Friday’s sharp selloff in precious metals wasn’t the end of anything — except maybe the nerves of short-term traders.
After a rollicking rally early last week, gold blew past my $5,200 target like a musket ball through tissue paper, topping $5,650 before gravity grabbed it by the ankles.
By the close on Friday, gold landed at $4,907. Silver, ever the drama queen of the metals complex, closed lower by 26% — a swan dive worthy of the name.
Cue the panic, the headlines, the talking heads… and the reader mail!
Here’s the thing: nothing’s changed. Our long-term forecast is alive and well.
Even in the technicals, the 200-day moving average still slopes upward like a westbound wagon trail, and until that reverses, the bull market remains intact.
Still, what happened on Friday proved to be rather emotional. The kind of trading spasms you see when headlines crash into sentiment and stir up more froth than a bucket of milk in a hailstorm.
And as we also forecast, a sign of markets to come in 2026.
The “news” that spooked markets was Trump’s long-teased announcement: Kevin Warsh is his pick to succeed Jerome Powell at the Federal Reserve.
🧠 The Warsh Gambit: Trump’s Fed Reset Begins
For months, speculation swirled like chimney smoke in a snowstorm. Would Trump tap a dove? A loyalist? A Wall Street man in a red hat? Warsh checks none of those boxes — and all of them.
He’s a former Fed governor, a Goldman alum, and a card-carrying skeptic of central bank omnipotence.
He’s said, “The Fed is not independent from government. It is independent within government,” which sounds like something out of a fortune cookie written by Hayek.
He doesn’t want the Fed playing God, and he’s not keen on printing money to mop up Congress’s mess. He believes in limits. In credibility. In consequences.
That’s exactly what makes his nomination such a curveball. Trump wants low rates and, as a consequence, a weak dollar. Warsh wants institutional credibility and a smaller Fed.
What remains to be seen: Will Warsh’s confirmation go without a hitch?
If he’s the Fed Chair, will he be able to reduce the Fed’s balance sheet, Quantitative Tightening (QT), and still encourage borrowing on Main Street? Recall, the FOMC board opted to end QT on December 2, 2025.
The market’s trying to figure out which Warsh shows up if he gets the gavel. God only knows what Trump will say when and if he does.
📉 “Buy the Rumor, Sell the News” — And Other Familiar Scripts
What happened in gold and silver last week fits an old pattern.
First, you get the rumor: Trump’s picking someone who’ll slash rates and juice the system. Then you get the reality: Warsh is a little more complicated than that. Then you get the selloff.
But this isn’t a trend reversal. It’s a textbook example of why news is a terrible trading strategy.
“Crypto’s downturn,” writes Adam Kobeissi, making another case in point, “is being blamed on just about every possible thing, ranging from Iran to the Fed. However, the answer to this question is actually quite simple when you look at the flow data.” Mr. K continues:
Why is Bitcoin below $79,000? It’s entirely a liquidity situation.
There have been 3 well-defined liquidation waves, totaling ~$1.3 billion over the last 12 hours. In a market where liquidity has been choppy at best, sustained levels of extreme leverage are resulting in “air pockets” in price.
Couple this with herd-like sentiment, constantly shifting from extreme bullishness to extreme bearishness, and the swings become even more aggressive. It’s a great time to capitalize polarity in emotion and price.”
The news just gets stapled on afterward. Investors had loaded up in anticipation of a dovish Fed pivot. When the pivot looked less dovish, they ran for the hills. But the larger pattern—the metacycle—remains unchanged.
🧭 Trump’s Great Reset: Reaganomics Meets Empire 2.0
Here’s where things get interesting. If we take a 30,000-foot view of the markets and the economy, we’re entering a fragile inflection point.
Every few generations, the American economy goes through a metamorphosis. Not a tweak or a stimulus package, but a full-bore reset.
1803: The Louisiana Purchase doubles our real estate and turns a fledgling republic into a continental juggernaut.
1869: The railroads stitch the nation together, transforming cattle towns into trade hubs.
1933: The New Deal rewires the social contract and anchors the U.S. as the global factory.
1982: Reagan kicks off a deregulation boom, lighting the fuse on an 18-year bull market.
Each time, the transformation is built on policy and power, followed by sentiment.
Today, Trump’s team is trying to orchestrate another one.
The architecture includes seizing Venezuelan oil reserves, reworking trade maps, rewiring the Fed, and recasting the postwar order through what looks suspiciously like a nationalist industrial policy with imperial ambitions.
The talk of Greenland, strategic minerals, oil chokepoints — none of it is window dressing. This is imperial logic dressed in campaign slogans.
📜 The Pax Americana Rewrites Itself
Post-WWII America, like Athens after the Persian Wars, didn’t choose empire — it stumbled into it. Europe was rubble. Asia was chaos. The old imperial powers were toast.
America had the capital, the military, and the manufacturing. Like Athens organizing the Delian League, we became the reluctant center of gravity. But empires don’t last on inertia. As we observed early on in Empire of Debt, they rely on constant renewal.
Power must be maintained, not assumed. It’s expensive.
When it fades, even the most secure hegemon becomes brittle. That’s where Trump’s reboot comes in. He’s trying to bolt new muscles onto the old bones: tighter borders, captive oil, compliant Fed, revived industry.
Whether it holds depends on whether the American public is willing to bankroll empire maintenance—or whether the decline phase continues, like Athens after it overreached in the Aegean. Or if, as in the upcoming midterms, the electorate chooses instead to succumb to the paranoid delirium of populist politics and consume itself.
🧊 Markets in the Freeze, Groundhog Sees His Shadow
Let’s talk weather.
Phil, our furry oracle from Punxsutawney, saw his shadow this morning. Six more weeks of winter, they say. The crowd groaned. Another month of busted pipes, space heaters, and electric bills that could make a grown man weep. Winter Storm Gianna already iced the South, and over 100,000 folks are without power across the East.
Cold fronts are snarling airports and delaying freight, pushing inflation higher with shipping surcharges and fuel costs—just as the Fed tries to hold the line.
Groundhog Day is, of course, less science than seasonal comedy. As Jonathan Erdman of weather.com reminded us, “There is no scientific basis for forecasting how early spring weather will arrive based simply on one morning’s cloud cover.”
But that hasn’t stopped Phil from climbing out of his hole every February for the past 139 years.
“The short answer is: it stinks,” Louisiana Senator John Kennedy might say about the state of forecasting the weather or economics and politics in this market. “The long answer is: it stinks to high heaven.”
Like Phil in his top hat, every economist on television is looking at the same cloudy sky and offering contradictory predictions with absolute confidence.
“Economists are like weather forecasters: they can tell you what happened in the past but have no idea what’s going to happen in the future,” the saying goes. Which only proves what John Kenneth Galbraith once said: “Economics is extremely useful as a form of employment for economists.”
Bundle up, hold your gold, and remember what Granny used to say: “When the weatherman smiles, bring an umbrella anyway.”
