Gold fades, credit and earnings are tarnished
What looked like a calm start to the week turned chaotic. Momentum trades were hit hard, and gold took centre stage with a historic 6% drop, its sharpest in twelve years. Silver fell nearly 9%. Gold miners were crushed too, with Barrick, Newmont and Agnico down more than 8%.
The sell-off came after nine straight weeks of gains and record highs above $4,200. There was no single trigger, no shock headline, no macro event. Just classic positioning: too many investors betting on a price increase, stretched momentum and a market full of new entrants chasing the move.
Money moving in and out of ETFs tells the story. Spot-gold ETF assets have almost doubled since February, and trading volumes hit record levels. Everyone wanted in, right as prices reached the upper edge of fair value. The result: a textbook drop in value.
We’ve been supporters of gold for over a year, and that call has aged well: it was up more than 60% since our 2025 outlook. But at these levels, the easy money’s gone. The fundamentals haven’t changed, but gains from here will likely be slower and more speculative. The metal still has a place in portfolios, just not in oversized doses.
Gold found some support near $4,100, but it may take time to rebuild confidence in it. Expect choppy trading as leveraged players (those who borrow to invest) shrink in number, and physical demand returns. The longer trend remains intact, but for now, the market needs a breather.
The dominoes keep falling in subprime auto lending. PrimaLend Capital Partners filed for bankruptcy this week, after months of missed payments and failed creditor talks. The Texas-based lender finances “buy-here, pay-here” dealerships catering to lower-income borrowers, a business model that works well until defaults spike.
This collapse followed Tricolor and First Brands, two other players in the same space that went under earlier this year. PrimaLend listed less than $500 million in assets and liabilities and says it will continue operating during restructuring, with help from new financing.
It’s another sign of stress in credit markets that have quietly been flashing warnings for months. Auto delinquencies are rising (repossessions too), and funding costs remain high. There are more cockroaches in this kitchen, but the question is how much contagion there can be.
Netflix and Tesla both reported results that missed the mark. Netflix’s numbers disappointed across the board: revenue and earnings per share came in below estimates, despite solid subscriber and ad growth. Operating margins took a hit from a tax dispute in Brazil, and the market wasn’t in a forgiving mood. The stock dropped hard, continuing a pattern of underperformance that started in the summer.
Tesla wasn’t spared either. The EV giant beat revenue expectations but missed on profits, with margins sliding to 18% and operating income down 40% year-over-year. Free cash flow was strong at $4 billion, but the quality of earnings was less impressive. The rush of buyers ahead of expiring EV tax credits boosted deliveries, but that’s not something Tesla can count on next quarter. The company’s tone was cautious, citing tariffs, rising costs and an uncertain global trade environment.
Looking ahead, next week will see earnings reports for most of the Magnificent Seven: Amazon, Facebook, Microsoft, Google and Apple (plus Eli Lilly). While this earning season is going very well overall, the real test of this equities rally will start next week.
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