MacroVoices #492 Daniel Lacalle: The End of American Exceptionalism?
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MacroVoices Erik Townsend & Patrick Ceresna welcome, Rick Rule. They’ll discuss tariffs, recession risks, the European perspective on U.S. geopolitics and markets, the future of the EU’s relationship with the United States, precious metals, energy, and much more. https://bit.ly/4llKZ8z
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Global markets are in a bull trend driven by synchronized central bank rate cuts and accelerating money supply growth, while trade negotiations have largely concluded successfully and will support currencies and commodities of US-allied nations, though the US dollar faces structural headwinds and gold is positioned for new all-time highs.
- Over 20 central banks cutting rates simultaneously with global money supply growing at 12% annually creates powerful tailwinds for equities
- Trade deal frameworks are 75% complete with major economies (EU, Japan, South Korea, Australia, UK) having agreed to significant changes, reducing macro uncertainty
- Fed's decision to hold rates while other central banks cut creates carry-trade opportunities in other currencies and precious metals, weakening the dollar structurally
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Central banks globally are balancing their asset bases with increased gold holdings and decreased government debt from developed economies (fewer euro-denominated reserves and treasuries), a trend that accelerates during the September-December period when central banks reassess their balance sheets, creating a seasonal tailwind for gold prices.
“We are seeing more and more central banks all over the world balancing their asset base with more gold, less eurodenominated reserves, i.e. less debt and less treasuries. So I think that that is one element that tends to coincide with the September to December period which is when central banks try to readress their challenges in their in their balance sheet”
The US dollar will remain the world's reserve currency in the fiat world because there is no viable alternative, not because of dollar strength but because the euro faces redenomination risk and enormous fiscal problems in member states, the yuan remains subject to capital controls that prevent alternative status, and no other currency can match US capital market depth and transparency.
“I think that the reserve currency of the status of the US dollar is unchallenged. The US dollar is the world reserve currency in the fiat world because there is no alternative.”
The Federal Reserve historically keeps monetary conditions too tight for too long, spurring economic weakness, and will likely prove late to the game in easing, with the key question being whether economic slowdown has emerged requiring deeper Fed cuts, potentially to 2% or lower if there is more prolonged weakness and a more dovish Fed chair is installed mid-2026.
“the Fed has historically kept conditions always too tight too long uh and inevitably spurred uh economic weakness cycle and how are we going to see this scenario where in fact some sort of a recession has emerged and the Fed will be late to the game proving that there was some form of a policy error in them waiting waiting this long to start to act.”
China does not want the yuan to become a reserve currency alternative to the dollar because doing so would require eliminating capital controls, currency controls, and financial controls that the Chinese government uses to maintain domestic stability and prevent capital flight—instead, China wants the yuan used in more global transactions while maintaining state control over the currency.
“China does not want the yuan to be an alternative to the US dollar. They may want the yuan to be used in more global transactions than currently but not to be an alternative to the US dollar because they don't want to eliminate the capital controls, the currency controls, the financial controls that they have in their economy”
New all-time highs in gold are likely as central banks accelerate their purchases of gold and reduce purchases of government debt from developed economies, with central banks balancing their asset bases with more gold and fewer euro-denominated reserves and treasuries, a process that typically intensifies in the September-to-December period.
“I think we will see new all-time highs of gold as the decision of central banks of purchasing more gold and less government debt from developed economies accelerates. We are seeing more and more central banks all over the world balancing their asset base with more gold, less euro-denominated reserves, i.e. less debt and less treasuries.”
The Federal Reserve has a historical pattern of keeping monetary conditions too tight for too long, which inevitably spurring economic weakness and requiring later emergency easing—this cycle pattern may be repeating as 2025 progresses
“the Fed is going to have to start to ease. And so uh the the a bigger question also there for is is that will that result in some sort of economic slowdown because the Fed has historically kept conditions always too tight too long uh and inevitably spurred uh economic weakness cycle and how are we going to see this scenario where in fact some sort of a recession has emerged and the Fed will be late to the game proving that there was some form of a policy error in them waiting waiting this long to start to act.”
