Will inflation reports cause the S&P to break out or break down? … gold keeps setting new highs – how to play it … when will crypto climb again?
Three inflation reports this week could be catalysts to help stocks resume their march higher.
As you can see below, the S&P has been stuck in neutral for more than two months. It’s trading at the same level as the first week of December.
Hopefully, that’s about to change.
Tomorrow brings the first important inflation report of the week
And if the data come in soft, the report could act as a defibrillator, jolting stocks back to life.
Tomorrow, we get the Consumer Price Index (CPI). Wednesday brings the Producer Price Index (PPI). And Friday is the Import/Export price report.
All three of these reports have the potential to move Wall Street, but the CPI is the most influential. Fortunately, our technology expert Luke Lango, editor of Innovation Investor, has done the research and his results point toward a bullish outcome.
From Luke:
According to real-time estimates from the Cleveland Fed, this week’s CPI data is expected to show a 4-basis-point decline in January’s headline inflation rate and an 11-basis-point decline in the core rate. It should be the first report since July 2024 that includes a decline in both the headline and core CPI inflation rates.
Better still, February’s CPI report is expected to show the same. Though it is still early, real-time estimates for headline CPI are 2.62% in February (a 23-basis point drop), while core CPI estimates are at 3.02% (an 11 basis point drop).
In other words… after five months of choppy inflation data… we are now entering a period where inflation should steadily drop for two straight months.
And that period starts this week with January’s CPI report.
That is exceptionally bullish for stocks.
Inflation has been a huge thorn in the stock market’s side for the last several years. Since 2022, when inflation has risen, stocks have consistently struggled – and when inflation has fallen, stocks have usually soared.
If we are about to enter a disinflation economic regime, as the real-time data suggests, stocks are likely on the launching pad, gearing up for takeoff.
We’ll be back tomorrow with the outcome of the CPI report – and hopefully, news of a celebratory rally in the S&P.
Another day, another all-time high for gold
Gold continues its epic run.
Though it’s taking a breather as I write on Tuesday, yesterday brought the latest in a string of all-time highs as gold soared above $2,900 for the first time ever (setting the fresh record of $2,942.70).
Below is gold’s price chart dating to 2020. Notice the steepness of gold’s surge that began about this time last year.
And if you look closer at the chart, you’ll see that gold has basically gone vertical recently.
To explain why, let’s jump to our global macro expert, Eric Fry, editor of Investment Report:
It all started [two weekends ago], when President Donald Trump announced plans to implement 25% tariffs on most Canadian and Mexican imports, as well as 10% on Chinese goods. Markets tumbled on the news and continued falling when trading resumed [last] Monday.
While Trump later suspended the Canadian and Mexican tariffs for 30 days, the added China tariff took effect on Tuesday. Then, China swiftly responded with targeted tariffs and restrictions on mineral exports to the United States.
Through the uncertainty, gold prices climbed to an all-time high, reaching a peak of $2,910.60 per ounce [last week]. This is an impressive 43% increase from a year ago.
Gold has climbed even higher since Eric’s analysis. Despite the new records, Eric believes more gains are on the way.
The tailwinds pushing gold higher
In his latest issue of his free e-letter Smart Money, Eric points toward some of the usual suspects: for example, falling interest rates and rising geopolitical tensions.
But he also highlights a major driver of demand that many investors overlook – central banks.
From Eric:
On a net basis, the world’s central banks have become large, consistent gold buyers. In 2022, they bought more than 1,000 metric tonnes – equal to more than one-quarter of the world’s annual gold production.
Central bank buying, by itself, will not trigger a major gold rally. But that buying could help power a rising price trend.
We just received updated numbers on central bank buying from the World Gold Council. And as Eric noted, central banks are behind gold’s recent record-setting annual demand.
From Gold.org:
The World Gold Council’s Q4 and Full Year 2024 Gold Demand Trends report reveals that total annual gold demand (including OTC) hit a new, record high of 4,974t, driven by strong, sustained central bank buying and growth in investment demand.
