Is silver set to shoot the lights out?
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Hello and welcome to the Saxo Market Call. It is Friday, 14th of March, 2025. We have a market that is trying to digest what is going on, as always. Maybe some slightly interesting divergences if we look at a couple of things. You can find the link to today's slide deck, by the way, in the podcast description, as always.

And we have a rundown of some little highlights, bullets on slide two. So to start with those, we did see another slide yesterday. So further risk off, there was a bounce overnight, I think in part on the partially clearing the risks of a government shutdown this weekend as Democratic Senator Schumer was out with some words to that effect.

That he wouldn't challenge things. And we have S&P 500, interestingly, reaching an official correction status, which is a drop of 10%. So that was achieved, if you want to call it that, yesterday. Maybe interesting, though, that while the S&P posted a new low for the cycle yesterday,

It looks like the NASDAQ did not. And we have things like the speculative space like Bitcoin, et cetera, trying to rally a little bit. So you could argue maybe some of the more speculative assets are showing a little bit of divergence here. I don't know how much to put into that. Our key has been that the NASDAQ 100 200 day moving average has been broken.

We're currently around 20 to 30 something, I believe it is. So around a thousand point rally would be needed to start breaking above that. So even if we are into a risk on shift here, a bit of consolidation, we still have crossed into sort of a...

A bearish outlook, if not the official bear market definition, which would be another 10% correction in the S&P. We're certainly not there yet. A couple of interesting individual stock developments. Adobe smashed 13.8% lower after its earnings on Wednesday after the close. So the Thursday session absorbing that.

news and there's a lot of a big drop in an intraday as well so even from the opening price dropping quite a bit it's that forward guidance on earnings related to AI which just have not materialized for the company it continues to grow but it's that frustration that it's not growing as much as

as was hoped on this AI angle. And kind of interesting to note that Adobe reached its current price for the first time in 2020. So five years ago, just before the pandemic, I think, in fact, with half the revenue and half the income. It's that come down in the growth rate, of course, since then that is plaguing the stock's valuation.

It continues to grow. Of course, at some point you would expect it to be gathered up, but those projections are disappointing.

And then we had Intel out with a 14.6% gain on a new CEO. He was the former CEO. I believe he's the former CEO anyway, but associated in any case with Cadence Design Systems, a spectacular performing stock, something like a 20-backer over the last 10 years. So hopes there for getting that company's, well, SHIT together after some really bad stumbles and searching for a new CEO since December.

And then Apple, just a really ugly performance, minus 12% and more this week. It crossed below that 200-day moving average that we mentioned on the Tuesday podcast and really swooshed considerably lower. So that's quite bad news there. On the good side, we had Rheinmetall in Germany after its earnings. It's up nearly 12% from the day it closed before that earnings report. So there's ongoing enthusiasm for European defense.

There was a news item on one of the bigger pension funds. I failed to remember the name that they would clear rules for investing in defense stocks. So all this sort of ESG, mamby-pamby stuff suddenly crumbles when you have real defense and national security needs coming into focus. And that could be an ongoing theme there in this space.

And then we have the German $500 billion infrastructure package seeming to progress as the Bundestag was reconvened yesterday, although the Greens are forcing concessions on something about climate. We'll see. Something will happen here, but we'll have to see how front-loaded versus back-loaded it is and if there are too many concessions to things like this climate harakiri that the Greens insist on trying to demand here.

And then we have the budget numbers out of the U.S. for February, where the doge, it was far worse than last year. So those touted cuts in spending are not materializing in the actual deficit numbers. It's a big concern for the whole sort of narrative that we're supposed to be believing from this Trump administration. We're going to need to see progress on that front soon.

Again, as mentioned, shutdown risks averted for now. We still have to get that bill passed, of course, today, ahead of the weekend, in the Senate, which Trump would sign. That would avoid a shutdown. Very important for the very near term. And then Trump threatening tariffs on your French wine, but you're not going to be consuming it in the U.S., lucky you. So that's the latest focus in this retaliatory set of tariffs.

Let's get you into the conversation. We're going to talk about gold today and silver, maybe especially silver, and really some fascinating technical things going on. But maybe we should first talk about gold. Just before we stepped in here, it's a $2,996 per ounce gold.

