US data sends its regards – Merry Xmas

The year is almost over, traders are partly — already — on vacation. Investors have largely reshuffled their portfolios; many have closed positions to call it a day. Trading volumes are thin — around 30–35% below the past month’s average — yet… yet the year keeps on giving.

Yesterday, the US announced a set of GDP data that blew everybody’s mind. The US economy grew 4.3% in Q3 vs 3.3% pencilled in by analysts.

Read that again: in dirt and dust, in the middle of trade tensions, tariffs, geopolitical chaos, job losses and uncertainty, the US economy managed to grow 4.3%. That’s the fastest pace in two years, driven by AI investment but also by strong corporate profits — up 4.4% QoQ — and very strong consumer spending, with sales up 4.6% QoQ.

Naturally, price pressures also flared up, with PCE prices rising to 2.8% on the quarter from 2.1% previously.

The good news is that expectations were for price pressures to rise slightly more — to 2.9% — keeping the Federal Reserve (Fed) hawks at bay. Meanwhile, weaker industrial production and softer consumer confidence helped balance out the euphoric growth and uncomfortably high inflation figures.

Still, the US 2-year yield — the best barometer of Fed expectations — jumped past 3.50% after the strong GDP and PCE data. The probability of a January Fed cut fell to 15% (from 20% before the figures), while Fed funds futures price a June rate cut at around 80%.

Did equity investors care? Yes — but selectively. Major US equity indices rallied on the strength of earnings and consumer spending, but small caps underperformed as rate cuts were pushed further out. The S&P 500 equal-weight index also fell, meaning the post-GDP rally was carried by technology stocks rather than a broader rotation into non-tech sectors. In other words, index gains masked a step back from the optimistic “rotation” narrative, and rising prices came with rising reversal risk.

The US dollar, meanwhile, eased despite more hawkish Fed pricing — suggesting downside pressure on the dollar is strong enough that even a 4.3% GDP print can’t fully revive the bulls.

The softer dollar pushed gold, silver and copper to fresh all-time highs once again. Gold traded above $4’500.

We can say it: it’s been a golden year. Gold has renewed record highs more than 50 times this year and rose more than 70%, while silver’s gains have been even more impressive. The grey metal is up around 150% since January, driven by the so-called debasement trade — the idea that fiat currencies lose purchasing power over time due to heavy debt, persistent deficits, loose monetary policy and financial repression (rates below inflation). Add rising demand for silver and copper to limited supply, and the performance of these metals becomes easier to explain.

The question everyone is asking: can the rally run further — or is this a bubble?

The reasonable answer is that the forces pushing metal prices higher remain firmly in place: heavy government debt into 2026 — check; persistent and widening deficits in developed markets — check; loose monetary policy and low real yields — check; geopolitical uncertainty — check; tight supply and rising demand — check. In theory, the medium- to long-term outlook remains positive.

In the short term, however, prices have risen too far, too fast, and a correction would be healthy. The gold volatility index is rising again, suggesting we may see a pullback in the continuation of the latest positive push. A sell-off could hit silver harder than gold, as the gold-silver ratio — historically in the 60–80 range — is falling rapidly toward the lower end (currently at 62). Assuming that the ratio remains within its historical range, silver may either underperform gold on the way up or correct more sharply on the way down. In both cases, pullbacks could offer attractive opportunities to add gold/silver to portfolios. Traditional investors typically allocate 2–5% to gold for diversification.

Anyway, it’s gently time for me to say goodbye. Recent sessions suggest Santa may still arrive this year. The so-called Santa Rally — the last five trading days of the year and the first two of the new year — could deliver another 1.5% gains – if history is any guidance.

And after that? Reality may bite.

The first two years of the AI boom were about funding, funding, funding — buying chips and building data centres, models and applications. The third year — this year — raised questions about viability, profitability and revenue. The fourth year — next year — is likely to be about clear winners and losers: those who turn investment into cash flow, and those who don’t.

So yes — for one last time — parts of the technology market probably look bubbly, and next year’s earnings season will be less about shiny numbers and more about where revenues actually come from.

First thing to watch: whether OpenAI’s planned chatbot ads can generate enough revenue to reassure investors that the money really circulates through the ecosystem. I genuinely believe it will be fine.

On this note, I wish you, All, a Merry Xmas, and a Happy and a Healthy New Year !