Central banks continued to buy gold at pace in 2024, with purchases exceeding 1,000t for the third year in a row. Buying ramped up significantly in Q4, reaching 333t and bringing the annual total for central banks to 1,045t.
To be clear, Eric isn’t recommending you load up your portfolio with precious metals stocks. But he does encourage a reasonable position size that hedges your broader portfolio against dollar weakness or, as he puts it, “some other unforeseen financial trauma.”
You don’t have to approach gold from purely a defensive orientation
In his trading service, Leverage, Eric recommended long-dated call options on the SPDR Gold Shares ETF (GLD) last March.
Since then, his subscribers have locked in the following gains on their trade:
- A one-fourth position on April 18, 2024, for a 379% gain…
- A one-fourth position on September 19, 2024, for a 94% gain…
- A one-fourth position on September 20, 2024, for a 110% gain…
- And the final one-fourth position on October 18, 2024, for a 292% gain.
Altogether, that clocks in as a 220% gain for Leverage subscribers who followed Eric’s official trade alerts.
For context, GLD’s return over this same period was just 32%.
If you’d like to learn more about how you can ramp up your returns with this type of long-dated option, Eric put together a free video that explains how it works. You can check that out here.
Finally, when will crypto resume its march higher?
Crypto investors can’t seem to catch a break.
After setting an all-time high at roughly $108,000 in December, Bitcoin has pulled back and can’t find enough buyers to resume its upward march. As I write Tuesday, it trades just below $97,000.
While that’s frustrating enough for crypto investors, many popular altcoins have fallen much farther over the last 30 days.
For example, Dogecoin (DOGE) has dropped 21%, Cardano (ADA) is down 22%, and Render (RNDR) has given back 36%.
Our crypto expert, Luke, doesn’t see this pullback lasting. In his most recent issue of Crypto Trader, he pointed toward nine tailwinds…from just the last week.
I don’t have space for all the details, but here’s the list (Crypto Trader subscribers, click here to login to read all the specifics in the update):
- Rising popularity
- More investment
- Deregulation
- Legislation
- Increased liquidity
- Positive money flows
- Rising activity
- Positive commentary
- Strategic reserve progress
Here’s Luke overall takeaway:
After digesting all those developments, it should be pretty easy to see why we think the crypto markets are primed for strong gains in February and beyond.
Everything is moving in the right direction for cryptos right now.
Against the backdrop of this overwhelmingly positive fundamental environment, any sideways action in the crypto markets should prove temporary.
To be sure, Bitcoin is regaining dominance in a bearish signal for altcoins, but we think it is only a matter of time before we swing firmly into Altcoin Season.
To profile which altcoins Luke believes have the most firepower, he held a free event last week called Great American Crypto Project. In the free replay, Luke explains why he thinks this could be the year of huge altcoin gains, similar to 2021 when dozens of altcoins rallied more than 5,000% in a single year.
Perhaps the biggest reason behind the potential gains is President Trump. As you’re likely aware, Trump is moving with incredible speed as he issues Executive Orders and looks to reshape our government. Luke believes the crypto sector is about to be in Trump’s crosshairs.
In fact, Luke expects Trump to take three steps during his first 100 days in office that will ignite the biggest crypto super-cycle we’ve ever seen. Luke dives into the details in the free replay.
He also walks through his team’s quant-based trading algorithm, and how it’s engineered to identify a predictable pattern before cryptos surge, potentially as much as 10X, 50X, even 100X in a hurry – sometimes in 90 days or less.
You can catch a free replay of the Great American Crypto Project here.
I’ll add that the crypto sector should respond favorably to news of cooling inflation. And that brings us full circle to tomorrow’s CPI report.
We’ll bring you the data…and hopefully, news of an ensuing stock/crypto melt-up.
Have a good evening,
Jeff Remsburg
