Precious metals skyrocketed after the Department of Justice launched an investigation into Fed Chair Jerome Powell, marking a severe escalation in political pressure on the central bank's independence. While gold hit new records and silver led the charge with massive gains, the author warns that the market may have already absorbed the shock. He speculates that with political tensions potentially at their peak, a de-escalation could be next, which might cause the rally in metals and miners to stall and reverse. The key signal to watch will be silver's relative strength during any future downturn.
Major Points:
A Sharp Rise in Precious Metals: Following a DOJ subpoena to the Federal Reserve regarding Chair Jerome Powell's testimony, gold surged 3% to a record high above $4,600, silver jumped over 8%, and mining stocks rose over 4%.
Trigger: A Political Attack on the Fed: The move is tied to escalating pressure from the Trump administration on the Federal Reserve’s independence, including public insults, a draft firing letter, the dismissal of a Fed governor, and now a Department of Justice criminal investigation.
Silver is the Outperformer: Silver’s significant surge suggests it is currently outperforming other precious metals. The author argues that its true breakout potential will be confirmed if it holds up better than gold and miners during the next meaningful market decline.
Miners Approach a Critical Test: The GDXJ (junior mining ETF) is nearing its all-time high. However, the author notes that buyers from the 2011 peak are only just breaking even in nominal terms, implying they remain at a loss when adjusted for inflation.
Warning of a Potential Top: The author questions whether this rally is sustainable, suggesting the market may have already priced in the "worst-case scenario." He predicts the extreme political pressure could stabilize or de-escalate, potentially causing precious metals and miners to form a price top imminently.
A Staggering "What If" for Silver: If the rally does not reverse soon, the analysis suggests silver could theoretically skyrocket to around $120 before forming a medium-term top.
