Gold Could Plunge to $3,600 If This Critical Level Breaks

CoreWeave

Across the shows: 50 speakers in other episodes, 12 bullish and 45 bearish calls, past 30 days

• Trey Reik · Bristol Gold Group LLCBearish

  CoreWeave's four-month-old bonds trading near 78 cents signal stress in the riskiest AI ecosystem.

  Reik says CoreWeave's bonds, issued only four months earlier, have started trading at about 78 cents on the dollar, which he calls a problem. He admits he does not fully understand the implications. He argues the drop caused ten- and thirty-year Treasury yields to reverse and fall, because capital was moving out of what he sees as the riskiest parts of the AI ecosystem and into Treasuries. He expects gold to benefit from that rotation.

  “[CoreWeave's] bonds started, which were just issued four months ago, started trading at about 78¢ on the dollar. That's a problem.”at 11:03

VanEck Gold Miners ETF

• Trey Reik · Bristol Gold Group LLCBullish

  Gold miners' smaller drawdown than bullion signals a durable investor base; gold equities should lead any rebound.

  Since the recent high, gold is down about 25% while the large-cap gold miners (GDX) are down only 29%. Reik says that in past cycles gold stocks fell 150-200% of gold's decline, so the smaller drawdown is a positive signal. He credits gold equity investors as a fairly long-term group. He also argues gold equities have historically doubled before the S&P 500 rises 10-15% after sell-offs, so investors should back up the truck during such troughs. He links this to a constructive view of bullion over the next year.

  “And the GDX, which are the large cap gold miners, is only down 29%. ... gold equity investors are by and large a pretty long term group.”at 18:42

Gold & precious metals

• Trey Reik · Bristol Gold Group LLC

  Gold bull market isn't over; long-term fundamentals intact, and gold should rally once short-term shocks pass.

  Reik argues the gold bull market is intact despite last week's disappointing performance. He says the three longer-term fundamentals he tracks (anti-dollar sentiment, the US deficit and Fed credibility) are fully intact. He treats recent weakness as a short-term knee-jerk reaction to oil prices rising and Fed tightening fears, and expects gold to rally once that passes. He ties the bullion outlook to a one-year horizon, saying the gold equity setup bodes well for what bullion does over the next year.

  “in my opinion, the gold bull market is absolutely not over. And I think these big three fundamentals that we focus on are actually getting more and more intense.”at 2:27

• Trey Reik · Bristol Gold Group LLC

  Gold's $4,000 level is key; if it breaks, gold could flirt with $3,600 over two to three months.

  Reik says the $4,000 level matters psychologically and technically. Futures traders probed below it last week, but gold held. He says he is not a technician, but acknowledges technicals drove the recent moves. If gold fails to hold $4,000 in the short run, he expects a two-to-three-month move that could flirt with $3,600. The downside case is conditional on the $4,000 level breaking.

  “So if 4,000 doesn't hold in the short one, we're probably looking, in my opinion, at a two to three month flirt with 3,600”at 4:06

• Trey Reik · Bristol Gold Group LLC

  Gold doesn't track CPI inflation; it responds to monetary inflation, so it isn't an effective CPI hedge.

  Reik argues CPI inflation and gold have little to do with each other, using a hedonically adjusted hot dog price example to make the point. He says gold should rise at the same rate as ordinary prices under CPI-type inflation, and says he can show that on charts over decades. Gold should outpace other prices only under monetary inflation, which is the basis of his gold thesis. He concludes gold has never functioned as an effective CPI hedge, and treats monetary developments such as Treasury policy and debt as more important than CPI or PCE prints.

  “I personally don't think CPI inflation and gold have much to do with each other. ... But if you have monetary inflation, ... then gold should go up faster than other prices in that economy.”at 8:15

• Trey Reik · Bristol Gold Group LLC

  Gold ETF holdings rising through the drop suggests patient investors are buying bullion from short-term traders.

  Reik says that while gold met price resistance over the past two months, ETF flows remained very strong, and ETF holdings increased through the past month. He concludes that patient holders with a proper time frame are buying bullion at good prices from short-term traders. He says retail investors are fairly paralyzed and inactive, so he thinks the buyers are the smarter money, whether retail or institutional. He also suggests the price weakness was partly liquidity-driven selling to cover losses in AI and growth stocks.

  “But through this past month, ETF holdings have been increasing. ... people who have a proper time frame in looking at their bullion investments are swiping some pretty good prices from the short term traders.”at 12:04

US Treasuries & yields

• Trey Reik · Bristol Gold Group LLC

  Fed likely aware of Treasury liquidity fragility after the coordinated late-September yield spike.

  Ten- and thirty-year Treasury yields broke out of their trading range after strong S&P PMI data on September 28, and the move was coordinated across the Fed. Reik argues the Fed's push to tamp down rate-hike expectations shows it is aware of systemic fragility or liquidity problems in the Treasury market, and that it is concerned about them. He says this is why gold has suffered in the short term, though he views the negatives as leading to stronger long-term fundamentals.

  “I would argue that it's because they're aware of systemic fragilities or liquidity in the treasury market. ... There's something that they're concerned about because that was a very coordinated effort.”at 7:02

AI infrastructure & data centers

• Trey Reik · Bristol Gold Group LLC

  AI build-out will prove the most egregious misallocation of capital in history.

  Reik says he has written that the AI infrastructure build-out will prove to be the most egregious misallocation of capital in history. He qualifies this by saying the market has decided otherwise, so his view is a contrarian call. The transcript gives no specific evidence beyond the CoreWeave bond stress he cites elsewhere in the discussion.

  “I've written about it being what I think will prove to be the most egregious misallocation of capital in history.”at 10:37

US rates & the Fed

• Trey Reik · Bristol Gold Group LLC

  Fed won't follow through on two or three rate hikes into Q1; it is tamping down hike expectations.

  Reik says the odds of an October Fed hike fell from about 70% on September 28 to roughly 10% now. Fed Vice Chair Jefferson and New York Fed President Williams signalled no urgency, and Chair Warsh does not want premature hikes. He argues the Fed is pushing down hike expectations because of concern about liquidity and fragility in the Treasury market after the coordinated yield spike. He doubts the market's expectation of two or three hikes into Q1 will come true, citing Treasury market liquidity, the large stock of debt, and the feedback loop that higher policy rates would create in government debt servicing.

  “I I personally think people who think the Fed is gonna raise rates two or three times here into the first quarter, that I don't think that will prove to be the case.”at 17:23

US deficit & government debt

• Trey Reik · Bristol Gold Group LLC

  Higher fed funds would raise government T-bill servicing costs on its debt, creating feedback loops.

  Reik says a Fed rate hike would raise the government's cost of servicing its T-bill debt, a point he says is often overlooked. He cites a figure of about $1.2 trillion, though the transcript does not make clear whether that is the debt or the annual servicing bill. He argues that rising debt costs, along with Treasury liquidity issues, create feedback loops that make it unlikely the Fed will tighten as much as expected.

  “We haven't even talked about the impact of raising, you know, fed funds on the government's treasury bill service of its debt, but we're at 1,200,000,000,000.”at 17:43