Stablecoins tied to the US dollar could become a viable alternative reserve currency mechanism because while they don't compete with the dollar itself, they shift the benefits of reserve currency status (unlimited demand, seigniorage, economic leverage) from the US government to stablecoin issuers, potentially decoupling reserve currency benefits from the fiat issuer.
“What if it was everybody has to have your stable coins? I think that changes the game.”
OPEC Plus, including Russia, announced the largest production increase in response to geopolitical risk between Iran and Israel (triggered by the International Atomic Energy Agency's aggressive statement against Iran) in order to absorb any price shock from that risk by putting 1.5 million additional barrels per day into the market, demonstrating strategic coordination to prevent geopolitical events from disrupting markets.
“once there was an evidence that there was a significant geopolitical risk building up between Iran and Israel. And if you uh go back a little bit more than what people believe, this basically came when the organization of atomic energy issued a very aggressive uh statement resolution against Iran. Immediately, OPEC announced the largest increase in production that would that would ultimately absorb any type of geopolitical risk simply by putting in the market 1.5 million barrels a day more than was initially expected.”
Global markets are in an upward trend driven by simultaneous money supply increases at approximately 12% per annum and rate cuts across more than 20 central banks worldwide, combined with earnings growth that exceeded expectations and reduced macro uncertainty around trade deals.
“I think that we are in a in an upward trend for global markets driven by the increase in money supply and driven by an absolutely brutal pace of rate cuts all over the world by central banks. more than 20 central banks cutting rates and money supply growth at a global level that is rising at around a 12% peranom rate which is insane.”
The Federal Reserve was exceedingly wrong about inflation on both the way in (2021-2022) and on the way out (2023-present), and this error is more dangerous than the current rate-cut debate because the Fed kept excessively low rates through 2022 while purchasing treasuries, generating elevated inflation that hurt families and small businesses, and now those same families and businesses suffer from high rates imposed afterward.
“the Federal Reserve hurt families and small businesses in the 2021 2023 period by keeping very very low rates and maintaining until 2022 the purchases of treasuries. ries and of assets and therefore being exceedingly doubbish in terms of policy that generated a very elevated inflation. And basically what is going on is that on the way in families and businesses have been hurt by elevated inflation and now on top of that they're suffering from high rates.”
The Fed must start easing more than previously expected because the negative jobs number is baking into market pricing the realization that the Fed will have to ease its stance; dollar weakness in response confirms this and indicates the structural downtrend in the dollar will likely continue.
“It's clear that the Fed is going to have to ease a little bit more than expected. That has to start being baked into the cake. And uh and the dollar uh has weakened on that.”
Decentralization of monetary systems and stablecoins tied to major currencies are the future because they would shift reserve currency benefits from the currency issuer (the Fed/US Treasury) to the stablecoin issuer, creating alternative demand mechanisms independent of traditional central banking, though this requires development of multicurrency bank accounts and distributed ledgers and is a long-term trend unlikely to fully manifest within 5-7 years.
“I think that decentralization is certainly the future in the monetary system...if stable coins take the place of the US dollar, they would continue to support the US dollar as I would say the leading fiat currency. But they but the benefits of being the reserve currency would be in the country and the issuer of those stable coins”
Systematic volatility-targeting funds (vault targeting funds) have largely completed their buying, reducing a key near-term source of equity demand, making future gains dependent on new catalysts such as recession probability shifts and Fed policy changes
“we now have the odds of a recession increasing. The likelihood the Fed is now going to be cutting three times this year appearing in the market. So a lot of these headwinds uh couldn't make the market heavy. Now typically if we see the resistance start to come in around that 64 6500 level on the S&P and this uh becomes uh a point of resistance for the markets throughout the month of August then we can start talking about uh what in September October could from a seasonality perspective bring about a deeper or more meaningful market correction. Right now, that information is all going to be revealed in how the market behaves up along these highs. Most systematic strategies have already done most of their buying.”
Decentralization of the monetary system is the inevitable long-term future, though it likely requires multiple significant steps including multiple bank accounts in multiple currencies and trade between them, and won't occur in the next 5-7 years but represents the eventual replacement of the fully centralized commercial banking and monetary system.
“decentralization is certainly the future in the monetary system... I think it's inevitable. I think it's inevitable. But it's am I going to see it in my lifetime? Maybe. But certainly not in the next five, seven years.”
