MacroVoices #425 Alex Gurevich: Real Rates, Precious Metals, Currencies and More

Episode Summary

Executive Summary: Alex Gorevich argued the inflation surge is largely behind us, but the full restraining effect of high real rates has not yet hit the economy because policy works with a long lag. He sees current top-down growth as resilient, expects a firmer dollar, remains constructive on hard assets over time, and thinks energy demand could be structurally higher due to AI and computation.

Main Topics: Inflation outlook and policy lag (Priority: 5/5): Gorevich maintains that the inflation spike has passed, but argues the effects of restrictive real rates are delayed and will become more visible over the next 6-12 months. Real rates as the key macro driver (Priority: 5/5): He emphasizes that cumulative real rates, not just nominal rates, matter most for future inflation, productivity, and asset pricing; real rates are only now approaching neutral on a two-year average basis. Stocks, rates, and two-year cycle framework (Priority: 4/5): He revisits his long-standing two-year lag framework, saying bond market moves over the prior two years help predict equity performance, though the relationship is imperfect and should not be treated as a law. Gold, silver, and platinum under a new regime (Priority: 4/5): Despite rising real rates, gold has stayed strong. Gorevich suggests precious metals may have more upside than many expect, especially silver and platinum, and notes mining costs have risen enough to support higher floors. Dollar strength and global reserve dynamics (Priority: 5/5): The discussion centered on U.S. rate divergence, capital flows, and why the dollar may remain strong near term even as longer-term reserve-currency credibility risks rise due to U.S. policy decisions. Energy markets and AI-driven demand (Priority: 4/5): Gorevich framed the future of energy as being dominated by explosive computation and AI demand, which he believes could overwhelm supply growth and make energy a persistent strategic bottleneck. Post-game market levels and positioning (Priority: 3/5): The hosts reviewed technical levels for SPX, QQQ, VIX, dollar, gold, oil, and uranium, with a broadly cautious near-term equity stance and constructive longer-term views on several hard-asset trades.

Key Arguments: High inflation is over, but there is no deflationary bust yet; the economy remains fairly solid in top-down data. The true macro effect of rate hikes operates with a long lag, so 2024 is still too early to declare victory or failure on inflation. Real rates are the most important input for future inflation because they influence productivity, inventories, and balance-sheet behavior. Two-year average real rates are only now moving from deeply negative toward neutral, so restrictive effects may still be ahead rather than behind us. A stronger dollar is likely if the U.S. keeps fiscal deficits large while maintaining relatively tight monetary policy. The stock market’s behavior should be assessed against rate history, but the two-year lag chart is a guide, not a physical law. Gold’s recent strength does not invalidate the real-rate framework; central bank buying, geopolitical risk, and mining-cost inflation may be supporting prices. Silver and platinum may offer more upside than gold on a risk-reward basis, given long-term historical price ranges. U.S. reserve-currency credibility is being weakened by the seizure/redistribution of Russian reserves, which could have long-run bearish implications for the dollar. AI/computation could drive a major step-up in future energy demand, making energy scarcity a lasting theme regardless of short-term economic cycles.

Data Points: Episode number: 425 - Macro Voices episode identification Production date: April 25, 2024 - Episode release timing S&P 500 June futures: up 89 bps to 5,107 - Week-over-week market recap U.S. Dollar Index: down 11 bps to 105.82 - Week-over-week market recap WTI crude oil (June): down 10 bps to 82.81 - Week-over-week market recap RBOB gasoline (June): up 37 bps to 271 - Week-over-week market recap Gold (June): down 209 bps to 2,338 - Week-over-week market recap Copper: up 276 bps to 446 - Week-over-week market recap Uranium: down 151 bps to 80 - Week-over-week market recap U.S. 10-year Treasury yield: up 7 bps to 4.65% - Week-over-week market recap EIA crude inventory change: -6.4 million barrels - Post-game inventory data EIA Cushing inventory change: -659,000 barrels - Post-game inventory data EIA gasoline inventory change: -634,000 barrels - Post-game inventory data EIA distillates inventory change: +1.6 million barrels - Post-game inventory data Net petroleum draw: -5.4 million barrels - Post-game inventory data U.S. crude production: 13.1 million barrels per day - Post-game inventory data SPX spot price: about 5,040 - Post-game technical discussion SPX May 17 implied move: ±140 points - Options/volatility context SPX key levels: 5,100 resistance / 5,000 support - Post-game technical discussion SPX downside targets discussed: 4,800 to 4,700 - Potential correction levels QQQ spot price: about 422 - Post-game technical discussion QQQ May 17 implied move: ±16 points - Options/volatility context QQQ key levels: 435 resistance / 413 support - Post-game technical discussion VIX: about 16 - Post-game volatility discussion Gold correction support zone: 2,250 to 2,200 - Technical retracement discussion Potential gold upside target: 2,500 - If bullish momentum resumes Real-rate swing in 2023: from roughly -6% to 0% - Alex Gorevich's macro chart discussion Long-end inflation-linked bond yield: about 2.5% - Alex Gorevich's valuation argument for TIPS Potential silver upside: $60 per ounce - Historical-range upside case Potential platinum upside: $3,000 per ounce - Historical-range upside case Potential gold upside: $3,000 per ounce - Historical-range upside case

Pivotal Quotes: "the time is getting closer to the point that my view will be seriously challenged" — Alex Gorevich: On how long his disinflation/deflation thesis can remain plausible if data do not change "I think the most important input for future inflation is current inflation" — Alex Gorevich: Explaining why inflation can persist or fade depending on the existing inflation regime "I no longer take seriously people who deny singularity and deny the fact that there is an AI revolution going on" — Alex Gorevich: His long-term energy thesis linking AI/computation growth to rising power demand

Implications: Near term, the panel leans cautious on equities and constructive on the dollar, while still favoring higher-quality hard-asset exposure and tactical hedges. Longer term, reserve-currency trust, real rates, and AI-driven energy demand could reshape macro trades across FX, metals, and energy.