Posted on 03/07/2025 12:20:39 PM PST by delta7
EU defence spending plans are driving German, French, and Italian bond yields higher. Japan’s are soaring too. The dollar is sinking: what does it all mean for gold and silver?
A graph.
This week, the end-February decline in gold and silver prices appear to be over, with a recovery based on a firm undertone. In early European trading this morning, gold was $2,920, up $60 from last Friday’s close, and silver $32.60, up $1.50.
Despite the recent transfers of physical gold into New York, there still appears to be a bear squeeze in place. Look at how Comex Open Interest has declined in the last few months as gold has continued to rise (upper chart):
Silver appears to have been behaving more normally until last week, when Open Interest fell significantly and the price less so. It points to a firm undertone, reflected in silver’s outperformance relative to gold in the last four trading sessions.
These are dollar prices. But the dollar weakened considerably this week against the euro and the yen, reflected in the next chart of the USD TWI.
The TWI has crashed back below its moving averages, indicating that a strong dollar is over for now, which is obviously supportive for gold and silver. But behind the dollar’s sudden weakness is euro and yen strength on the back of sharply rising bond yields in the two currencies, illustrated in the following two charts of the German 10-year bund, and the 10-year JGB.
Japanese bond yields are still too low for the inflation outlook. More concerning is the German bund, which is the marker for all the other Eurozone bonds, pushing up financing costs particularly for France, Spain, and Italy which make up the bulk of Eurozone economic activity.
Under the excuse of unexpected defence spending, Germany is raising its debt limit and increasing defence spending by a further €500bn. Additionally, Brussels is allocating a further €800bn to defence, between them inflating the amount of euro debt funding significantly at a time when inflationary pressures haven’t gone away. And all this when the ECB decided to cut rates by a further 0.25% to leave its key deposit facility at 2.5%. It could turn out to be yet another ECB error, when a eurozone debt trap suggests that rates should rise, not decline.
The concern has to be that with bond yields rising in euros and yen, strains are being imposed on the global banking system. In the last two years, US regional banks have learned not to fund long maturities out of short-term deposits. It is not clear that this message has been fully absorbed in the highly leveraged Eurozone and Japanese banking systems.
Additionally, there is increasing evidence of stalling economies, with the Atlanta Fed’s GDPNow model estimating a sharp contraction in GDP. This is next: Graph.
Just when you might expect US industry to have increasing confidence due to Trump’s trade protectionism, it is collapsing. Should this continue, all DOGE’s efforts to reduce the budget deficit will be overwhelmed by lower tax revenue and higher welfare costs. Worse still, a contracting GDP combined with rising government debt is the classic definition of an intensifying debt trap.
Putting all the evidence together, of rising government deficits in the US, Eurozone, and Japan at a time of declining private sector activity, markets are likely to wake up to rapidly increasing credit risk at the currency level. No wonder precious metals appear to be headed higher — possibly much higher — reflecting not so much an increase in their values, but currency debasement.
The good news? He will take care of our citizens first, professionally managing our decline. What will be interesting is will he abide by the Dodd Frank Act which mandates “ bail ins”?
A weaker dollar is good for US exporters.
I fully expect a thriving US economy with the weaker dollar helping trade tremendously and also helping to get the debt under control.
Last term covid hit...I remember NO financial crisis..just making a lot of money in the market.
and imports become more expensive.
Gold and silver have not moved that much in the last 6 months-—silver has been between 29-33$ per ounce.
Last term covid hit...I remember NO financial crisis..
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Not at your level. The C flu crisis wiped out hundreds of $$$ billions, and cost the world Central Banks ( some say trillions of debt issuance).
The little guys like us ( I to profited) often don’t see the big picture, until the “ waterfall effect” hits.
(good for US exporters)
That’s why I focus on the exporting
Gold and silver have not moved that much in the last 6 months
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HUH? Silver up 16 percent in 6 months, Gold 16.5 percent. Gold YOY 34 percent. What are you smoking?
i know nothing about silver. Is 33/oz good? is it down or up over the last few years?
One thing that concerns me is that desperate times call for desperate action, not just for people, but for nations! It’s how wars are started.
A weaker dollar makes imports more expensive which in turn makes domestic products more competitive which in turn drives up demand which in turn means more jobs.
Also, the weaker dollar makes exports cheaper abroad which makes demand for our products abroad even greater.
I call that win/win/win/win thank u very much.
How is getting rid of overpaid do-nothing government workers, corrupt programs, and illegal aliens going to spike the welfare costs?
284 K Native Born American Jobs createdin February.
Well, Recently, the 10-year U.S. Treasury bond yields have been fluctuating. As of March 3, 2025, the yield is at 4.16%, which is slightly lower than the previous day’s yield of 4.24%. However, the overall trend has shown some ups and downs over the past few weeks.
No clear trend can be discerned from this.
Nothing wrong with that when we are trying to build up own industrial base.
“I fully expect a huge financial crisis in the US ( and world) during his term.”
In 2014 you predicted gold would hit $5000 in 2015. $2000 to go!
In 2014 you predicted a world financial collapse in 2015.
Will any of your predictions ever come true before you die?
You can make up any price if you choose a certain period of time...6 months ago it was 35, then it dropped to 28, now its up to 32.5...when it pushes past 40 let me know...
i know nothing about silver. Is 33/oz good? is it down or up over the last few years?
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Silver and Gold is wealth, all else is credit ( debt), been so for 5,000 years. Currencies are for spending, PM’s for accumulating.
Silver up 15.5 percent last six months, 35 percent last year, 92 percent last five.
Yet another Armstrong interview for you. Say what you will, but the world is now taking note of his legendary computer Socrates and it’s forecasting.
You can thank me later.
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