspective, But we have one of the one of the deepest labor market signals in the world. Given our four one k record keeping surface, you know, millions of real time we can see in real time how many are being hired let go, and also their wage increases. And so what we see is is affirming at a low level.
Wage growth is stronger than employment growth. And if we're right, we should see a little bit greater, bigger in the labor market in the back half of the year. But we're not out of that yet. I mean, we are prepared to see in some month a modest negative non farm payroll that's that break, even with the supply having coming down, so that I think could be a you know, some market nervousness. You could see a federal reserve easing
into that, you know, between now and the summer. But if you're bold enough to look past that, we see some firming in the labor market.
Joe, thanks so much for joining us.
Really appreciate getting a few minutes of your time. Joe Davis, he's global chief economist at Vanguard Group.
Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am. Eastern Listen on Apple Karplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Lexus Christopher sitting in for Tom Keene this morning on Paulsweeny. We live here in our Bloomberg Enrector Broker studio in New York City. We're streaming live on YouTube as well.
Well.
The US government stumbled.
Into a partial shutdown while waiting for the House to approve a funding deal. President Donald Trump worked out with Democrats to get the latest reporting from what's happening down there in DC.
We go to Henrietta.
Tres co founder of Veda Partners. Henrietta, when are we going to get this government this partial shutdown partially re opening?
Yeah, that might be what it is, a partial, partial reopening. We are looking at votes tonight in the Rules Committee around four o'clock. Maybe movement on the House floor around six pm at the earliest. But Speaker Johnson is setting the table for Tuesday votes, so it's going to be a little while yet. I think we are on a path towards reopening, but you should expect some drama on and off today.
So what's the sticking point here? Henriette is it's still about immigration, ICE and how the White House is dealing with all of it.
Yeah, definitely, And I think more than just the technicals and the policy will fight that fight for the next two weeks over masks and IDs and videotapes and stuff for all the ICE officers. But right now, it's really about the House Democratic Conference getting socialized the idea that they're going to need to provide quite a lot of
votes to this, and Speaker Johnson accepting that. So Leader Schumer and President Trump were able to negotiate a deal that would work on the Upper Chamber, but now you know the House has to weigh in. What I look at from the inside is where members who are not Hakeem Jeffries are. Where not on the far left, you have guys that are stalwarts in DC like Steady Hoyer and Jim Clyburn saying that they want to support the bill,
and they're encouraging their moderate members to do so. I suspect you'll see, much like in the Senate side, a good chunk of bipartisanship to get this over the finish line later on this week.
Henretta, I believe the polling suggests that most Americans do not approve of the tactics Ice is employing here. How does that translate into, you know, what some of these Republican members of Congress do in terms of maybe this vote and maybe pushing back on some of the other president's agenda items.
Where do we stand there?
Yeah, it's it's amazing. Everything is just broken right now. So you can't just say up and down this is a red versus Blue issue or a D versus R issue. You have members up for reelection in Texas who saw a thirty one point swing in a state Senate seat just this weekend.
That's crazy town.
So you start to then fracture what would otherwise be a unified Republican or Democratic base. President Trump is going to do some serious arm twisting on I would say at least thirty forty members of the Republican Party to get them on board with this package. And on the Democrat side, you're going to have to see a lot of movement into the realm of being willing to negotiate with Speaker Johnson and with the White House.
So it's the wild less out there right now.
I just want to broaden this and go international for a moment. Henriette. Because things are heating up here. It's worrying between Iran and the US. I know that over the weekend around Supreme Leader warned the US of what he called a regional war. He said, quote, the Americans should know if they start a war this time, it will be a regional war. Talk to us a little bit about that, and where do things stand right now?
Yeah, I mean, military advisors will tell you that that's a posture that must take on domestically because they do not have the firepower to go against the United States one on one, so they need to turn it into a regional theater. And what has occurred obviously as a result, because so many folks in DC, myself included, are worried about escalation on the military front, some sort of kinetic event where we are in Iran or somewhere nearby.
We know the USS Abraham Lincoln is in.
The region prepared to do what it was not prepared to do, you know, a week or two ago.
So things have absolutely escalated.
But the United States Senate already has members who are out there trying to put a war powers resolution on the floor to limit the president's ability to go you know, to the next level with Iran. So I think there's going to be a sustained push that the president can't avoid. He doesn't get to just act in a vacuum here like perhaps was the case with Venezuela. Now members are very keen to what's going on. They do not want to see another regional war in the whole of the
Middle East. That does not play well with the American public, and Republicans don't want that on their backs going into a midterm election cycle either. So a lot of oversight that we did not see earlier in the year with Venezuela.
So we were going into this election year, Henriette, thinking that perhaps Democrats could get control of the House, and then we see this state race in Texas that you mentioned, which was a real surprise win for the Democrat there. What's the feeling on the calculus for midterm elections here?
So so early in the year, yeah, I.
Mean, in this Texas seat, you had a plus seventeen for Trump electoral outcome, and I want to say that now it would swung back to plus thirteen for the Democratic candidate over the weekend.
That is absolutely not normal.
That is obviously the trajectory of what you see in a wave of election cycle. It builds up of what Democrats were able to notch as wins across the Northeast in November and Minnesota, Georgia, and Mississippi around the same time as they were doing the governor's races in New Jersey and Virginia.
Sage is really quite clear.
I thought Senator Tillis had a really important point for Republicans, which is, you know, the House is very likely to switch to Democratic control where at like eighty five percent on the Senate side, though our odds are much more muted at thirty percent. But look at the fundraising in a race like Alaska, where the Democratic challenger freized, you know, one and a half million dollars in twenty four hours, which is more than the current incumbent Republican race all quarter.
There is okay, galvanization and enthusiasm, and it's coast to coast, I mean Jersey to Alaska. You can't get more inclusive than that.
Zachy similar types of weather though, Henrietta, thank you so much.
I appreciate henning you to Trece, co founder of Beta.
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