The Economy Nobody Believes In: Q3 GDP Surges 4.3% While Consumers Complain

The US economy expanded at a 4.3% annualized rate in the third quarter, crushing the 3.2% forecast and accelerating from 3.8% growth in Q2. The Commerce Department report, delayed from its October 30 release by the government shutdown, marked the fastest growth rate in two years.

Consumer spending drove the surge, jumping 3.5% from 2.5% in the prior quarter. Exports soared 8.8% after falling 1.8% in Q2, while government spending added fuel. Investment declined somewhat, but less than in previous quarters.

The strength came despite a chaotic year. The economy contracted 0.5% in Q1 as businesses rushed to import goods ahead of Trump's tariff threats. Growth then recovered on AI infrastructure investment and consumer spending.

Q3 growth was boosted by wealthy Americans buying EVs before Biden-era subsidies expired and increased healthcare spending.

Much of the consumption growth came from affluent households spending on travel, recreation, and restaurants, while lower-income families wrestled with rising costs for beef, coffee, and furniture.

Here's the problem: the solid GDP reading contradicts a sluggish labor market that prompted the Fed to cut rates three times this year. Strong growth typically translates to strong hiring, but hiring has been slow and employers shed workers over the summer.

Unemployment hit 4.6%, the highest since September 2021.

Inflation pressures persist. The PCE price index rose 2.8% and core PCE climbed 2.9%, both well above the Fed's 2% target and up from prior readings of 2.1% and 2.6%.

The strong data complicates Fed decision-making. Inflation above target argues for keeping rates high. Weak jobs data suggests cuts are needed. Following the release, traders increased bets that the Fed would hold rates steady in January and March.

Markets barely reacted to the backward-looking data. Stock futures dipped slightly. Treasury yields ticked higher.

Fed Chair Powell said in December that the "baseline would be solid growth next year" due to AI and consumer spending. But Mark Hamrick at Bankrate noted: "A key question is whether the job market stabilizes. If not, consumer resilience will be put to the test."

Gold Hits $4,500, Silver Crosses $70: The 1979 Playbook Returns

Gold surged past $4,490 per ounce on Tuesday, closing in on $4,500 after jumping 2.2% Monday. Silver crossed $70 for the first time, hitting $70.61. Both metals are on track for their best year since 1979, when the Iranian revolution and Soviet invasion of Afghanistan sent commodities soaring.

Gold is up over 70% in 2025, its biggest annual rise since that tumultuous year. Silver has surged 143%, vastly outpacing gold. Copper hit a record near $12,000 per ton. Platinum jumped to a 17-year high, while palladium touched a three-year peak.

The immediate catalyst was Trump's blockade of Venezuelan oil tankers, with Trump saying he wasn't ruling out war. As always, there's more to it.

The dollar plunged 11% in the first half of 2025, the biggest decline in over 50 years. It's on track for its biggest annual fall since 2017. Markets are pricing two rate cuts in 2026 despite persistent inflation, especially as Trump may name a new Fed chair by early January to replace Powell.

Central bank buying has been particularly powerful. Matthew McLennan of First Eagle Investments told CNBC: "The value of gold as a monetary potential hedge has reemerged" due to outsized fiscal deficits in the US, UK, Europe, Japan, and China.

Silver benefits from supply-demand deficits and industrial applications, especially in solar panels, electric vehicles and data centers. Macquarie expects silver to average $57 in 2026. But some analysts are more bullish. Some analysts believe that gold might reach $5,000 by next year.

Jim Wyckoff of Kitco Metals cautioned: "Raw commodity markets go through boom and bust cycles. We're in a boom cycle." He estimated we're in the "8th or 9th inning," though he acknowledged "a lot of runs could still be scored."

The debasement trade is in full swing. As governments pile on debt, investors are betting fiat currencies lose value. Gold rose during seven of the last nine major stock selloffs since the late 1980s. The playbook from 1979 still works.

Trump's Venezuela Blockade: Oil Stuck, Tankers Chased, China Furious

The Centuries

Trump ordered a "complete blockade" of sanctioned oil tankers entering and leaving Venezuela last week, and the effects are immediate. Tanker loading in Venezuela dwindled Monday, with most ships moving oil only between domestic ports.

The number of loaded tankers that haven't departed has increased, leaving millions of barrels of Venezuelan oil stuck on ships as customers demand deeper discounts and contract changes.

The US seized the tanker Skipper on December 10, carrying over 1 million barrels. On Saturday, the Coast Guard intercepted the Centuries tanker carrying sanctioned oil, though the ship itself wasn't sanctioned. The US remains in pursuit of a third vessel, Bella 1.

"It's moving along, and we'll end up getting it," Trump said Monday.

Trump confirmed the US will keep the seized oil and ships. "Maybe we'll sell it, maybe we'll keep it, maybe we'll use it in the strategic reserve," he told reporters. Asked if his goal was forcing Maduro from power, Trump said: "I think it'd be smart for him to do that." He added: "If he plays tough, it'll be the last time he's ever able to play tough."

Venezuela exports about 749,000 barrels per day, with more than half going to China. China's foreign ministry called the seizures "a serious violation of international law," adding Venezuela "has the right to develop relations with other countries." Russia expressed "deep concern" and "reaffirmed its full support" for Venezuela.

Brent crude rose 2.4% to $61.94 Monday on supply disruption fears. Venezuela has the world's largest proven oil reserves, making this strategically significant beyond the immediate barrels.

Trump's pressure campaign includes ramped-up military presence and more than two dozen strikes on alleged drug trafficking vessels. At least 100 people have been killed. Senator Rand Paul called the operations "a provocation and a prelude to war."

The UN Security Council scheduled an emergency meeting on Tuesday at Venezuela's request, backed by Russia and China.