Why Key Market Indicators Suggest January 30th's Metals Crash Was Just Noise

• Gold and silver experienced a sharp selloff on January 30th, with gold down 9% and silver down 26%, erasing approximately two weeks of gains, though both metals remained positive for January overall.
• The executives from Olive Resource Capital (ORC) view the correction as technical rather than fundamental, with no signs of systemic risk in credit markets, high-yield spreads, or repo rates, suggesting healthy market plumbing despite the volatility.
• Kevin Warsh's nomination as Fed Chair is discussed as potentially ending true Fed independence, as both Warsh and Treasury Secretary Scott Bessent are protégés of Stanley Druckenmiller, suggesting coordinated monetary and fiscal policy ahead.
• The ORC fund remains heavily invested in precious metals heading into Q1 (historically the best quarter for commodities) but plans to gradually rotate toward industrial commodities and base metals as economic growth accelerates.
• Upcoming Q4 earnings reports from major gold producers (starting with Agnico Eagle on February 12th) should showcase exceptional cash flow generation with gold prices $700/oz higher than Q3, likely supporting share buybacks and dividends.

Olive Resource Capital executives Derek Macpherson (Executive Chairman) and Samuel Pelaez (President, CEO, and CIO), discussed the sharp correction in precious metals markets that occurred on January 30th, along with broader implications for commodity investing and monetary policy. They addressed the approximately 9% decline in gold and 26% drop in silver on that Friday, while maintaining that the underlying bullish trend remains intact. The discussion carries relevance for investors seeking to understand recent volatility in commodity markets and potential shifts in U.S. monetary and fiscal policy coordination.

The January 30th Correction: Technical vs. Fundamental

The precious metals complex experienced significant selling pressure on January 30th, with gold declining 9%, silver falling 26%, platinum down 12%, and palladium off 15%. These declines effectively reset prices to levels seen approximately two weeks earlier - gold returned to January 26th levels, silver to January 12th, platinum to January 8th, and palladium to January 4th.

Despite the sharp intraday moves, the speakers emphasised that January remained a strong month for precious metals overall. Pelaez noted that "even with a correction, [January] is the fifth best month percentage-wise for gold" since December 2015, which is considered the bottom of the previous gold bear market. Their fund posted a 12% gain for January despite the month-end selloff, matching their December performance.

Macpherson and Pelaez characterised the selloff as a technical correction rather than a fundamental shift. "None of the liquidity or big indicators of market problems are flashing any problem," Pelaez stated, referencing high-yield credit spreads, option-adjusted spreads in the bond market, and overnight repo rates. This assessment led them to conclude that "the plumbing of the system is working fine" and that markets experienced "a very localised reversal of a trend that frankly was a little bit excessive."

The hypothesis presented was that a large institutional player - described as "a big whale" - executed significant position adjustments over the final days of January, possibly due to being caught short or needing to meet month-end requirements. Speculation about Chinese selling or CME margin requirement changes was dismissed as "marginal in reality."

Strategic Response and Current Positioning

Macpherson and Pelaez  described their response to the January 30th selloff as deliberately passive.

"We sat out for the most part on Friday. When you learn there's an overriding theme that you don't control, you step on the side and watch it happen." 

This approach reflects their view that attempting to trade during such technically-driven moves carries more risk than potential reward.

Looking forward, the executives indicated they remain "well invested" heading into the first quarter, which they described as "historically the best performing quarter for the commodity complex." Their portfolio maintains heavy precious metals exposure while gradually increasing allocations to base metals and industrial commodities. The strategy involves "rotating our assets very very slowly as we see opportunities" rather than making dramatic shifts in response to short-term volatility.

Macpherson suggested that the pullback from extreme highs may actually benefit the market by enabling corporate activity. He cited the example of Eldorado Gold's acquisition announcement on February 2nd, which was structured as an all-stock deal at a premium to the 20-day volume-weighted average price but zero premium to the January 30th close. "When markets are up on a stick, it's really hard to do relative value, especially to do all-share deals," he explained, arguing that more normalised price levels create healthier conditions for mergers and acquisitions.

Upcoming Earnings Catalysts

The discussion highlighted upcoming fourth-quarter earnings reports from major gold producers as a significant near-term catalyst. Agnico Eagle is expected to report first, on February 12th, followed by other producers throughout February. These reports are anticipated to show substantial improvements in financial metrics due to higher average gold prices.

With gold trading around $4,700 as of the recording date (down from recent highs but still elevated), producers face a $700 per ounce increase quarter-over-quarter. 

"When these producers report, it's going to be ridiculous cash flow generation. Your quarter over quarter and year-over-year numbers are going to look spectacular."

The expected outcomes include announcements of dividend increases, share buyback programs, and debt reduction - all developments that typically attract equity investor interest. It was noted that buyback programs represent "a very significant source of marginal buying into the stocks," though there may be blackout periods between fiscal year-end and earnings announcements when companies cannot execute buybacks.

Kevin Warsh Nomination and Fed Independence

A significant portion of the discussion addressed the nomination of Kevin Warsh as Federal Reserve Chairman, which coincided with the shift in precious metals momentum. While some market observers attributed the selloff to concerns about a less dovish Fed Chair, Macpherson and Pelaez presented a contrarian interpretation.

Both Warsh and Treasury Secretary Scott Bessent are described as protégés of Stanley Druckenmiller, the legendary investor known for never posting a negative year. 

