Alphabet fell about 12% today after reporting negative free cash flow, and the company says capex will rise significantly in 2027.
Capex was $51.4 billion last quarter against $42.3 billion of operating cash flow, so free cash flow came in $9.1 billion negative, the second straight negative quarter. A $5.2 billion payment on an EU fine and a build in TPU system inventory added to it. Most of that money goes into servers, networking gear and data centers, which use copper, silver and power. Silver and copper are both lower today, which I'm not pinning on Alphabet. Numbers are from Alphabet's Q3 release and call.
I don't expect Washington to cut its way out of the debt. No politician wants to tell people the benefit they paid into is going away. Without cuts, the bill can get paid in dollars that buy less. That's my case for gold and silver.
This is from my Oct 24 video on how the debt ends: youtube.com/watch?v=7yBTsmE-…
Big debts have often been worked down through inflation over time, and savers in cash and bonds carry that cost when their interest doesn't keep up.
Metal pays no interest, but it isn't anyone's promise to repay. Its price swings a lot, and it is well below this year's high, so it carries its own risk.
None of this has a date on it. To me that makes it a reason to hold some metal for years.
Prices rose 0.5% in September. After taxes and inflation, income fell 0.3%.
BEA's PCE report put inflation at 3.6% from a year ago and core at 3.1%, both in line with forecasts. The saving rate was 3.8%, and Q3 GDP grew at a 3.4% pace. My read is that falling real income with inflation at 3.6% helps the long-run case for holding metal, even on a morning when gold and silver trade lower.
Warsh said the Fed will cut back on rate votes, with one meeting in 2027 set aside for strategy and no vote on policy.
My read is that with fewer rate votes on the calendar, each one that remains may matter more to bonds and metal.
Gold dipped a little when the statement hit and won part of it back going into the press conference. Silver moved with it.
The Fed held today, and both dissents wanted a hike, not a cut.
Lisa Cook and Beth Hammack voted for another quarter point. The statement still says inflation remains elevated, upgraded growth from solid to strong, and swapped September's promise of a timelier return to 2 percent for waiting on "the accumulation of more information."
To me that reads like a pause. With the 10-year still near 5 percent, holding metal instead of bonds costs more, and nothing in today's text changes that.
Correction on my Fed post: I said the statement swapped September's promise of a timelier return to 2 percent for waiting on more information. That made it sound like the goal was dropped. It wasn't. The new statement still states a timely return of inflation to 2 percent. What went away is September's line that the policy action "will support a timelier return to the Committee's 2 percent goal."
Fed Decision is out for today. The fed has left rates unchanged in a 10-2 vote. Today is not about today, it is about December and beyond. In particular, where to the fed governors stand. That is what the market is fully focused on.
Real yields went from -1% at the end of 2021 to about 2.7% now. Gold more than doubled anyway.
That isn't how it used to work. From 2008 through 2021, gold and the 10-year TIPS yield moved almost in mirror image over the long run. Since 2022 that long-run link has mostly broken, going by the Fed's own H.15 data against COMEX gold.
Central banks bought more than 1,000 tonnes in each of 2022, 2023 and 2024, per the World Gold Council. They may not be weighing gold against a TIPS yield, so I'd put less weight on the old real-yield rule when the Fed speaks at 2 ET.
More of the world's silver now comes out of copper mines than out of silver mines.
Copper operations supplied 28% of mined silver last year, per the Silver Institute's 2026 survey. Primary silver mines supplied 26%, a new low.
So copper supply news is silver supply news. Freeport, one of the world's largest publicly traded copper producers, reported this morning that it produced 832 million pounds of copper in Q3, down from 912 million a year earlier. It ties the drop to lower operating rates at Grasberg in Indonesia while the underground mine ramps up.
Nearly three quarters of mined silver is a byproduct. Its supply follows copper, lead, zinc and gold decisions, and a higher silver price can't call much new metal out of the ground on its own.
The AI trade is a metals trade most people still file under tech.
Microsoft, Alphabet, Amazon and Meta spent $165 billion on capex in Q2, up 87% in a year, per their filings. Those data centers run on copper, silver and power, and the build plans don't wait on the Fed.
No recession. No pandemic. Washington still ran its third-biggest deficit since 2000.
Treasury's final tally for fiscal 2026 came in close to $2 trillion. Only 2020 and 2021 were worse, and both of those had an emergency behind them.
All of that gets financed with new Treasuries. Three big note auctions land this week with yields already this high, and at these rates the interest bill keeps climbing, which means more borrowing after that.
Gold hasn't been trading on deficits lately. It's been trading on the Fed. But a gap this size in a non-crisis year is the slow, steady reason people hold metal, and it'll still be there after Wednesday.
Gold opened the week sitting right on $4,000, and every major average on the chart is above it.
COMEX gold closed Friday at its lowest level since mid-July, and the Sunday evening open hasn't changed much. It's been under its 50-day average since late September and under its 200-day since late August, and the 50-day has started to turn down.
That round number has held on every close since then. Wednesday's Fed decision and Thursday's PCE inflation report are the two days most likely to move it off that line.
This is a picture of where gold is, not a call on where it goes. Averages sitting above the price just mean most of the last few months traded higher than today.
Silver is in the same spot, below both of its averages, so it isn't only a gold story.
The input I'd watch closest this week is real yields. The Fed and PCE both feed straight into them.
Do you think the defensive line coach once, just once talked to the ends about maintaining contain?
Apparently NOT!!
#BYUvsUCF
40 Trillion in debt. What can or should we do now
youtu.be/7yBTsmE-Mcg?is=60sM…
Gold is up 119% since the end of 2021, and the dollar is stronger now than it was back then.
The Fed's broad dollar index did come off its early 2025 high, but it's still above its 2021 close and about where it was a year ago. Gold didn't need a weak dollar to more than double.
So if you hold gold or silver, a firm dollar week isn't the thing to lose sleep over. It hasn't been for almost five years.
The dollar was never the whole gold story, and this chart shows it.
Since 2022 gold has climbed through a dollar that stayed firm. The steadier support has come from elsewhere, like central banks adding to reserves and Washington borrowing at much higher rates.
Next week puts that to the test, with the Fed on Wednesday and the ECB and Bank of Japan on Thursday. A big dollar move off those would show up on this chart fast.