The Federal Reserve's policy error was more fundamental than current rate-cut timing debates: the Fed kept rates excessively low from 2021-2023 while purchasing assets, generating the elevated inflation that families and small businesses suffered through, and now those same groups suffer again from high rates used to combat the inflation the Fed created.
“the Federal Reserve hurt families and small businesses in the 2021 2023 period by keeping very very low rates and maintaining until 2022 the purchases of treasuries. ries and of assets and therefore being exceedingly doubbish in terms of policy that generated a very elevated inflation. And basically what is going on is that on the way in families and businesses have been hurt by elevated inflation and now on top of that they're suffering from high rates.”
The US dollar's reserve currency status is unchallenged in the fiat world because there is no viable alternative; the euro has redenomination risk, massive fiscal problems exceeding those of the US, and unfinanced government liabilities in some cases exceeding 500% of GDP; the Chinese yuan cannot become an alternative because China does not want to eliminate capital controls and currency controls.
“I think that the reserve currency of the status of the US dollar is unchallenged. The US dollar is the world reserve currency in the fiat world because there is no alternative. If you think about what could be the alternative, the euro, it has redenomination risk. It has enormous fiscal problems, much larger fiscal problems than the uh than the United States”
The idea that BRICS countries will create an alternative currency to dethrone the dollar is unrealistic given that BRICS' own state-owned exporting companies continue to use the US dollar for all transactions, revealing an internal contradiction between BRICS rhetoric and member behavior.
“the idea that Brazil, Russia, India, China, South Africa are going to create a currency that will dethrone the US dollar is also very very challenging simply by looking at the way in which their own state-owned exporting companies behave which is to continue to use the US dollar in everything that they do”
OPEC+ adopted a strategy of maintaining low oil prices to signal to consumers that oil suppliers won't deliberately harm them, while simultaneously showing that alternatives like shale and renewable energy are less affordable and competitive than conventional OPEC oil, thereby preserving OPEC+'s position as the global central bank of oil and most reliable supplier.
“the strategy is both to show to consumers that it's that oil suppliers are not going to hurt consumers, that they're not looking to increase prices for no reason. and and at the same time to try to show that the alternatives in the energy world are not as affordable and as competitive as some would have expected particularly in the renewable sector etc.”
No central bank or government is currently defending the purchasing power of fiat currencies, so the dollar will not experience a significant rally to 110 on the DXY despite structural weakness, because neither the Trump administration nor the ECB nor the Japanese government has incentive to support the dollar—the Trump administration is comfortable with modest weakness, the ECB prefers euro weakness for export competitiveness, and Japan needs to weaken the yen to manage fiscal illusions.
“I think that the problem with fiat currencies is that nobody no central bank and certainly no government is defending the purchasing power of the currency. The Trump administration is not particularly comfortable with a weak dollar but it's not comfortable with a very strong dollar either. the European Central Bank and the European Union are perfectly happy if the euro starts to weaken because it's basically going to be a very significant counter effect to the tariff impact for exporters. And certainly we don't have to even debate that the Japanese government needs to continue to destroy the purchasing power of the yen in order to maintain the illusion, the monetary illusion of its absolutely nightmare fiscal and debt situation.”
The Fed's decision to maintain elevated interest rates while other central banks cut rates is creating a reverse carry trade and serves as an 'early Christmas gift to emerging economies, the euro and the yen' because US treasury hedging costs become prohibitively expensive for international investors, causing them to seek alternative investment opportunities.
“when the Fed keeps elevated rates at the same time as other central banks are lowering them, what it basically means is that for international investors, investing in treasuries is very expensive and the hedging cost is too high and it completely eats away the yield of the treasury. Therefore, what the Fed is basically doing is almost an early Christmas gift to emerging economies, the euro and the yen.”
European Union commentators and economists frame the US trade agreement negatively not because the agreement itself is negative, but because it reveals fundamental weaknesses of the EU: lack of energy, military, or technology leadership; inability to redirect exports to alternative markets; and dependence on the US market being more important than Europeans believed.
“the reason why so many commentators are negative about this agreement is not because the agreement is bad in itself. I think that it's a positive agreement. The reason why they're angry is because it shows that the European Union did not have any aces in this uh game of cards...It did not have obviously the possibility of moving its exports to other markets.”
