An overview of several price projection methods, all of which point to a short-term target of around $50 for silver. In the long run, however, silver is likely to go much higher.I love it when a plan comes together. And the plan I’m speaking of here is the bull market in silver I’ve been predicting and writing about non-stop since April of 2024. While silver has steadily climbed since then, the road has been rocky as it advanced in a three steps forward, two steps back manner.

But in June, silver finally broke out above the major $32 to $35 price ceiling that had been impeding its progress, and I said at that time that I believed silver had entered a new phase of its bull market that would be much more powerful and resilient. 

Sure enough, that is what we are now seeing happen, and I believe it is just getting started. In today’s update, I want to give you a credible reason to believe that silver hitting $50 and beyond is actually realistic in September or October.

Let’s first take a look at the spot price of silver and how it finally broke above the $32 to $35 resistance zone that acted as a ceiling throughout much of 2024 and early 2025. 

When silver broke out in early June, it was a clear sign that a major shift had occurred and that a new bull market was underway. Sure enough, silver is now soaring and has just surpassed the key psychological $40 level for the first time in fourteen years.

I see strong parallels between silver’s struggles beneath the $32 to $35 resistance zone and gold’s struggles from 2020 to 2024 below its $2,000 to $2,100 resistance zone. 

That resistance kept gold suppressed for years until it finally broke out, triggering the powerful bull market it remains in today. 

Now that silver has decisively broken out as well, there is a strong chance it will follow a similar path, and it will likely even outperform gold in the near future.

Now that I’ve shown the breakout above silver’s resistance zone, I also want to highlight the triangle pattern that formed over the past few months. 

This pattern actually provides a price target for how high silver is likely to climb during the course of this move, which I will discuss shortly.

For now, I want to focus on the triangle itself and the breakout that recently occurred, which has led to a strong rally. Triangle patterns are consolidation patterns that form when a market or asset pauses to catch its breath, and that’s exactly what happened in July and August when silver moved sideways, largely due to Wall Street being in vacation mode. 

But now that summer is ending, silver is continuing its bull market just as I’ve been expecting.

Interestingly, now that silver has broken out of its triangle pattern, we can use a principle from technical analysis known as the measured move to project how high it is likely to go. This technique estimates a potential price target based on the size of the prior move and often proves to be remarkably accurate.

I created the diagram below to illustrate how measured moves work. It begins with an initial impulse move—such as the $500 advance shown in the example. 

After that surge, the market or asset pauses to consolidate its gains. This consolidation phase can take various forms, such as a sideways trading range or a triangle pattern.

Once the consolidation is complete, the asset breaks out and resumes its rally, typically rising by an amount equal to the initial move—in this case, another $500. It’s a straightforward concept, but a powerful one.

Now that we’ve established how measured moves work, let’s apply the concept to silver following its breakout from the triangle pattern. 

The move leading into the triangle, from April to July, was an $11 per ounce gain. We project that the same $11 move upward from the breakout point at $39, which gives us a price target of $50.

Adding further weight to this projection is the fact that $50 is a major psychological level and also marked silver’s historic peaks in both 1980 and 2011. 

Of course, this does not mean silver must stop at that level. It simply represents the minimum price target based on the measured move technique.

To further confirm the bullish outlook for silver and the related price projections, it’s also worth examining gold, which is now in the process of breaking out of its summer triangle pattern. 

Gold plays a major role in influencing silver prices and is one of the key components of the Synthetic Silver Price Index, alongside copper.

We can also apply the measured move technique to gold’s triangle to estimate a potential price target. The move leading into the pattern was approximately $900, and projecting that upward from the current breakout point gives us a target of $4,400.

There are several compelling reasons to believe that silver reaching $50 and beyond in the near future is entirely realistic. One of them is the gold-to-silver ratio, which currently stands at 85.46 and shows that silver remains extremely undervalued relative to gold. 

For reference, the long-term average dating back to 1915 is around 53. 

In the shorter term, during the course of silver’s bull market, my conservative projection is that the ratio will fall to around 65, which also served as a key level in 2016 and 2021.

Doing some quick back-of-the-envelope math, if the gold-to-silver ratio falls to 65 and gold reaches a realistic $4,000, that would imply silver hitting $62, which represents a 52% increase from the current price. 

