Gerardo Del Real,
Editor
Jan. 21, 2025
2025 is going to be a memorable one.
Gold is breaking out again, now back near $2,800.
Copper is moving higher, too.
Throw in what I believe will be a rebound in the lithium sector and the next leg up in the uranium space, and we have ourselves the kind of setup that provides incredible opportunities to make money.
If the start of the year reminded me of anything however, it's that it won’t be without increased volatility.
Here at home but also in China.
There are serious cracks showing in the Chinese bond market, which is an extension of an economy that is struggling to get going.
For all the talk of inflation worries, the biggest fear central bankers have is deflation. The Yuan recently touched a 16-month low and the 10-year just touched an all-time low.
The threat of tariffs from incoming President Trump combined with a lagging economy has proven a tough riddle to crack for the world’s second-largest economy.
Which is why I expect China to ramp up its stimulus efforts in very aggressive fashion in the coming months.
The U.S. dollar is sniffing this out and recently flirted with the 110 level and I suspect China is continuing to bolster its gold reserves, hence the reason we’re near record prices despite a robust dollar.
Reuters recently reported that China will sharply increase funding from ultra-long treasury bonds in 2025 to spur business investment and consumer-boosting initiatives.
Special treasury bonds will be used to fund large-scale equipment upgrades and consumer goods trade-ins, said Yuan Da, deputy secretary-general of National Development and Reform Commission (NDRC) at a press conference.
Reuters went on to report that under a program launched last year, consumers can trade in old cars or appliances and buy new ones at a discount, and there is also a program that subsidises large-scale equipment upgrades for businesses.
Households also will be eligible for subsidies to buy three types of digital products this year, including cell phones, tablets, smart watches and bracelets because what do you do when people start feeling less affluent? You entertain them, of course.
China also continues to play the long game with critical metals. China has proposed export restrictions on lithium battery cathode material preparation technology and lithium extraction technology. The move is designed to “safeguard China's core technologies and provide clear guidance for companies engaging in international technology exchange.”
This came after last month’s announcement that China is banning exports to the United States of gallium, germanium, antimony and other important materials.
The next several weeks will be important ones as we start to get clearer guidance from President Trump on actual policy. What we know so far is that he wants to make Canada, Greenland, and the Panama Canal part of the United States, while also renaming the Gulf of Mexico to the Gulf of America.
We’ll find out in the coming weeks and months how much of the talk is rhetoric and how much of what has been floated around and speculated on will lead to concrete action.
What we know for now is that the bond market is calling China’s bluff and China will have to respond with overwhelming stimulus to fight off the bond vigilantes. The Eurozone is also going to have to print and cut rates to fight off its deflationary trend.
Here in the U.S., mortgage rates are near 8%, the dollar index continues to surge and the Fed will be continuing its rate cut cycle albeit maybe at a more moderate pace. Unless the bond vigilantes decide to call the Fed’s bluff in a more pronounced way.
Volatility is back. There will be challenges but there will also be opportunities.
We’re going to profit from them.
Editor’s Note: You just read the intro to the January issue of my Junior Resource Monthly newsletter. We’re sitting on half a dozen triple-baggers, and I expect more in short order as these markets heat up. Get the full issue here.
Let's get it,
Gerardo Del Real
Editor, Daily Profit Cycle