Stablecoins are a good strategy for the US administration to cement the US dollar's position in the fiat currency world and maintain and strengthen demand for US treasuries by allowing non-US investors to access dollar exposure without leaving the system.
“the rise of stable coins is a very good idea that the US administration has in order to cement the position of the US dollar within the fiat currency world and to maintain and strengthen the demand for US treasuries.”
China's state-owned exporting companies continue to use US dollars for international transactions despite Chinese government rhetoric about dedollarization, revealing a preference for dollar-denominated settlement over alternatives
“the idea that Brazil, Russia, India, China, South Africa are going to create a currency that will dethrone the US dollar is also very very challenging simply by looking at the way in which their own state-owned exporting companies behave which is to continue to use the US dollar in everything that they do”
OPEC Plus, including Russia, is deliberately maintaining lower oil prices as a strategic choice to demonstrate to consumers and competitors that oil suppliers won't exploit geopolitical crises for price gains, remain the reliable and affordable supplier of first resort, and show China (a major importer) that OPEC won't hurt them during trade negotiations.
“the strategy from OPIC plus and from Saudi Arabia in particular but also from the countries that I would say share the same strategy with Saudi Arabia is to remain the global central bank of oil and to maintain their position as the as the supplier of first resort and also as the most reliable and affordable supplier.”
The European Union-United States tariff agreement, despite appearing as a European capitulation, is actually beneficial because it includes two critical strategic elements: an energy deal reducing EU dependence on Russian liquefied natural gas and a microchip/technology agreement reducing reliance on Chinese tech, thereby weakening the possibility of EU alignment with Russia-China.
“In the EU United States agreement there there are two exceedingly important points. One is the energy agreement and the other is the microchip and technology agreement. Those two are certainly deals that are going to reduce the possibility of the European Union, let's say, uh, falling into the arms of China and Russia.”
The S&P 500 had moved 300 points above its 50-day moving average before the jobs report, creating a typical overbought state associated with mean reversion toward the 50-day average, which is a normal feature of bull trends where corrections of 3-5% back toward the moving average are routine throughout the year.
“the jobs numbers last week finally triggered a market correction. We were 300 S&P points above the 50-day moving average, a typical overbought state that has mean reversion. Now, we weren't bearish thinking that there was a massive decline, but these kind of 5% market corrections back toward the 50-day moving average are common place throughout the course of a year uh as these bull trends happen.”
The Federal Reserve's decision to maintain elevated interest rates while other major central banks lower them creates a 'beautiful present' for international investors, emerging economies, the euro, and the yen because the high cost of hedging US Treasury investments eliminates yield advantage, prompting capital to seek alternatives in cheaper non-dollar assets.
“when the Fed keeps elevated rates at the same time as other central banks are lowering them, what it basically means is that for international investors, investing in treasuries is very expensive and the hedging cost is too high and it completely eats away the yield of the treasury.”
European economists and commentators view the EU-US trade agreement negatively not because the agreement itself is bad for Europe, but because it reveals fundamental structural weaknesses of the European Union—specifically its lack of energy, military, or technology leadership that would allow better negotiating terms with the United States.
“the reason why so many commentators are negative about this agreement is not because the agreement is bad in itself. I think that it's a positive agreement. The reason why they're angry is because it shows that the European Union did not have any aces in this uh game of cards in order to try to squeeze better trading terms from the United States.”
Copper prices have been dangerously destabilized because the bullish trend was predicated on long-term expectations of electric vehicle adoption and renewable rollout, making it easy for Trump administration rhetoric to unwind that bullish thesis quickly with just a few messages, without requiring step-by-step fundamental supply-demand reassessment.
“In the case of copper, what we have seen is that the front end of the curve actually was moving very aggressively on expectations of electric vehicles, of expectations of renewable roll out, etc. all these tremendous demanddriven bullish messages. So it it seems that it was easy for Trump and Bent to prick that let's say that trend with a couple of messages”
Trump administration and Secretary Bessant have completed approximately 75% of their trade negotiation objectives, with main frameworks of agreement set for EU, Japan, South Korea, Australia, and UK, leaving only details like sectoral tariff timelines and investment allocation decisions remaining.