If gold instead reaches the $4,400 price target indicated by the measured move from its triangle pattern, that would imply silver rising to $68, a 67% increase. 

Either way, it’s easy to see how significant gains in silver could be achieved from current levels.

Adjusting silver’s price for inflation makes its historical undervaluation even more apparent, highlighting just how much room it still has to move higher. 

During the Hunt brothers-induced spike in 1980, silver reached an inflation-adjusted price of $198. In the 2011 bull market, driven by quantitative easing, it hit $72. 

Currently trading at just $40.67, silver has significant room to rise if it’s to catch up with these previous inflation-adjusted peaks.

Another way to assess whether silver is undervalued or overvalued is by comparing it to various money supply measures. 

The chart below shows the ratio of silver’s price to the U.S. M2 money supply, providing insight into whether silver is keeping pace with, outpacing, or lagging behind money supply growth.

If silver’s price significantly outpaces money supply growth, the likelihood of a strong correction increases. Conversely, if silver lags behind money supply growth, it suggests a potential period of strength ahead. 

Since the mid-2010s, silver has slightly lagged behind M2 growth, which, combined with other factors discussed in this piece, positions it for a strong rally.

Finally, I want to address what I believe is likely to happen once silver reaches the $50 level. This is a highly significant psychological milestone that also marked the major peaks in both 1980 and 2011. Levels like this often act like magnets, drawing prices toward them. 

I believe silver could reach $50 relatively quickly, which is typical when bull markets accelerate. However, once that level is hit, I wouldn’t be surprised to see a temporary, shallow pullback or a period of sideways consolidation as the metal takes a healthy breather following such a strong advance.

But after that breather, I expect things to get much more exciting, as it would put into play the massive cup-and-handle pattern in silver that stretches all the way back to the 1960s. The resistance level of this pattern is $50, formed by the peaks in 1980 and 2011.

Once silver decisively closes above that level, the pattern points to a move into the several-hundred-dollar-per-ounce range. I fully believe and expect that outcome. 

And in case that sounds preposterous, it really isn’t—I see it becoming a reality as the world reaches the end of a massive Keynesian monetary experiment, which I believe will trigger an epic global economic crisis.

Anyway, to summarize, all the stars are currently aligned for silver, which I believe is in the early stages of a powerful bull market that will ultimately go down in the history books. 

I presented several methods for estimating how high silver is likely to rise in the short term, and they all point to a target around $50. That is not far-fetched at all, considering silver is currently just under $41. 

Of course, I don’t believe the bull market will end at $50—I ultimately see silver going much higher—but I view $50 as a strong short-term target, after which the bull market is likely to accelerate even further.

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With a surge in volume and breakouts across major world currencies, gold and silver confirmed yesterday the breakouts that began on Friday, paving the way for the resumption of their bull markets.Yesterday was a very exciting day because gold and silver both officially broke out, giving the green light for powerful rallies into year-end. This is the scenario I’ve long been anticipating as summer wrapped up and Wall Street returned from vacation mode. 

Yesterday, gold surged 1.64% to reach another all-time high of $3,533.55, while silver jumped just under 3% to hit a 14-year high of $40.88. While many are pointing to the pullback in U.S. stocks and long-dated Treasuries as the main catalyst for yesterday’s precious metals rally, I believe the move is primarily technical in nature. 

As I explained a month ago, this breakout was already long in the cards. In my view, gold and silver had been coiling like compressed springs, and now that pressure is being released, they are finally taking off.

Now let’s take a look at the charts, starting with COMEX gold futures. COMEX gold has officially broken out of its Summer 2025 triangle pattern, as well as above the key $3,500 resistance level I had been watching for additional confirmation. 

Breakouts above horizontal resistance levels tend to carry more weight than those above diagonal ones, which is why this development is especially significant.

I was also looking for a surge in volume to validate the breakout, and sure enough, we saw that in droves yesterday—a very encouraging sign that the so-called “smart money” is behind this move. With gold’s triangle pattern now decisively broken, there is a high probability that it will rally toward a target of at least $4,400.

Next, let’s take a look at the spot price of gold in U.S. dollars. Like COMEX gold futures, the spot price has now broken out of its Summer 2025 triangle pattern and above the key $3,500 resistance level, which was the high from April. This is a very encouraging sign.