"He's not a fundamental investor. Druckenmiller is what we call or refer to as a positional investor... [he and] by extension these two people that are now commanding these two very important offices understand how money flows through the system."

This connection led to a provocative assertion: "There were concerns about Fed independence. I think you can put that completely aside because it's not going to be independent.” Derek clarified that unlike President Trump's public pressure on Jerome Powell to lower rates, coordination between Warsh and Bessent would occur "behind closed doors."

The strategic implication, according to this view, is that coordinated monetary and fiscal policy could "unlock the release of funds to the real economy beyond just the financial economy, which is where most of the money has been trapped." This assessment challenges the conventional interpretation that Warsh's nomination signals a more hawkish, inflation-fighting Fed. Instead, both Derek and Same suggest it could enable more effective stimulus reaching productive economic activity rather than inflating financial asset prices.

Pelaez emphasised that central bank independence is not universal: 

"If you look all over the world, central banks are not independent... they share the same objective of the government, which is to create an amenable environment for business and for people to grow their assets and their businesses. [Warsh appointment could] bring things back closer to the line where they should have always been, which is not necessarily conceding to the government but working together with the government to achieve policy goals."

Sector Rotation Thesis: Precious to Industrial Metals

Both the hosts articulated a medium-term investment thesis involving gradual rotation from precious metals toward industrial commodities and base metals. This view stems from their interpretation of how monetary and fiscal stimulus will flow through the economy in 2026.

"Precious metals have led this commodity rally because monetary policy has been front and center. I think we're going to see a little bit of a handover from monetary policy to the Treasury this year, and the Treasury can inject the money more directly into the real economy than the Fed can."

The distinction drawn is that Federal Reserve policy primarily inflates financial asset prices, while Treasury Department initiatives - potentially infrastructure spending, targeted subsidies, or other fiscal programs - can create demand for physical commodities. This transmission mechanism would theoretically support "higher GDP, higher economic growth, higher ISM manufacturing indices," leading to what Pelaez called "the equilibration or the catch-up trade for the industrial sector and the industrial commodities to where the precious metals are."

Supporting evidence for this rotation was noted in January commodity performance. While precious metals dominated headlines, "the best performing commodity in the month of January was crude oil. It wasn't silver, it wasn't gold, it wasn't copper - it was crude oil." Additionally, during the January 30th precious metals selloff, copper traded essentially flat, and base metals broadly showed normal volatility rather than the extreme moves seen in gold and silver.

Both Sam and Derek indicated their portfolio would gradually increase exposure to energy and base metals while maintaining substantial precious metals positions, rather than executing a wholesale pivot.

Market Monitoring and Risk Indicators

The discussion identified several indicators the ORC fund monitors to assess whether the commodity bull market thesis remains intact. Primary among these is global liquidity, which the executives believe continues to expand. Pelaez noted, 

"I watch the price of Bitcoin, not because I'm interested in buying it, but because it's been historically so deeply linked with global liquidity that a collapse in the price of Bitcoin would alert me to go back and reevaluate all of my studies on global liquidity."

A sustained decline in global liquidity would "naturally dampen significantly the performance of the commodity complex and in general of risk assets," making Bitcoin a useful real-time proxy for monitoring liquidity conditions without waiting for official monetary data releases.

Other indicators mentioned include high-yield credit spreads (which show corporate credit stress), option-adjusted spreads in bond markets, and overnight repo rates (which indicate stress in short-term funding markets). None of these showed concerning levels following the January 30th selloff, reinforcing their view that the correction was technical rather than symptomatic of broader financial instability.

They also also highlighted upcoming economic data releases as important for near-term direction, including ISM Services, ISM Manufacturing, JOLTS job openings, jobless claims, and non-farm payrolls. These reports would provide insight into real economic momentum and potentially validate or challenge the thesis that fiscal policy will support industrial commodity demand.

Key Takeaways

Macpherson and Pelaez maintain that the sharp late-January correction in precious metals represents a technical reset rather than a fundamental shift in the commodity bull market. Their portfolio remains heavily invested in precious metals heading into the seasonally strong first quarter, while gradually rotating toward industrial commodities. The nomination of Kevin Warsh as Fed Chair is interpreted not as a hawkish turn that threatens precious metals, but potentially as enabling closer coordination between monetary and fiscal policy that could broaden the commodity rally beyond precious metals. 

Upcoming producer earnings reports should demonstrate exceptional cash flow generation and potentially support equity valuations through buybacks and dividends. The executives view current market conditions as an opportunity to be patient and selective rather than reactive, maintaining exposure while monitoring liquidity indicators and preparing for a potential leadership transition from monetary metals to industrial commodities as Treasury-led fiscal stimulus reaches the real economy.

TL;DR: Executive Summary

Gold and silver's sharp late-January correction (down 9% and 26% respectively on January 30th) is viewed as a technical reset by large institutional positioning rather than a fundamental shift, with the commodity bull market thesis intact and supported by continued global liquidity expansion. Kevin Warsh's Fed nomination may actually strengthen the precious metals case by enabling coordinated monetary-fiscal policy, while exceptional Q4 producer earnings (reflecting $700/oz higher gold prices quarter-over-quarter) should drive buybacks and dividends. The fund maintains heavy precious metals exposure while gradually rotating toward industrial commodities, anticipating Treasury-led fiscal stimulus will broaden the rally beyond monetary metals.

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