“I think that we are 75% into wrapping it up. Why? because the main frameworks of agreement have been set up and I think that by now once the European Union, Japan, South Korea, Australia in agriculture or the United Kingdom etc all have agreed upon very significant changes for the trade relationships.”
Secondary sanctions against India for buying Russian oil are very difficult to enforce because India purchases oil based on commodity availability and economic need as a fast-growing economy with high commodity demand, not geopolitical positioning, and Trump's secondary sanctions threat is primarily a tactical tool to force India into a trade agreement rather than a fully enforceable sanction package.
“I think that it's very difficult to enforce. I think that is very very difficult to enforce because India does not buy Russian oil because of a geopolitical position or because any let's say strategic advantage provided by their relationship with Russia. It's basically because they buy any and every amount of commodities that they can from where they can.”
The EU-US trade agreement is positive fundamentally because it includes critical energy and microchip/technology provisions that reduce EU dependency on Russian liquefied natural gas and Chinese semiconductors, thereby preventing the European Union from aligning with Russia-China, even though the presence of 15% residual tariffs makes many European commentators frame it negatively.
“In the EU United States agreement there there are two exceedingly important points. One is the energy agreement and the other is the microchip and technology agreement. Those two are certainly deals that are going to reduce the possibility of the European Union, let's say, as you said, uh, falling into the arms of China and Russia.”
Copper prices represent a dangerous technical breakdown because they were predicated on long-term bullish expectations about electric vehicles and renewable energy rollout, making them vulnerable to political messaging that wasn't grounded in fundamental supply-demand analysis, and this vulnerability suggests caution against assuming current prices represent a bottom.
“In the case of copper, what we have seen is that the front end of the curve actually was moving very aggressively on expectations of electric vehicles, of expectations of renewable roll out, etc. all these tremendous demand-driven bullish messages. So it it seems that it was easy for Trump and Bent to prick that let's say that trend with a couple of messages”
The European Union in 2024 imported record levels of Russian liquefied natural gas that exceeded the total aid the EU has provided to Ukraine, highlighting European energy dependency despite geopolitical tensions
“The European Union in 2024 imported record levels of Russian liqufied natural gas. And this deal, what it basically shows is that the European Union needs to choose between the United States or Russia plus China.”
Global markets are in an upward bull trend driven by three reinforcing factors: global money supply growth at approximately 12% per annum, rate cuts by more than 20 central banks worldwide, and earnings season performance that exceeded expectations, creating conditions where investors move capital from money market funds back into equities.
“we are in a in an upward trend for global markets driven by the increase in money supply and driven by an absolutely brutal pace of rate cuts all over the world by central banks. more than 20 central banks cutting rates and money supply growth at a global level that is rising at around a 12% peranom rate which is insane.”
Secondary sanctions against countries like India that buy Russian oil are very difficult to enforce because India's purchases are driven by commodity-hungry economic growth rather than geopolitical alignment with Russia, and the sanctions threat is actually a negotiating tactic to force India to expedite US trade agreements rather than a credible enforcement threat.
“I think that it's very difficult to enforce because India does not buy Russian oil because of a geopolitical position or because any let's say strategic advantage provided by their relationship with Russia. It's basically because they buy any and every amount of commodities that they can from where they can. It's a fast growing economy with a tremendous thirst for commodities.”
The dollar index will likely remain in a trading range between 98.5 and 100, not rallying to 110, unless the Federal Reserve changes course and cuts rates significantly, which would make Treasury hedging attractive again and draw inflows of euros and yens into dollar assets—but that scenario is more likely a 2026 story requiring both Fed rate cuts and completion of trade deal-related capital flows.
“I think that it's likely to remain between the 98.5 to the 100 level. I don't think it's going to go up massively unless the Federal Reserve starts to massively cut rates and leads to a huge move in terms of financial flows into treasuries when hedging becomes much more attractive.”
The dollar index is likely to remain in a range between 98.5 and 100 and will not reach 110 unless the Federal Reserve massively cuts rates and triggers huge financial flows into treasuries when hedging costs make treasuries attractive relative to Japanese and European bonds, which would require both Fed course change and significant capital flows from trade agreements, a scenario more likely in 2026.