The future had already hit $3,000. I think it was already overnight. Any sort of proximate drivers here? Is this going to be a big level? I mean, these big round levels have traditionally been a bit sticky in gold bull markets in the past, et cetera. Yeah, well, we just five bucks below that $3,000 level. It is a key psychological level, and probably not really in terms of technical levels, but it is psychologically a big one. And lo and behold, we're probably...

yeah, it's probably likely we'll see it today. We do have a University of Michigan sentiment survey out later today. I think that run last month really sent a cat among the pigeons with this long-term inflationary forecast, but we'll come back to that. But yeah, the drivers for gold and also silver, they remain the same. They've been the same now for the last two years, and it's only been

been really been strengthened in this past couple of months with all the uncertainty. And we still have to remember gold is a dead relic. It's just a piece of rock, not a rock, but a piece of metal that doesn't give you any dividend or any yield. So the fact that investors are continuing to be willing to buy that at the expense of something that could provide them a return in terms of yield and dividend, that just basically shows that this world is still very uncertain and it's driving this demand.

There's also, John, some additional support coming in from the New York market. We're seeing that both in copper and silver, and I think that's also part of the push that we're getting into gold. It's also coming to a certain extent from both copper and silver, especially the futures in New York. But isn't there been – you pointed it out in the last podcast, and of course I have not tracked the issue as closely as you, the expert, have.

It feels like a lot of this moving gold is on the part of large players in the market and especially central banks. That sort of popular level investor hasn't even caught on to this theme in terms of the holdings in these sort of basic physical ETFs. Is that not correct? That was correct up until a few weeks ago. We are actually starting to see a bit of a pickup. But we're still not at anything like record highs. Nowhere near. I don't have a slight –

We'll get it next time or the time after.

But these buyers have started to come back. And clearly, when their equity market returns looking as poorly as they do right now, then you're probably more inclined to look for some safe haven or at least somewhere where you can park your money in the short term. And that, I think, is really what's benefiting the gold market now as well. All right. Let's turn to silver then. Very interesting levels coming up, as I will talk about. I made a...

I would call it fun because I love this Elliott Wave stuff, a fun chart on where we might go from here. It might be where you're getting your target from as well. We'll talk about that in a second. But just a couple of words on all this stuff I saw on Twitter, a whole furious bunch of tweets on X on huge movements in silver bullion for in and out of warehouses and things like that. So what's going on with the silver movements here? Does it mean anything or is it easy to understand what's going on?

Well, it's not easy to understand at this stage. I understood it in the past months or so, but it's starting to get a little bit ridiculous. If you look at slide 7, I just highlight the COMEX monitored warehouse stocks in gold and silver. As you can see, this whole tariff threat on imports has really triggered a massive exodus of

of metals out of warehouses in Asia and Europe to the US. And while gold seems to be slowing down a bit here, I think there's still very much on... I think there's still a great deal of doubt that gold would be included in tariffs, but silver is still out there considering that they're considering tariffs on copper as well. And so the silver...

Import just continues to surge higher. What this will do is a similar story as what we'll do for, as we're seeing in copper right now. It's simply that it's hoovering the global market for physical stocks. And the question is really whether these inventories are going to be stranded in the US waiting for a consumer eventually to turn up or whether it will come back into the market if tariffs are not being applied or if it's being applied at a lower level. So this is really the whole game right now.

But if you are able to get silver into the New York market, you can sell, say, the May contract, which is right now the...

the front month's contract in silver, you can sell the May contract at an annualized yield of something. I calculated it to be more than 10%. And obviously, if the funding is less than half of that, you're actually doing quite a nice trade. So the arbitrage is there, but the question is really why it's so aggressive as it is.

And this may be putting you on the spot here, or it is putting you on the spot, but I saw at least one comment or post on X that was speculating that this could be linked to some kind of cornering of the physical market. If there was some kind of crazy...

whether it's 1980, a 79 style, 1980, whatever it was, Hunt Brothers, physical market cornering. Is this the kind of data point that we would see or a series of data points we would see in these warehouse movements? I'm struggling to see that as well, John. The Hunt Brothers was the other, was the reverse because they were basically massively long the future and the exchange basically told them, okay, guys,

deliver the bars that you bought, take delivery, which obviously they couldn't and they had to get out of the futures market. Because they were leveraged. Exactly, and the market collapsed. This time around, if you look at the level of silver that has arrived in these Comix warehouses, they're well above the shorts that's currently held by swap traders, so that's normally the banks, which again normally you would assume is held against physical bullion holdings or hedges against client positions.

and also the producer short. So what could happen is if the producers, if their pockets are not deep enough, they could potentially start considering removing some of their hedges in the futures market. So the squeeze potentially could increase

I think the risk of another squeeze could more come from futures shorts held by producers than other sources. But it just highlights that for now, New York is becoming a little bit dislocated from the rest of the world simply because of the threat of terrorism. Maybe we should just take that as we are on the metals, John, just on the copper, because we talked about it before, slide eight,

Right now, the copper priced in New York trades 11% above London. It's just phenomenal. While silver is around 2.2% above, if you look at the spread we just talked about, we're looking at an 11% premium in New York. What does this mean?