I had been waiting for both COMEX gold futures and the spot price to break out and send the same message. The two have diverged more than usual lately due to the distorting effects of the Trump administration’s tariff plans and the speculation surrounding them.

I’ve recently begun tracking gold priced in the World Currency Unit (WCU)—a composite currency based on the GDP-weighted average of the world’s 20 largest economies. 

In many ways, it offers one of the most balanced and accurate reflections of gold’s true global performance, which is why I’ve been paying close attention to it.

Since its April peak, gold priced in WCU (World Currency Units) was consolidating within a trading range between 2,400 and 2,600. 

It finally closed above the 2,600 resistance level yesterday, which is a major sign of strength and confirmation that the summer consolidation is over and that gold’s bull market is resuming.

Next, let’s turn to silver, starting with COMEX silver futures. COMEX silver broke out of a triangle pattern last week, which is a very bullish signal, and then pushed above the key $40 resistance level I had been watching. 

This level marked the late July peak and is especially important because horizontal resistance levels tend to carry more weight than diagonal ones.

I had also been looking for a surge in volume to confirm the breakout and signal that the smart money is backing this rally—and we got exactly that yesterday, which is very encouraging. 

Right now, all systems are go for silver, and the next stop is $50 and higher, possibly as soon as this month, as I explained recently.

Adding to the excitement is the fact that the Synthetic Silver Price Index (SSPI), a proprietary indicator I developed to confirm whether moves in silver are genuine or simply noise or manipulation, has just broken out of the ascending triangle pattern that has been forming over the past five months. 

This breakout indicates that both the SSPI and silver are now entering powerful new phases of their bull markets.

Last week, I wrote about the major volatility squeeze forming in the SSPI and explained why it was likely signaling a big move in both the SSPI and silver. That move is now clearly underway.

Gold mining stocks, as measured by the VanEck Gold Miners ETF (GDX), continue to gain momentum after breaking out of their ascending triangle earlier this month. 

With multiple factors now aligning in their favor, I believe we are still in the very early stages of the bull market for gold miners.

In addition to being bullish on gold mining stocks, I am also very optimistic about silver mining stocks and will be publishing a detailed report on them soon. 

The monthly chart of the Global X Silver Miners ETF (SIL) shows a decisive breakout above the critical $48 to $52 resistance zone that has capped gains since 2016, which I view as a major bullish signal.

To summarize, gold, silver, and mining stocks have now fully broken out of their summer consolidation patterns and are in confirmed uptrends. I expect their rallies to continue at least through the end of this year, with gains likely to be explosive as public awareness and participation increase.

Although gold and silver have already performed exceptionally well over the past eighteen months, I do not believe they are too high or have gotten ahead of themselves. 

Precious metals bull markets typically last ten to fifteen years, and I expect this one to follow a similar path. It is great to see the stars align and to watch our favorite investments finally surge and begin receiving the recognition they deserve.

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Summary US dollar is firm against the G10 currencies today but is mostly trading inside yesterday’s ranges. After yesterday’s disappointing … Continue reading →

Federal Reserve Governor Christopher Waller speaks during The Clearing House Annual Conference in New York City on Nov. 12, 2024.
Brendan McDermid | Reuters

Federal Reserve Governor Christopher Waller, a candidate to take over from Jerome Powell as chair in 2026, on Wednesday voiced his support for starting a rate-cutting cycle in two weeks and said the central bank has the flexibility to adjust that pace in the future.
“When the labor market turns bad, it turns bad fast … So for me, I think we need to start cutting rates at the next meeting,” Waller said in an interview on CNBC’s “Squawk Box.” “We don’t have to go into a lock sequence of steps. We can kind of see where things are going, because people are still worried about tariff inflation. I’m not, but everybody else is.”

Considered to be on President Donald Trump’s short list of potential successors for Fed chair, Waller was one of two Fed governors to dissent from the July FOMC decision to hold the central bank’s benchmark interest rate steady in a range between 4.25%-4.5%. It was the first time two governors had opposed a committee rate decision in more than 30 years.
Waller believes there should be multiple cuts over the next few months, saying interest rates today are perhaps 1.0 to 1.5 percentage points above their “neutral” level.
“I would say over the next three or six months, we could see multiple cuts coming in. Whether it’s like every other meeting, every meeting, we’ll have to wait and see [what] the data says,” Waller said.
Waller acknowledged that tariffs are a tax on the consumer that will slow growth, but he doesn’t see a recession in his economic forecast.
The Fed’s next policy meeting is scheduled for Sept. 16- 17.

