Momentum in Gold and Silver and Liquidity Shock at EDF Repo, 2001 and 2008 – Is the system insolvent?

[Igor Pereira]

At the heart of any sustainable trend, there is a rhythm, a breath. What many investors interpret as weakness or top of the market is actually a technical pause needed to recharge energy.

By Igor Pereira, Financial Market Analyst, Junior Member WallStreet NYSE

The Price Oscillator (P/O) of Gold and Silver has just performed a classic and healthy retreat, positioning itself perfectly for the next high movement. The price rises with momentum (MoMoMo), but for this momentum to extend and break new barriers, the asset needs to "take breath". The current structure shows exactly this: a constructive consolidation that is preparing the ground for the next big jump.

The Momentum Trigger: Crossing the Zero Line

The key to understanding the timing of the next move is the interaction of the Price Oscillator with the zero line. Historically, when the momentum retreats and then crosses again upwards across the zero line, this signals a renewal of the purchasing force and an extension of the price trend. We're at this tipping point. The energy accumulated during this consolidation phase is about to be released. The technical scenario does not suggest exhaustion, but rather a "compressed spring" ready to expand. For the traders positioned, this is the sign of confirmation that the upward trend is far from over; the next impulse is just ahead of us.

In September 2025, while the headlines focused on the euphoria of Artificial Intelligence actions, a silent earthquake fractured the foundations of the American financial system. A hidden liquidity shock swept the Repo markets (repurchase), caused SOFR rates to skyrocket and distorted the interest curve of Treasury bonds.

Gordon Gekko once prophesied that the system is insolvent and just repeats insanity until the next bubble bursts. In 2025, this prophecy seems to be coming true. The secular cycle of "boom, bust, rescue, repetition" that has governed the Federal Reserve system since 1913 has reached a new and dangerous tipping point.

The Curve of Interest: The Real Signal It's not inversion, it's "Steepening."

For decades, investors have focused on the reversal of the interest curve as the sign of recession. However, financial history reveals that the true trigger for collapse is not the inversion itself, but the violent "steenening" (inclination) that occurs later. In March 2001 and August 2008, the market disaster did not occur during the reversal, but when the 10Y-2Y curve abruptly tilted upwards, signaling that the financing stress had become existential for banks. Today, with the 10Y-2Y curve close to +0.57%, we are not at the beginning of a cycle, but in the middle of the same stepening phase that preceded the technological and financial crashes of the past. The banking business model is under attack: financing costs trigger, liquidity drains and credit freezes.

The Belly Collapse and the Collateral Crisis

What makes the current scenario unique and terrifying is the behavior of the "belly" of the interest curve – the 1- to 5-year bonds. For the first time in modern history, 2-year rates are collapsing faster than 3-month rates.

This is the market screaming that something dangerous is coming and that the demand for medium-term security is desperate. The origin of this fear dates back to the summer of 2025, when the use of the Discount Window went off and the collapse of Tricolor revealed that collaterals classified as AAA were actually garbage. In a system where collateral is oxygen, doubt about asset quality is fatal.

The Financial Morphine: The Fed and Illusion of Nasdaq

The Federal Reserve is aware of the danger. The interest cut in September was not about inflation or unemployment; it was a panic response to the collapse of the financing market, evidenced by the shooting of the SOFR rate above the target.

The subsequent liquidity injection via Repo in October boosted Nasdaq artificially, acting as financial morphine. When this liquidity was withdrawn in November, the stock market suffered its worst fall since 2008. The recent $50 billion re-injection at the end of November only proves that the market cannot survive without Fed's vital support. We are living the weeks where decades happen, and the question is not whether the system is solvent, but how much longer this illusion of liquidity can mask the reality of insolvency.

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