Well, it means that the global market is getting hoovered right now for physical available metal. Because if you can get copper into New York and you can sell the fuse against it, you can lock in 11%. That is a fantastic trade if you are a physical trader and you're normally trying to pick up nickels in this arbitrage trade.

What does this mean going forward? Well, it means basically that the U.S. consumes roughly around 6%. I think that was a number I saw from Goldman Sachs. 6% of global copper demand comes from the U.S., whereas the rest comes from the rest of the world. But if this continues, we could potentially see half of the visible available stocks being shipped to New York over the coming months, basically leaving the rest of the world unsold.

very low stock levels, underpinning prices in London. So while you'd imagine that this would primarily be a New York thing, it's actually also now starting to become an international thing. And just think about New York and the US, they

They are in front. They're heading towards a massive increase in power. Strategic stockpile in copper all of a sudden. They're heading for a massive increase in power demand. And obviously, with power demand, also rise demand for the conductor. And the conductor is copper, and that price is now 11% higher than the rest of the world. That is ultimately leading to higher prices. So, yeah, it's difficult to gauge whether we should follow the high-grade futures contract or we should follow London contracts.

I'm a little bit torn. I've always been watching the New York price, but right now there is a massive dislocation, which makes it difficult. Yeah, very special set of circumstances. And if we just should finish off on silver, John, because I think then, well, actually, let's take your chart silver, because it's actually quite funny or interesting the kind of target you have.

Yeah, I just love to pull out the old Elliott Wave playbook when things start to get interesting in case you're looking at a very large trending move. And a lot of the times the precious metals do trade on very, very technical levels. For example, you had the big 2020 rally in silver.

where it rallied to about $30 an ounce. And that retracement, where it finally found its lows in late 2022 amidst all the panic about higher yields, was just right back and forth around the 61.8% retracement level. I don't have that level on that chart there on slide six, by the way, 1770 or something like that.

And then we were in consolidation phase for just forever. I mean, it was a boring market largely for the better part of, let's call it, four years. And then we saw this really tight rally, sort of silver finally waking up a bit to what's going on in gold, where I started to mark the Elliott Wave rally.

series a 135 sequence uh making up a proposed large roman numeral one wave uh that's the rally from the 22 bucks to the 30 plus bucks we saw in early 2024 then we consolidated we saw a very sloppy rally that could be rally sorry wave one of a five wave sequence

which I've labeled question mark Roman numeral three. And if we gauge the size of that using Fibonacci principles relative to the size of wave one, we get 161.8% target of $43 and a half. Uh, if we really get an aggressive move, 261.8%, it would be 54 bucks. Um, and I've put in there as well, the big red dotted line, maybe the reason we petered out on this rally, just shy of or around 35 bucks. I can't remember if it broke 35 bucks or not. Uh,

35.22 is the 61.8% retracement of the 2011 high to 2020 low. So it's a very major break if we break above 35 and change there. That's that big retracement level. And it opens up targets to the upside, I would argue. Yeah, and that takes me actually to our current forecast because –

We are looking at 3,300 in gold to be reached sometime. And if we save with that move that the gold... Well, because we know silver normally tends to be gold on steroids. So if gold rallies to 3,300, I could see the gold-silver ratio drop back down towards the 75 level where we were on two previous occasions, showing that on slide 7. And the maths are quite easy. If you take 3,300...

in gold and 75 on the ratio that takes us, takes your silver to $44. There you go. So, um, fits with our 161. So let's revisit that number in a few months time. Yeah. See how wrong we were. We need to maybe put a pin in these things somewhere on our, on our podcast slides. Yeah.

Okay. Rewinding a little bit to – I think I've mentioned it on the last podcast. What is the general driver of the U.S. underperformance? I'm convinced it's a global questioning about allocation to U.S. assets more generally speaking from pensions, from big money in general and not just the risk, pronounced risk of –

a U.S. recession on all of the disruptions going on with the Trump administration wanting to front load the growth to hit to get its agenda kicking into full gear later in 2026. And some interesting people to follow on that, among other things, especially whether we – the most existential problem for equity market bulls would be if the passive crowd is sort of unsettled by what's going on and starts to under-allocate towards passive strategies or towards rotating into stocks in general.