“I think that it's likely to remain between the 98.5 to the 100 level. I don't think it's going to go up massively unless the Federal Reserve starts to massively cut rates and leads to a huge move in terms of financial flows into treasuries when hedging becomes much more attractive.”
No central bank or government is defending the purchasing power of fiat currencies; the Trump administration is comfortable with neither a very weak nor a very strong dollar; the ECB is happy with euro weakness to offset tariff impacts on exporters; Japan must continue depreciating the yen to maintain the 'monetary illusion' of its fiscal/debt nightmare situation.
“I think that the problem with fiat currencies is that nobody no central bank and certainly no government is defending the purchasing power of the currency. The Trump administration is not particularly comfortable with a weak dollar but it's not comfortable with a very strong dollar either.”
Gold miners, which had good earnings, broke out to fresh 52-week highs and are leading the way for gold futures, which may be an indication that a technical breakout to new all-time highs in gold futures is imminent.
“gold just proved to be in one big trade range and traded right to the bottom end of uh the June low and uh once uh that dollar broke down uh shot right back up to its highs. The more interesting thing is to seeing how the gold miners, which uh had a good earning season, broke out to fresh new 52- week highs and were almost like leading the way for for gold futures.”
Trade negotiations between the Trump administration and major trading partners (EU, Japan, South Korea, Australia, UK) are approximately 75% complete, with main frameworks of agreement already established and only minor sectoral details remaining such as timelines for zero tariffs and Japanese investment allocation.
“I think that we are 75% into wrapping it up. Why? because the main frameworks of agreement have been set up and I think that by now once the European Union, Japan, South Korea, Australia in agriculture or the United Kingdom etc all have agreed upon very significant changes for the trade relationships.”
Oil is currently testing the bottom of its June-July trading range at the 64-65 level, and if recession odds continue rising with deteriorating economic data, the question becomes whether oil demand destruction will break support at these lows with a measured move to retest the 2024 double-bottom lows in the 55-56 area.
“we've now uh come right to the bottom of the trade range that was essentially established throughout June and July...uh we are at the cliff's edge to find out if uh the support lines don't hold right at these lows. The technical measured move is for a uh double bottom retest of that $556 area.”
Gold continuation chart is technically strong despite weakness in the expiring contract due to contract roll premium; gold likely to break above current levels, pause at previous all-time high around 3,500-3,508, then eventually break above with target range of 3,750-3,950, though another test of 3,350 lower trendline support is possible before the upside breakout.
“Ultimately, I expect that we're going to break above this level and then there's going to be another pause at 3508 or so, which is the all-time high resistance, and then finally a breakout from that previous all-time high to a new target somewhere in the 3750 to 3950 range.”
Uranium spot prices (SRUUF) are in early stages of a bullish trend following a 15-month bear market that wiped out 50% of value; the dip has been well-defended in retracement zones and represents a classic buy zone for upside breakout in physical uranium, with dips likely to be bought if uranium spot prices turn higher.
“We had a 15month bare market decline that uh wiped out close to 50% of the value uh of that spat physical uranium trust. And since then we have now technically broken out of that bare market decline. And so far the dip has actually been very well defended right in the retracement zones and is actually technically trying to turn up. This is a classic buy zone uh for the for an upside breakout on physical uranium.”
There is asymmetric opportunity in copper at support levels because downside is protected by the major $4 support line (established in late July and November-December 2024), while upside has potential to bounce back toward $5, making copper an attractive asymmetric bet despite the terrible-looking chart.
“you it's very likely copper is going to hold those lows on any downside. So the asymmetry of the opportunity exists that you're essentially buying support lines anticipating that uh a move in uh or a bounce in copper here could work its way back towards $5 on the upside.”
The US dollar's attempted counter-trend rally failed at round-number resistance at 100 on the DXY after a 6-month downtrend with trading decisively below the 50-day moving average; the failure at 100 suggests the structural bear trend is likely back on with probable downside to the 97 level and eventually to 95 if distribution into strength continues.
