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April 9, 2025
Dear Fellow Investor, |
| It isn’t often that you check the markets over your first cup of coffee and find gold up over $100. |
| But, as you can see from the pic I snapped above, that’s precisely what greeted me as I switched on CNBC this morning. (And yes, I am a closed-captioning boomer.) |
| Shades of October 2008...and March 2020! |
| Over the past week, we’ve seen similarities with those two previous crises in that gold and silver have been alternately sold off as investors desperately raised cash for margin calls, and then bouncing higher as traders bet on more mayhem and easier money. |
| Today (or rather, last night) we got another throwback — the feeling that the global financial system was in danger. |
| That’s because, contrary to the wishes and the strategy of the Trump administration, Treasury yields spiked overnight.
As our friend (and New Orleans Conference alum) Jim Bianco posted on X this morning: |
| Something has broken tonight in the bond market. We are seeing a disorderly liquidation.
If I had to GUESS, the basis trade is in full unwind.
Since Friday's close to now ... the 30-year yield is up 56 bps, in three trading days.
The last time this yield rose this much in 3 days (close to close) was January 7, 1982, when the yield was 14%.
This kind of historic move is caused by a forced liquidation, not human managers make decisions about the outlook for rates at midnight ET. |
| The “basis trade” has been a darling of hedge funds, which bet on the arbitrage between spot Treasury yields and futures, using massive leverage on this tiny spread to get enough torque to make it worthwhile.
It’s the kind of trade that emerges when there are vast oceans of liquidity sloshing around the markets looking for any advantage. And those oceans are the result, as I’ve been writing ad nauseum, of decades of ever-easier monetary policies.
It’s also the kind of a trade that can go radically south on an unexpected turn in the markets, as will happen when the rest of the world decides to sell anything associated with the U.S. and its currency. |
| What Alan Greenspan Warned Me Of... |
| It reminds me of a conversation I had with Alan Greenspan about a decade ago.
I was sharing my concern over the expanding federal debt, which was at that time just a fraction of today’s level, but still worrisome to me. |
| Greenspan shared my worries on the federal debt, but then confided that what really concerned him was the derivative exposure of the “too big to fail” institutions. Nominally, that exposure is denominated not in trillions, but somewhere above a quintillion. |
| As Greenspan pointed out to me, even those institutions couldn’t get a handle on their liabilities, since their derivatives were interconnected with those held by other institutions...and all their exposure was now backed by Uncle Sam!
The crack-up of the Treasury basis trade, along with nations and global investors shedding their U.S. exposure to equities, Treasurys and the dollar, directly impacts that derivative market.
And gold, as you can see below, has been soaring in response. |
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| After trading off of its morning highs for a while, gold is now rocketing higher again. And so are U.S. equities, as the Trump administration has announced a 90-day pause in the reciprocal tariffs...although China is still in the crosshairs thanks to their retaliatory responses. The rally in gold today, as well as over the past year or so, has been nothing short of remarkable. As you know, now and then over this new bull market, I’ve rhetorically pondered, “what is gold telling us?” |
| Is it seeing stagflation ahead, with the trade war bringing a recession along with higher inflation? Yes.
Is it the Fed’s debt trap, with over $9 trillion of Treasurys that need to be refinanced this year at much higher interest rates? Yes.
Is it the teetering bond market and the risk of contagion endangering the global financial system? Yes.
Is it a global flight from dollar hegemony, but not only central banks but investors across the globe? Yes.
In short, gold has been telling us that it’s not one thing. It’s everything. |
| After decades of ever-easier money, ever-greater financialization and globalization, ever-larger debts and more, gold remains the only thing that protects against everything. |
| How To Play It |
| The good news is that not only are gold and silver soaring, but investors are finally jumping onto the mining stocks to gain exposure to the already high metals prices.
The stocks in our Gold Newsletter portfolio are taking off. And I’ve unveiled exciting new picks in recent days that I feel could be among my biggest winners ever.
You can get access to all of these by subscribing to Gold Newsletter or our Alert service here. |
| But you can also get free insights into many of today’s best junior mining companies through our Gold Newsletter YouTube channel, where my friend Kai Hoffman interviews executives to get their latest updates. |
| I urge you to click on the links below to view some of these fascinating interviews now. |
| All the best, |
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| Brien Lundin
Publisher, Gold Newsletter
CEO, the New Orleans Investment Conference |
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