Gold’s Warning Signal

Over the course of COVID, the U.S. government spent absurd amounts of money to prevent a total financial collapse.

At least $4.6 trillion was pumped into the economy in the form of stimulus checks, forgivable loans, tax breaks, and healthcare spending.

For the past five years, we’ve been coasting off of this stimulus. But now, the effects are finally beginning to wear off.

And it’s showing up in the data, particularly sentiment. Take a look at the chart below, which shows the ongoing results of the University of Michigan’s Consumer Sentiment Survey.

Source: University of Michigan

As you can see, the percentage of people who think business conditions will be worse in one year has doubled over the past month or so.

Investor sentiment regarding the stock market has also turned sharply negative. Here’s the latest data from the American Association of Individual Investors Sentiment Survey (red is bearish).

Source: AAII

As you can see, almost 60% of those surveyed are currently bearish. That’s high above the historical average bearish percentage of around 30%.

So we’re in deeply red sentiment territory, in both markets and business.

More of the Same

Ever since 2008 (and arguably 2000), our entire system has been propped up by artificial supports. Low interest rates. Excessive deficit spending. Periodic stimulus checks to qualifying individuals.

When Trump first came into office, for a brief period it seemed like those days might be over. With DOGE and other initiatives, surely we would be on the path to lean & mean government, right?

Well, maybe not. I’m starting to lean back towards suspecting that DOGE is going to have a rough go of it. The swamp has been blocking DOGE’s efforts at every turn, and limiting its impact. The swamp’s innate immune system is proving to be robust.

Another issue I’ve been thinking about is how when Elon Musk was on Joe Rogan’s podcast recently, he came out and said that he was scared of being killed if he dug too deeply into corruption issues. Not exactly a great sign if the reformers fear for their lives at such an early stage…

Our country’s political and financial systems are deeply and possibly irreparably broken. Even if DOGE does make good progress, will it be enough? My doubts are growing…

Gold Sends a Message

The fact that gold is still climbing steadily and just surpassed $3,000/oz is a strong signal that our country is still not on a sustainable path. Not even close.

The spending bill just signed by Trump is not exactly an encouraging sign, either. It cut $13 billion off 2024 non-defense spending, but added $6 billion to defense spending.

Compared to the overall topline discretionary spending of $1.7 trillion, $7 billion of savings are a drop in the bucket. Of course, it’s better than an increase, but still not going to get us to where we need to be.

Of course, Trump is still new in office, and I will give him every chance to impress going forward. But thus far, my expectations have been lowered by reality.

Cutting government spending and waste is no easy task. I’m still hopeful that Trump and Elon will make meaningful progress over the coming years. And trust me, we’d have been far worse off under a Kamala presidency.

But I’m certainly not selling my gold, silver, or miners. I suspect there will be more deficit spending and stimulus checks to come. And with U.S. stock markets still within ~10% or so of all-time highs, good alternatives are few and far between.

Aside from gold and silver, I continue to explore emerging markets, which I believe could be a bright spot over coming years. Look for more coverage on that in the near future.