ALL THINGS BIG AND SMALL 2.0

  This week's forecast vs actual was thrown out of whack by Kevin Warsh's speech at the Jackson Hole Central Bankers' summit on 280826. Gold and Silver reacted negatively to the inflation and rate hike scare. So the forecast for the week ahead has taken last night's price move into account.  But here are two new developments that may upend all forecasts and and fire up gold/silver from now till 20 September. 1. Probability of Carry Trade Unwind has increased • BOJ hike odds have surged from ~23% to ~87% for the September 18 meeting over the past month, on hawkish BOJ commentary and hot Tokyo inflation data. Actual policy rates haven't moved, so the rate-differential component has been flat at 64.7 for three straight weeks — but if the BOJ actually hikes 25bp while the Fed holds, the differential compresses by roughly another 25bp in a single step, not gradually. The framework only scores realized rates, so this risk is currently invisible in the score. • Japan...

Chart above shows since 2025, the level of Uncertainty as measured by the q90-q10 spread in pur quantile forecasts has dropped significantly. Interpretation: Forecasts are now less uncertain and more reliable. The chart above shows that the degree of Gold/Silver negative correlation as dropped since May 2026 and is now rising in a tight range between -0.25 and -0.05. Interpretation: There are other factors besides Treasury yields that impact the price of gold and silver. A basic tenet of Finance- that Gold as a non-yield asset moves in the opposite direction to Treasuy yields is losing its hold. 

 Silver 20 Day ahead Monte Carlo Simulation animation shows Silver moderately bearish  Gold 20 Day ahead Monte Carlo Simulation animation shows Gold taking a rest. Silver 60 Day ahead Monte Carlo Simulation animation  shows bearish trend has stopped. Gold 60 Day ahead Monte Carlo Simulation animation shows in the longer term Gold slighly more bullish CAVEAT: The situation may change from week to week roiled and buffeted  up and down by Trump and his Tweets. But focus on the inevitable:  Here is the math behind the unprecedented US national debt. -Size of debt as of today. $40 Trillion plus -US GDP $32 Trillion -Annual budget deficit $2 trillion -Unfunded liabilities (Social Security, Medicare, Veterans Benefits, Food Stamps $100 Trillion! - Debt/GDP ratio 125% -Annual interest payment 1 Trillion  - Amount to be refinanced this year $10 Trillion - Average interest rate on old debt 2-3% -Average interest rate on new debt 4-5%

  Richard Wagner's opera Gotterdammerung (Twilight of the Gods) depicts the curse placed on humanity for stealing the magic Gold from the River Rhine. Götterdämmerung is visually defined by a fiery, apocalyptic clash between divine light and absolute destruction, capturing the literal "twilight" or downfall of a mythic world.  I liken the US's  uniliteral suspension of  backing the USD  with Gold in 1971 (Smithsonian Agreement August 1971) as akin to Alberich the Dwarf's  theft of the Rheingold. Which began the gradual creation of the current unsustainable  US national debt leading to the coming financial Gotterdammerung.  Here is the math behind the unprecedented US national debt. -Size of debt as of today. $40 Trillion plus -US GDP $32 Trillion -Annual budget deficit $2 Trillion  -Unfunded liabilities (Social Security, Medicare, Veterans Benefits, Food Stamps $100 Trillion! - Debt/GDP ratio 125% -Annual interest payment 1 Trillon - Amount t...

When will the US Financial Armageddon happen? The list of factors that can be the straw that breaks the Camel's back are many. But currently one of the most likely is the unwinding of the JPY Carry Trade. Here is the 220826 weekly monitor and score for the likelihood of the unwinding. Data Sources: USD/JPY Spot; USD/JPY Volume; US 10-yr yield, JGB 10-yr yield; VIX; Fed Funds Rate, CFTC weekly Traders' Commitments; Leveraged Funds and Cayman Isands Hedge Funds data. Methodology and model weights: Proprietary.  

 Gold: Forecast vs Actual Gold: The week ahead Silver: Forecast vs Actual Silver: The week ahead Executive Summary The outlook for Gold and Silver remains bullish. In the q50 (median) quantile, Gold outperformed the weekly forecast by 3.8% while Silver outperformed by 3.97%. The steep run-up was partly due to Scott Bessent's (US Treasury) intervention to reverse the rise in 30-year Treasuries which hit aan unprecendented  high of 5.34% As with his Japanese Yen intervention, this did not work as yields fell for a day before before retracing back to 5.28%  On a relative basis, and compared with historical Gold/Silver behaviour, Gold far outperformed Silver. Historically, Silver has a Beta of at least  2. That is, Silver moves up (as well as down) twice as much as Gold.  After such a breathless run-up, it is not surprising that the momentum will decelerate for the week ahead. Silver will underperfrom Gold, as it is not a 1st tier central bank reserve asset like gol...