Markets Get Deep Sixed By DeepSeek
By Brien Lundin
Market mayhem just ensued as China unveils a cheaper, better AI.
As much as market experts and pundits plan and predict, it seems that the big developments come out of left field.
And you can’t get more out of left field than the big shocker that emerged over the weekend:
Researchers at Chinese AI company DeepSeek launched its AI program, dubbed R1, which it claimed performs as well as the West’s most advanced — and expensive — AI agents.
Those other AI efforts, notably OpenAI’s models, are famous for needing the most advanced chips from Nvidia, which has driven the rocket-shot performance of that stock along with other AI-oriented plays.
Naturally, DeepSeek’s claims that their model could perform just as well for a small fraction of the cost, and do so with off-the-shelf gaming chips, were met with some skepticism.
But as experts ran through the system over the weekend, those claims were more than vindicated. Some interactions with the AI that I’ve seen are actually frightening.
So as this new reality emerged over the weekend, it was widely expected that today’s trading sessions in stocks and other risk assets would be a bloodbath. And that’s just what emerged, with all the major stock indices falling at the open.
Of course, most of the damage was within the tech-heavy Nasdaq, and as I write the Dow is actually trading back in the green. The Nasdaq is off about 3.5% while Nvidia has shed about 17% of its market value.
Gold has had an interesting session so far. After beginning the day only off about $8, it began selling off more and more, apparently on margin-call-related selling. It now stands down about $36, while silver has shed 55¢.
The Big Picture For Gold Is Better Than Ever
Again, today’s selling in gold and silver seems to reflect a rush for liquidity to meet margin calls in other investments.
This sort of market action typically passes quickly, and in fact, gold’s longer-term technical picture just got much better.
Consider this chart:
Note how gold has been struggling to recover from its big election correction, trading in a range and tracing out a classic flag or pennant formation.
And now see how the price trend has dramatically broken out of that flag pattern as the price was once again challenging $2,800 and a record high…before today’s setback.
For my part, I’m betting on the big picture. This year will bring more surprising developments in the markets and the economy, and gold is the only asset that stands to benefit from virtually anything that happens.
If you’re a serious investor, you need to be positioned in the metals as wealth insurance, and high-powered junior mining stocks as investments.
Republished on Money Metals Exchange.