“It failed. It was rejected right at round number resistance at 100 even on the Dixie. Already at recording time, we're back down to trading on a high 97 handle. So, all indications are that the counter trend rally that you and I both thought might have legs to 102 or 104 may have already failed at 100. Even this says to me that the structural bare trend is probably back on, meaning more downside for the dollar”
Markets are now approaching a distribution phase and potential topping formation as vault-targeting funds complete their buying and the initial correction from overbought conditions (300 S&P points above the 50-day moving average) has occurred; if resistance at 6450-6500 holds and prevents further upside in August, September-October seasonality could produce deeper market correction.
“we are transitioning from the bull phase into much more of a distribution phase which is associated with topping formations and trade ranges...Now typically if we see the resistance start to come in around that 64 6500 level on the S&P and this uh becomes uh a point of resistance for the markets throughout the month of August then we can start talking about uh what in September October could from a seasonality perspective bring about a deeper or more meaningful market correction.”
The market may be transitioning from a bull phase into a distribution phase associated with topping formations and trade ranges similar to the November 2024-February 2025 period, which would be indicated by whether resistance around 6450-6500 holds and whether systematic buying from volatility-targeting funds (which have largely finished their purchases) generates sufficient momentum for further upside.
“if uh we are transitioning from the bull phase into much more of a distribution phase which is associated with topping formations and trade ranges which is an example of what essentially happened starting in November of last year into February of this year that was like a 3 four month trade range with a ceiling on the market. Will we see that uh develop?”
Long-term oil ownership remains strategically attractive at these levels despite short-term technical vulnerability, as fundamentals support higher oil in longer-term but current near-term price action makes this not the place for aggressive directional positioning.
“Overall, I think that these are still great levels to own oil in the longer term, but on the short term, this may not be where the trade is.”
Eric is tempted to buy copper at current distressed levels despite nuclear-bomb-looking technicals because copper is a strategic commodity and he does not expect a global recession, making fundamentals attractive even as the chart appears destroyed.
“It's so tempting to just say, Okay, it's an incredible buy the tip opportunity here because it's a super strategic long-term resource that just got whipsawed around so badly and beaten up so badly by the president's uh I would say somewhat reckless negotiating style of of foreign diplomacy that the the technical chart just got artificially beaten up.”
People are increasingly questioning whether electric vehicle and renewable energy deployment at massive scale will occur in 2025-2029 timeframe as previously expected, with some analysts pushing expectations to 2035-2040 instead, representing a huge impact on copper net present value because long-duration commodity futures price changes dramatically with multi-year timeline shifts.
“A lot of people also are starting to question those uh those trends and whether the implementation and uh of electric vehicles on a massive scale was going to be something that we're going to see in 2028 2029 and maybe moved it to 2035 2040 which is obviously huge in terms of net present value on the price of a commodity.”
Lay is comfortable maintaining a long gold position at current levels, and he is similarly bullish on silver to a lesser extent and other precious metals, viewing them with a benign outlook given the confluence of central bank demand, money supply growth, and potential Fed easing.
“I would certainly be very comfortable with a long gold position at these levels. And how do you feel about the reserve currency status of the US dollar at this point?”
The SPAT physical uranium trust (spot uranium ETF) had a 15-month bear market decline that wiped out approximately 50% of value, but has now technically broken out of that bear market and is defending dips in retracement zones, showing classic buy-zone setup for an upside breakout.
“We had a 15month bare market decline that uh wiped out close to 50% of the value uh of that spat physical uranium trust. And since then we have now technically broken out of that bare market decline. And so far the dip has actually been very well defended right in the retracement zones and is actually technically trying to turn up.”
Copper has gapped down significantly into the $4 range, establishing a major $4 support level tested in late July and November-December 2024, making it very likely that copper holds those lows on any downside and creating asymmetric opportunity at support levels.
“with the fact that we gap down into the low $4 range, uh we have a major $4 support line that was established in 2024. the lows uh both in late July and those uh and the lows as well through November and December. And [1:00:32] so at this stage uh you it's very likely copper is going to hold those lows on any downside.”
The 10-year Treasury yield broke down decisively on the jobs report due to increased recession odds and expectations of Fed rate cuts, with the breakdown creating potential for yields to reach 4% or lower if the 4.35% area does not hold support.