And that's Mike Green. I've touted his ex-handle before, at ProfPlum99. And I have a trio of his tweets on slide three about signs and risks of this angle of wanting to move away from U.S. allocation from Canadian funds. I mean, not that they're the biggest, but that's just one example where, for example—

And the options you have in one of Canada's big savings vehicles for wage earners is basically all U.S. funds, where you basically have a 3% allocation to your own country's equities at a time when you have Canadians outraged at Trump's behavior and wanting to boycott the USA in any way it can. So I think this behavior risks spreading. Of course, it risks spreading to Europe as well, where the U.S. is doing what it's doing. And there's a widespread popular backlash to that on top of the

On top of the fiscal angle of Europe. Fast forward, slide four, earnings upcoming the week ahead. We had BMW out this morning. Some very disappointing results. The relative market, it was getting punished. It's around the 200-day moving average, the BMW stock. So watch that one technically. Next week, not a lot on the earnings front, but a couple of interesting names, I think, largely on the consumption front where we have Nike,

discretionary spending indicator there. We also have U.S. retail sales out next week. And then Darden Restaurants. And I put a really long-term chart of Darden Restaurants on slide four. You could say, why the heck would I care about a U.S. restaurant chain? But I mean, it's been a spectacular stock to own over the last 20 years, trading well below 25 during the

great financial crisis and hit a high of $200 recently. So not bad stuff for a humdrum retail sort of popular restaurant chain. So you can see the massive drawdowns it suffers during traumatic recessions as the 2008-9 crisis showed and 2020. But I would use that as a

I mean, if there's anything that's discretionary spending, it should be sort of restaurant dining at a sort of lower to mid-tier level in the U.S. So just anything they're saying on what they're saying could be interesting as an indicator on the U.S. consumer, which there are so many little data points suggesting that they're understrained. But we need to see that picking up and some of these real results as well.

Slide five, I'd look at the FX lay of the land, and you can see that the Swedish krona momentum has come off a bit there. The yen is just really lost at sea here, locally speaking. I think there's so many important things coming up. We've got the Bank of Japan next week, end of financial year, end of this month. We have been

Seen a huge heavy move in positioning favoring the yen. And then the Europe fiscal distraction came in and suddenly pumped your yen to new highs and pumped European yields much higher. It's just lost focus. So wondering how the yen regains focus for Europe.

A potential upside versus the dollar if it's soon or it's a little bit later because we see an ugly squeeze on positioning. I think that's one of the more interesting things, not right at this moment, but in the coming couple of weeks. And then the dollar rally status, or sorry, dollar sell status and euro dollar status, where do we find support? I suspect at quite high levels on euro dollar specifically. And whether we see that Renminbi finally moving away from constantly just directionally

you know, correlating with low beta to the direction of the U.S. dollar. I want to see some signs of independence there before I believe in this revaluation scenario that many have talked about for the Renminbi higher. All those topics discussed in my latest FX update. I will provide a link to that in the podcast description.

Well, I don't know if you wanted to highlight anything on crude oil that you're seeing before we – I know we have a general sort of medium-term to long-term outlook that the current prices are destructive of supply, of key sources of supply. Of course, if we get an ugly recession, we get these dynamics where we move into steep contango and can get some crazy front-of-the-curve low prices, spot prices for energy. But any other thoughts on crude for this time around? Yeah.

Just the fact that we have managed to stabilize this week despite continued bad news coming in on the worries about the demand side. We've seen some downgrades from the oil.

oil forecasters, IEA as well yesterday came out with that. But I think what we have to really focus on in the short term is the fact that we are seeing US stepping up their sanctions against Iran, Venezuela as well. We have to remember that in the last four years,

Venezuela and Iran lifted production by 1.6 million barrels a day. That is basically more or less the same that Saudi Arabia, Kuwait and UAE lowered their production by. So instead of focusing on OPEC plus starting to increase production from next month, which will be relatively small increments,

I think the real threat is that we can see a sizable drop from Iran and that will underpin prices. So even though demand has really been the focus, I think there's an equal risk that supply could be challenged as well, especially also increased murmuring that the sub-60 in WSI could lead to a demand supply destruction or lower production in the U.S. So, yeah.

