"We've cautioned that the rapid surge in precious metals was built on froth and leveraged positions, not just fundamental demand. Last week's washout is precisely what we anticipated—a necessary cleansing." — Proflex Panel
Last week rattled markets, climaxing in a shocking Friday. The potential nomination of Kevin Warsh to a key Fed role injected significant uncertainty into an already sensitive market ahead of upcoming Federal Reserve announcements. This sent shivers through the market, directly contributing to the Gold and Silver tumble. Silver experienced one of its highest historical drops, underscoring the extreme sensitivity of overleveraged positions to shifts in monetary policy expectations.
SIlver's historic crash on Friday
Proflex has consistently highlighted the impending volatility in precious metals, and the current market recalibration across all assets confirms our thesis: leveraged positions are washing out, but fundamentals largely remain intact. The Fed's next moves will be scrutinized for any signals related to policy shifts, especially with global central banks already in various stages of easing.
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The market is fixed on the Federal Reserve’s upcoming signals, with President Donald Trump now moving to nominate Kevin Warsh, a development that has revived “higher-for-longer” fears.
The paradox in Kevin Warsh being floated for Fed chair is that he’s read as “more hawkish” on inflation, yet his nomination is also being interpreted as a vote for Fed independence and credibility, which can cool inflation expectations without needing meaningfully tighter policy. That credibility shock matters because the Federal Reserve is already in a 3.50%–3.75% target range, and markets have been leaning on a dovish path from here.
Warsh Communications Index: A highlight of "Hawkishness"
That sensitivity showed up instantly in metals: In the initial shock around the Warsh news, gold fell about ~9% intraday and silver saw an extreme liquidation (down as much as ~27%), a reminder that positioning + policy-credibility narratives can overwhelm even bullish longer-term fundamentals in the short run.
Proflex Stance on Gold/Silver: Despite the violent flush, we believe gold and silver remain in a structural bull market, the move was a short-term reset driven by leverage and crowded positioning & not a breakdown in fundamentals. Importantly, even after the liquidation, both assets are still holding above early Jan all-time-high levels, suggesting that once forced selling clears, capital is likely to rotate back into hard assets.
AI's Litmus Test: AMZN, AMD, and GOOG Under the Microscope
NVDA saw a notable pullback as AI worries continued, specifically with reports of a stalled OpenAI-NVIDIA deal. This highlights the fragility of the AI-driven market premium. This chart shows how AI economics are circular: hyperscalers and startups pour capital into compute, NVIDIA monetizes the spend, and that revenue flows back into cloud, model development, and venture investment—reinforcing the loop.
With the OpenAI–NVIDIA deal temporarily on ice, that flywheel pauses at the margin: capex timing stretches, sentiment compresses, and AI valuations wobble, not because the thesis broke, but because capital velocity slowed. This week, all eyes are on AMZN, AMD, and Alphabet (GOOG), whose earnings and forward guidance will serve as a crucial litmus test for the sector. Over the past year AMD has generally beat or met earnings expectations with strong revenue growth (e.g., record Q3 2025 revenue of ~$9.2 B and EPS beats), driven by broad demand in data-center, AI, client and gaming chips. Alphabet (GOOGL) has also, regularly beaten expectations with strong ad-revenue growth and expanding cloud/AI businesses, highlighted by a Q3 2025 EPS beat and record revenue above $100 billion. Amazon's aggressive $50 billion investment in AI and supercomputing capacity by 2026, alongside its 16,000 job cuts signaling a shift towards AI efficiency, indicates a massive structural transformation. However, market sentiment is now demanding tangible, immediate returns on these colossal investments.
Dominant platforms like Google and Amazon are expected to flex their muscle against smaller players in the AI landscape through 2026, but any misstep could trigger a broader recalibration of tech valuations.
Bitcoin: Volatility vs. Gold, Froth vs. Fundamentals
Bitcoin (BTC) has continued its slump, reflecting a broader market deleveraging. However, it's critical to note that Bitcoin's volatility has recently been lower than Gold's, signaling a maturity in the asset class even amidst price corrections.
The current downturn is a necessary structural wipeout of market froth from over-leveraged positions, rather than a fundamental invalidation of its long-term thesis. Macroeconomic factors like M2 money supply growth and liquidity conditions in major economies remain key drivers for Bitcoin's 2026 outlook. BlackRock insights emphasize liquidity as a primary driver, while Hyperscale Data continues its dollar-cost averaging purchases, viewing volatility as an opportunity. What's bothering Bitcoin now is the same force impacting all assets: the unwinding of leveraged bets and the search for genuine value amidst a tightening financial environment.
🧭 Proflex Playbook – Positioned for Post-Washout Upside The market's shocking Friday last week, driven by Fed uncertainty, AI concerns, and Bitcoin's deleveraging, has cleared the speculative deck. This is not a time for panic, but for disciplined positioning. Our conviction stays anchored in the data:
Focus on Structural Growth: Continue to overweight the secular AI theme, recognizing its multi-year runway.
Anticipate Shallow Corrections: Use dips as accumulation opportunities, not reasons for fear, understanding that "none of the corrections stick."
Diversify Thoughtfully: Recognize the "decorrelation" across asset classes; consider gold, silver and Bitcoin for portfolio resilience.
Develop Mental Models: Prioritize long-term planning (6-12 months out) over short-term news, aiming for consistent, incremental gains.
If you're an All-Access or Managed Portfolio subscriber, our positioning has already shifted ahead of this moment—scaling up asymmetric hard asset plays while hedging for earnings volatility and geopolitical tail risks.
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Until next week, — The Proflex Team Trusted Macro Insights. Calm Investing. Tactical Trades.
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