“the 10-year yield decisively broke down uh on that jobs number. It's clear that there's um an increased odds of some sort of recession based upon the revisions and and so this type of a breakdown means that the pressure for higher yields has now dissipated. The question though is that will we see 10-year yields get back to levels where we were last year where we were trading down around the uh 360 level on the downside. At this moment there was definitely a breakdown in these yields. We'll see whether or not they sustain down here below this 430 area. 435. If they do, definitely vulnerability down to 4% or lower is uh entirely on the table.”
Crude oil tested the bottom of the June-July trade range at $64-65 on the jobs report, raising the question of whether oil demand will weaken on recession fears and whether support at this level will hold or if oil breaks down to retest the $55-56 double bottom from earlier in the year.
“we've now uh come right to the bottom of the trade range that was essentially established throughout June and July. Uh we obviously had that uh Middle Eastern uh confrontation uh spike in crude oil. Uh and since then this has 646 $65 level has been the base and the question here is that with the uh recession odds now increasing clearly uh the question is is that will there be less oil demand and does that create a situation where oil uh can actually break down this key support line”
Gold's 100-day moving average is rising through 3,285, which serves as a buy-the-dip support level if gold experiences a counter-trend move in the dollar or other policy development that's temporarily bearish for precious metals.
“the 100day moving average on gold is rising through 3285 3285. So, if we had a deeper bearish pullback here, a test down to uh 32.85, you know, just below that 3,300 level again to test the 100 day moving average before finally breaking higher, that would uh certainly make sense as well.”
The gold contract roll premium in August saved the continuation chart's technical picture, as the expiring August contract weakened but the roll premium pulled the continuation chart above the critical 3,300 support level that was under threat the previous week.
“The gigantic contract roll premium basically saved the day for the continuation chart. The contract chart really wasn't looking good. We had a a firm technical level at 3,300. We were not holding that level as we recorded last week's podcast, but the contract roll got us back well above that key level.”
The US dollar stabilized in June-July after a six-month downtrend, showing signs of a basing pattern and a first attempt to break above the 50-day moving average, which would normally trigger buying feedback and short covering, but that rally failed when negative jobs data communicated increased Fed easing expectations.
“we basically spent uh a better part of six months in a downtrend trading decisively below the 50-day moving average and the dollar stabilized throughout the month of June, July. Uh and we saw a basing and we saw the first attempt to squeeze uh above the 50-day moving average breaking to a higher high. These things typically would trigger a feedback mechanism of a buying and a short squeeze.”
If the dollar breaks below the 97 level on the DXY, the characteristic signal of further downside will be quick distribution into strength (showing that conditions are deteriorating), which would measure a further downside target of 95 on the DXY.
“the first sign will definitely be a breakdown to the 97 level on the Dixie. But then really what we want to see is the characteristic of failed rallies uh quick distribution into any strength. the type of price action that is saying that the situation is deteriorating for a further breakdown. Another leg down in the dollar index if that becomes the unfolding reality does measure all the way down to the 95 level on the downside of the Dixie.”
Eric Townsend expected a buyable dip in uranium equities (specifically the URA ETF) but instead received only a 4-7% pullback before the market fully retraced, and expects new cycle highs over $42 per URA share imminently, with bigger upside catalysts not expected until late Q3 and Q4 but is content to hold a full target position through volatility.
“I brought on the buyable dip, but I think it's really interesting that number one, that buyable dip was only about a four or 5% buyable dip. Uh maybe it was six or seven, I'm not sure. Uh it had fully retraced by recording time, and I won't be surprised if we're looking at new cycle highs on the URA ETF over $42 by the time our listeners hear this podcast.”
A 5% equity market correction is common and healthy within bull market trends, and the current 3.5% pullback in the S&P 500 is within normal parameters rather than a sign of trend reversal
“these kind of 5% market corrections back toward the 50-day moving average are common place throughout the course of a year uh as these bull trends happen”
Eric has been using Wednesday's dip in crude oil to the 100-day moving average at $63.63 on the September WTI contract to add to his time spread trade (buying near-term contracts, selling far-term contracts) in both size and duration, betting on curve steepening in oil prices.
“Wednesday afternoon's dip was a perfect test of the contract 100day moving average at 63 spot 63 on the September WTI delivery contract. I use that weakness to add to my time spread trade in both size and duration of the spread.”