Yeah, we stay fairly constructive on crew prices, even though the economic outlook looks a bit murky and...

at this point in time. And I was just trying to wait and to see whether we could hit that number, John, while we were doing this recording, but we've had a higher 2,999.5 on gold. But nevertheless, just imagine that is a standard central bank gold bar, 400 ounces, costing $1.2 million. It's worth in weight just above 12 kilos. It is phenomenal. Wow. That's a lot of money for a piece of metal just sitting there in front of you. All right.

Our appendix slides in. There's so many good links, interesting things going on in this world, and I'm trying to link to as many of these as I can. We have a good Michael Every piece, this time a longer one on EU's economic statecraft, the update there.

I think it's a 15-pager, at least with references, et cetera. It's a thorough look at what the EU is saying it is all about, and a lot of these things that it's saying it's all about, it doesn't really have the power to back up in terms of being in favor of the international rules-based order and then a beacon of democracy and things like that. Of course, democracy can do all the democracy it wants domestically, but it's about what is happening in the backdrop, and I think every does a great job of saying –

Of asking questions more than providing answers and pointing out some of the tensions and what the EU is trying to do with the realpolitik backdrop and how much it would have to move to get where it needs to, to make, you know, back up what it's saying with some real force.

Wall Street Journal, it is behind a paywall, but I found an interesting one on, you know, just there's a microcosm of when the U.S. tries to do something that's on a profit basis, like create a graphite mine, it fails because China then just moves in and subsidizes via its grand macro strategy, as every would call it, subsidizes graphite production to just put everybody out of business that would even attempt to do such a thing. So

What does that mean? It means if other players want to play the same game, they may have to just prioritize strategy and national security over profits. I think that's one of the key themes. What every sort of reduces to the question, what is the GDP for? Do we want GDP because growth, because profits, or do we want GDP because we have to do something that is in our national security interests?

Somewhat on the same note is the Chinese domination of shipbuilding. There's a think tank piece of a very long one that I've linked to as well. There's also a two-page summary basically pointing out that the U.S. does not build any of its ships. And I saw another interesting tweet about

China has created some kind of missile system that you can load into a standard container and the idea that basically container ships could double as naval forces in some sort of scenario with Chinese military operations. So interesting one there.

critique of MAGA on the 40 chests, the idea that MAGA has got everything right. It's identified a lot of problems and is trying to address those problems, but in many cases it is doing it the wrong way. And I agree with many of these points that they're bringing out there. It's not to be political. It's just to point out what missteps MAGA risks making here in carrying out its agenda.

And then an FT Alphaville piece, that one should be available if you just register no paywall on making little or not making fun of, but just saying that the Mar-a-Lago Accord is what he calls pointless, ineffectual, destabilizing, and only leading to the erosion of the dollar's preeminent role. I think that is the risk as well.

for this, what has been forwarded as the Mar-a-Lago Accord. And then I have all the macro calendar highlights for the week ahead, or at least I hope I have all of them. I can't guarantee completeness, but I've made an attempt on slide 11. We have one, two, three, four, five central bank meetings next week.

Uh, the more interesting ones, the FOMC as always, because we have the quarterly updates with the dot plot, et cetera. Although I wish, I think the FOMC wishes it could flush this dot plot, uh, exercise down the toilet and never have to do it again. I think forward guidance is largely useless from the fed, but of course it means something day to day. Bank of Japan may be a bit more impactful and the other ones, Swiss national banks, Sweden and bank of England. Um,

We'll talk more about their various rate decisions next week. But on the U.S. data front, we have the retail sales up on Monday. And that is the question or could be starting to answer the question on whether the U.S. consumer is starting to

you know, stay at home more and spend less. We saw an ugly January data point. There's been some bad weather here and there this winter. So weather effects are a possible one-time risk, but we'll see that report. And then that's mainly the only big U.S. data point of note, some housing market stuff up as well. But then as the FOMC,

And I think the highlight of the week is probably that Friday, Japan national CPI for yen traders. And of course, we've got maybe one or two headlines from Japan.

His Excellency the President Donald Trump next week. I'm thinking maybe. I think that's probably one thing we can rest assured. There's no need to get our stress levels or pulse down anytime soon. The nice thing is that we're seeing a little bit of a reduction of the reaction function to these things, just maybe out of sheer exhaustion. All right, it's been a long one today. We'll wrap it up there and have a wonderful weekend when you get there. Stay very careful and we'll be back next week with the next episode.

Saxo market call.