Waller declined to comment on Trump’s attempt to fire fellow Federal Reserve Governor Lisa Cook. But he reiterated the importance of Fed independence and said the central bank will maintain its independence whoever assume leadership.
“The independence of the Fed is critical for everything we do, and there are things that are going on that make people worried, but I still believe that we have an independent Fed,” Waller said. “People that are appointed will behave that way and act in an apolitical fashion.” Continue reading →

A Fed rate cut may be coming into focus. What’s the next move for savers? – MarketWatch photo illustration/iStockphoto With … Continue reading →

The recent silver breakout means that silver is likely on an almost clear path to this target area (previously presented):               The current bottoming pattern from around 2014 to now is very similar to the early 2000s bottoming pattern.I have highlighted two similar patterns (marked 1 to 5). The bottoming period of the early 2000s started when silver broke down at the black support line (bottom of the channel) in late 2000 and made a low at point 5. This is similar to the period since the breakdown at the blue support line (bottom of the channel) in late 2014, eventually making a low in 2020.

I have indicated how the current chart position is similar to late 2003, when prices were still around $5. The recent breakout is a significant indication that the price could move relatively fast to the blue line.

Price will probably soon move back inside the channel just like it did in December 2003 and stay above that blue line for the rest of the bull market. So, although there could still be pullbacks along the way, it is expected (based on these fractals) that we are now likely in a sustained silver rally similar to 2010-2011, for example.

In a previous article, I have shown how significant silver peaks occurred within 8.5 years after the Dow/gold ratio peak, with the Great Depression silver peak occurring the soonest (6 to 7 years after).

It is now 6 years and 10 months since the Dow/gold ratio peak of October 2018. In other words, there are still about 1 year and 8 months (20 months) left before we get to the 8.5 years since the Dow/gold peak.

Given that silver actually rallied on a sustained basis for at least 2 years before each of those peaks, we are likely to see silver rally for most of the coming 20 months.

When considering that we are probably very close to monetary reform, the rest of this decade will certainly make for interesting times.

Warm regardsHubert Moolman Continue reading →

Is this it? The long-awaited breakout for gold? This past week gold made a record high weekly close but remains just under its all-time high of $3,500. Continue reading →

I’ve been spotting and writing a lot about volatility squeezes lately, which occur when volatility drops to extremely low levels and signal big upcoming moves. This dynamic is currently developing in assets such as gold and U.S. Treasuries. These volatility squeezes are not coincidences, as they are actually all related. Much of the financial market is in a gigantic volatility squeeze as they wait for a major catalyst. 

These potential catalysts include further clarity on the U.S. stagflation situation (inflation + economic stagnation), the likelihood of further rate cuts, and the next Fed chair that President Trump will appoint.

In today’s update, I want to focus on the volatility squeeze developing in copper and how it is setting up both copper and its closely correlated counterpart, silver, for a significant move.

Let’s first take a look at the weekly chart of London Metal Exchange (LME) copper futures, which I am now using as my preferred proxy for copper prices instead of U.S. COMEX copper futures because the latter have been heavily distorted by the Trump administration’s recent tariffs.

This chart shows a clear volatility squeeze as indicated by the Bollinger Band Width indicator beneath the chart, which is a valuable tool for tracking volatility in financial markets and assets. 

The last time volatility in copper dropped to such extremely low levels was in 2022 and 2023, and in both instances, it led to significant moves in copper prices. 

Based on the current setup, I believe another major move in copper is ahead as this volatility squeeze resolves.

While volatility squeeze setups indicate that a big move is likely ahead, they do not reveal the direction of that move. To determine the likely outcome, we need to incorporate other methods, including chart analysis.

The weekly chart of LME copper futures currently shows an ascending triangle pattern forming, which is typically a bullish chart pattern. However, it must be confirmed by a decisive breakout on strong volume above the $10,800 per tonne resistance level. 

This combination of an ascending triangle and a volatility squeeze indicates that a significant bullish move in copper is likely ahead.

