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I\u2019m constantly looking for Black Swan events that threaten the financial system. Currently, the\u00a0Basis Trade<\/a> has my full attention. This occurs when hedge funds using extreme leverage short Treasury futures and go long their cash equivalent, capturing a tiny spread.<\/p>\n<\/div>\n<\/div>\n In theory, it\u2019s a riskless trade because the spread between futures and their cash counterpart should remain stable. Another firm, Long Term Capital Management<\/a>, used a similar strategy in the late 1990s. Eventually, market forces changed, and their strategy imploded in a dramatic fashion.<\/p>\n If the yield on the 10-year rises above 5.00% after next week\u2019s QRA and Fed meeting, lookout!<\/p>\n<\/div>\n<\/div>\n A \u201cMinsky moment\u201d is a term in economics and finance that describes a sudden and severe market collapse. It\u2019s characterized by a sharp drop in asset prices and a sudden shift in sentiment from bullish to overwhelmingly bearish.<\/p>\n The concept is named after economist Hyman Minsky, who studied financial instability and the cycle of optimism and risk-taking in financial markets.<\/p>\n The odds for a Minsky Moment within the next 12 months are around 70%, in my view. The exact trigger and timing are unknowable, but I see several potential black swans. Consequently, I think it\u2019s a great time to be in cash and precious metals as we await the next opportunity.<\/p>\n Every quarter, the Treasury releases its funding needs. Below is the reported issuance for October through December. Note the net cash raised for Q4 is $854 billion, of which $513 billion is new money.<\/p>\n The QRA for Q1 2024 comes out October 30th, two days before the Fed announcement. The Treasury will issue a lot of debt in the first three quarters of 2024; ever-rising supply with limited demand could keep yields uncomfortably high.<\/p>\n<\/div>\n<\/div>\n Mortgage rates hit 8% for the first time in 23 years. The Housing Affordability Index reached a record low at ~90. Affordability is down 50% since 2021 and nearly 70% from the peak in 2012. Americans now need $114,000 in annual income to afford the typical house in the US \u2013 up a massive 90% from $60,000\/year in 2020.<\/p>\n The percentage of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September, the highest in data going back to 1994, according to Fitch Ratings.<\/p>\n October was the first month of student loan payments resuming since 2020. Already, we are seeing a large share of households having difficulties paying expenses. More specifically, difficulties in paying are concentrated among households with a college degree.<\/p>\n Gold<\/a> prices are decisively above the downtrend line. If we continue to follow the 2019 analog, I see the potential for a breakout above $2090 in November. I still think we could see a run towards $3000 in 2024.<\/p>\n<\/div>\n<\/div>\n Overall, this looks like a pause in the trend before the next rally. The true test will come after next Wednesday\u2019s Fed announcement. Gold could break decisively above $2000 and perhaps attack $2090 soon after if the market believes the Fed is done hiking.<\/p>\n<\/div>\n<\/div>\n Silver<\/a> is consolidating below the 200-day MA. Prices must close above last week\u2019s $23.88 pivot to support a breakout. The real fireworks will come after a breakout above $26.00.\u00a0<\/strong><\/p>\n<\/div>\n<\/div>\n Platinum continues to struggle at the 50-day EMA. Prices need to get above the downtrend line ($940) to confirm an October bottom and a new bullish advance.<\/p>\n<\/div>\n<\/div>\n Miners<\/a> need a strong close above $30.00 to confirm a bullish breakout. In the meantime, I see support near the $27.70 price gap. The real test will come after next week\u2019s Fed decision. Miners are profoundly undervalued and see much more upside once gold breaks to new highs above $2100.<\/p>\n<\/div>\n<\/div>\n The October washout in precious metals is complete, and gold may be entering the next stage of a powerful bull market.<\/p>\n Next week\u2019s Treasury refunding announcement and Fed meeting are critical.<\/p>\n Click here: To read our article on $10,000 gold and $300 silver<\/a>.<\/p>\n AG Thorson is a registered CMT and an expert in technical analysis. For regular updates, please visit\u00a0<\/strong>www.GoldPredict.com<\/strong><\/a>.<\/strong><\/p>\n<\/div>\n<\/div>\nMinskey Moment<\/h2>\n
Macro Update<\/h2>\n
Quarterly Refunding Announcement (QRA)<\/h3>\n
Unaffordable Housing<\/h3>\n
Auto Delinquencies<\/h3>\n
Difficulty Paying Expenses<\/h3>\n
Gold Weekly
<\/strong><\/h3>\nGold Daily
<\/strong><\/h3>\nSilver Daily
<\/strong><\/h3>\nPlatinum<\/h3>\n
GDX<\/h3>\n
Conclusion<\/h2>\n