The longer-term monthly chart of LME copper futures highlights both the ascending triangle pattern that has been developing over the past several years and the critical $10,000 to $10,800 per tonne resistance zone, which dates all the way back to 2011. 

Once copper achieves a decisive breakout from both its ascending triangle and above this major resistance zone, I believe a powerful new bull market in copper will begin.

For those interested in this bullish copper thesis, one convenient way to gain exposure is through the Global X Copper Miners ETF (COPX). 

Interestingly, COPX has also been forming an ascending triangle pattern since 2021 and is now on the verge of breaking out. However, I would prefer to see a decisive close above the $48 resistance level for stronger confirmation of the breakout.

In addition to the bullish technical setup in copper, the fundamental picture is also highly supportive. For example, Goldman Sachs has dubbed copper “the new oil” due to its essential role in clean energy technologies, and Visual Capitalist published a fascinating infographic on this theme.

Copper earns this title because its demand is expected to surge in the coming decades, while oil consumption is projected to decline as the world transitions away from fossil fuels. Reflecting this shift, the IMF forecasts a 66% increase in copper demand between 2020 and 2040.

Copper’s likely upcoming bull market would align with the outlook of French billionaire and commodities trader Pierre Andurand, who predicted that copper prices could soar to $40,000 per tonne in the coming years—a more than fourfold increase from the current price of $9,682 per tonne.

Explaining his bullish stance, Andurand stated, “We are moving towards a doubling of demand growth for copper due to the electrification of the world, including electric vehicles, solar panels, wind farms, as well as military usage and data centers.”

If copper enters a major bull market, it would also be highly bullish for silver because silver, along with gold, is heavily influenced by the prices of both metals. This relationship exists largely due to arbitrage trading algorithms that tend to pull silver in the same direction as gold and copper.

Because of this little-known dynamic, I developed a proprietary indicator called the Synthetic Silver Price Index (SSPI). 

The SSPI is essentially the average of gold and copper prices, and it has proven to track silver extremely closely, making it a powerful tool for both confirming and predicting moves in silver, as I’ll demonstrate shortly.

Interestingly, a volatility squeeze is also forming in the SSPI, which reflects the volatility squeezes occurring in its underlying components, gold and copper. 

As shown in the chart below, previous volatility squeezes in the SSPI have consistently led to significant moves in the indicator—and, by extension, in silver as well. I view the current volatility squeeze in the SSPI as a strong signal that a major move in silver is approaching.

Zooming in on the daily chart of the Synthetic Silver Price Index (SSPI) shows that an ascending triangle pattern is forming (there are a lot of these lately!). 

Once this pattern breaks out, it is likely to result in a significant bullish move, which would also place substantial upward pressure on silver.

The chart below illustrates just how closely correlated my proprietary Synthetic Silver Price Index (SSPI) and silver are. Since 2018, the correlation has been an impressive 95%, which is remarkable given that silver is not even a component of the SSPI.

One of my favorite ways to use the SSPI is to perform technical analysis on it and treat its breakouts and breakdowns as signals for what silver is likely to do next. This approach has proven to be highly effective and, in many cases, the SSPI even leads the price of silver. 

For this reason, the current volatility squeeze and ascending triangle pattern forming in the SSPI are particularly noteworthy and well worth watching for silver bulls.

I mentioned earlier that the volatility squeeze in the Synthetic Silver Price Index (SSPI) is the byproduct of the volatility squeezes in its two components, copper and gold. I’ve already shown the setup in copper, so now let’s look at the triangle pattern that has been forming in gold over the past five months. 

I am now waiting for a decisive breakout in gold. Assuming that occurs, I expect it to run to $4,000 and beyond, which would, in turn, boost both the SSPI and silver itself.

With all this discussion about how bullish moves in copper and gold would be highly supportive for silver, let’s finally take a closer look at silver itself. 

I believe silver began a major new bull market in early June when it broke above the $32 to $35 resistance zone that had capped its progress for much of the previous year.

Since that breakout, silver has been consolidating and forming a triangle pattern of its own. Despite this sideways action, I believe the bull market thesis remains intact. Silver has simply been taking a healthy breather, which is normal during the summer months when much of Wall Street is on vacation.

Looking ahead, the combination of summer ending and the potential for major breakouts in both copper and gold is what I believe will propel silver’s bull market much higher—to $50, $60, and far beyond. However, confirmation is still needed, which would come in the form of silver closing above the key $40 resistance level.

To summarize, the extremely quiet trading that has characterized Summer 2025 has actually created multiple volatility squeezes across key assets, including U.S. Treasuries, gold, and copper. 

Ironically, periods of extremely low volatility almost always resolve with extremely high volatility, and I believe we are likely to see that happen in these assets soon.

While many investors are bored with these assets, and most don’t even understand what volatility squeezes are, they should be doing the exact opposite. 

This is shaping up to be a very exciting setup and opportunity for precious metals investors, as big rallies are likely to erupt this fall.

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U.S. Treasury market volatility is at three-decade lows, strongly indicating that a major move is ahead that will have significant effects on the financial markets, including precious metals.Although often overlooked by retail investors, there is a strong case that the most important market to watch is not stocks but U.S. Treasuries. 

Treasuries set the tone for long-term interest rates, shaping everything from government and corporate borrowing costs to mortgage rates, stock prices, and even precious metals prices, which perform best in environments of low real yields. 

Right now, I see clear and compelling evidence that U.S. Treasuries are on the verge of a major move that will have sweeping consequences across the entire financial landscape.

My thesis is based on the fact that volatility in the U.S. Treasury market is currently at multi-decade lows, a condition known as a “volatility squeeze.” History shows that such squeezes in financial assets almost always precede major moves. 

Now, let’s examine the charts across the Treasury complex, beginning with U.S. 2-Year Treasury Note yields, to highlight the highly unusual setup currently developing. 

The weekly chart shows a triangle pattern forming over the past two years, signaling a period of compression similar to a spring under pressure. When that pressure is released, it typically leads to a powerful breakout, and I expect a similar move in Treasury notes soon.

This volatility squeeze is further confirmed by the Bollinger Band Width indicator beneath the chart, which is a valuable tool for tracking volatility in financial markets and assets. 

I’ll address which direction Treasuries are likely to break out shortly, but first, I want to show the fascinating volatility squeeze setup across the entire Treasury complex.

The same triangle pattern and volatility squeeze setup can also be seen in U.S. 5-Year Treasury Note yields:

The most important and closely watched bellwether of the Treasury complex, the 10-Year Note yield, is also showing a triangle pattern and volatility squeeze setup:

Finally, the 30-Year U.S. Treasury Bond yield is showing the same setup as the shorter maturities, and the fact that this pattern is consistent across the entire Treasury complex strengthens my thesis by highlighting how broad-based it is:

To illustrate just how extreme the current volatility squeeze in U.S. Treasuries is, I created a weekly chart of U.S. 10-Year Note yields going back to the year 2000. 

According to the Bollinger Band Width indicator, volatility is now at its lowest level in this entire period at 7.4. The only other times it came close were in 2007 (7.7) and 2018 (8.04), and both of those periods were followed by major moves in interest rates. 

I believe another significant move is approaching very soon.

It is important to note, however, that while the last two episodes resulted in falling yields, a volatility squeeze does not indicate direction. It only signals that a large move is ahead. 

I will address the likely direction shortly, but for now, focus on the highly unusual nature of this volatility setup.

Now that I’ve made the case that the unusually calm behavior in U.S. Treasuries is likely to give way to an explosive move, I want to address the question of direction. 

Unfortunately, the outlook is uncertain because of conflicting economic crosscurrents, primarily inflation and economic growth.

The situation is unclear, and even the Fed, Wall Street, and most economists are acknowledging that reality. This uncertainty is the precise reason why Treasuries remain stuck in a low-volatility holding pattern as they wait for further clarity. 

Once that clarity emerges, Treasuries are going to pick a direction and move significantly.

As mentioned earlier, Treasury yields are driven primarily by inflation and economic growth. High inflation and strong growth push yields higher, while low inflation and weak growth cause yields to fall. 

Like all bonds, Treasuries are sensitive to inflation because it erodes the value of their fixed coupon payments.

Treasuries are also sensitive to economic growth since strong growth often leads to higher inflation and tighter monetary policy from the Federal Reserve. 

In contrast, weak growth and especially recessions typically cause Treasury yields to decline because they signal falling inflation and looser monetary policy. This is often accompanied by quantitative easing (QE), where the Fed digitally creates money to buy Treasuries, which drives yields down further.

While the straightforward scenarios above are easy to understand, the real world is often more complicated. 

Things become tricky when Treasuries receive mixed signals from the economy, particularly in a stagflationary environment where inflation remains stubbornly high but economic growth is weak. In such situations, the proper response for Treasuries is far less clear. 

That is exactly where we are right now, and it explains the current volatility squeeze in Treasuries as the market waits for additional inflation and economic data before committing to a clear direction.

Over the past month, concerns about a potential U.S. stagflationary scenario have been growing. A surprisingly weak July jobs report showed that only 73,000 jobs were added, while job growth for May and June was sharply revised downward by a combined 258,000 jobs. 

This prompted Fed Chair Jerome Powell to acknowledge on Friday that “downside risks to employment are rising.”

On the inflation front, the Fed’s preferred gauge, the Personal Consumption Expenditures (PCE) price index, showed that core inflation rose to 2.8% in June, remaining well above the Fed’s 2% target and signaling that inflation is still stubbornly high. 

Economists are increasingly concerned that the Trump administration’s new tariffs may already be contributing to higher prices and are watching upcoming inflation reports closely to see if this trend persists.

The key upcoming labor and inflation reports to watch are: Personal Consumption Expenditures (PCE) on August 29, the Producer Price Index (PPI) on September 10, and the Consumer Price Index (CPI) on September 11. 

On the labor side, important releases include JOLTs Job Openings on September 3, the ADP Employment Report on September 4, Nonfarm Payrolls on September 5, and the weekly Initial Jobless Claims, released every Thursday morning.

My view, at least for now, is that a U.S. economic slowdown leading to a recession will become much more evident in the months ahead, and that will drive Treasury yields sharply lower.

I see the abrupt deceleration in both the job market and the housing market as early evidence. Adding weight to this outlook, Moody’s Analytics chief economist Mark Zandi recently issued a high-profile recession call, citing a weakening labor market along with soft consumer spending, construction, and manufacturing data.

What raises the risk of an economic slowdown and recession is the Fed’s ongoing quantitative tightening (QT) program, which is shrinking its balance sheet by reducing holdings of Treasuries and mortgage securities, as shown in the chart below.

The flip side, however, is that a resulting recession would likely trigger a return to quantitative easing (QE) or digital money creation. 

Since the U.S. economy is now heavily dependent on monetary stimulus, this would almost certainly lead to another round of Treasury purchases by the Fed, driving yields much lower. Such a shift would also be extremely bullish for precious metals.

While the Treasury market remains in a holding pattern, waiting for upcoming data to confirm or refute either a recessionary or stagflationary scenario, I want to emphasize the value of technical analysis in this scenario. 

As an analyst, I do not make short-term predictions; instead, I prefer a reactive approach that allows the market to reveal its direction through decisive price action supported by volume.

At this point, I am waiting for Treasury yields to break out clearly in one direction, confirmed by economic data consistent with that move. My bias is that Treasury yields are more likely to decline from here due to economic weakness, but I am maintaining a disciplined wait-and-see approach.

The current volatility squeeze in Treasuries closely parallels the five-month volatility squeeze and triangle pattern forming in gold. In fact, the indecision in Treasuries is a major driver of that behavior in gold, since gold takes its cues heavily from U.S. interest rates.

If interest rates were to fall significantly from here, that would likely trigger a breakout in gold from its triangle pattern, with the potential to run to at least $4,000.

To summarize, volatility in U.S. Treasuries is at its lowest level in decades, and history shows that such periods almost always precede major moves. This dynamic, known as a volatility squeeze, indicates that a powerful move in Treasuries is coming that will have a dramatic impact across the financial markets.

For now, the Treasury market is in a holding pattern as it waits for clearer signals from upcoming economic data. Neither the Treasury market nor most economists can yet say with confidence which path lies ahead, but that clarity should emerge soon, and when it does, it should trigger a historic move in interest rates.

If the outcome is a sharp economic slowdown or recession, Treasury yields will fall significantly, and that would propel gold to $4,000+ and silver to $60+. 

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Summary The Fed’s Jerome Powell sounded dovish. He noted the rising unemployment rate and inflation getting closer to the Fed’s … Continue reading →