Trump landed in Beijing this morning. Meetings with Xi start tomorrow.
Tim Cook, Elon Musk, and a dozen CEOs are with him. Three hundred Chinese children waved American flags on the tarmac.
The TACO setup is obvious.
The Beijing Bounce That's Coming (and What Follows)
At some point in the next 48 hours, Trump will post on Truth Social about "tremendous progress" or a "historic deal" with Xi. China might announce purchases of US energy, agriculture, and/or Boeing aircraft. The rare earth truce will likely be extended. Trump will claim Xi agreed to pressure Iran. The stock market will rally. Oil will drop. Precious metals might rally briefly, but it’s not that clear in case of mining stocks due to their tendency to be weak in the final parts of the rally.
We've seen something similar on April 17 (Strait "reopened," 18 hours), April 22 (ceasefire extended), May 1 (Iran "responded to amendments"), May 5 (Project Freedom paused, "great progress"), and May 7 (MoU "closing in"). Each time, the market rallied on optimism. Each time, the structural reality reasserted within days.
The Beijing version will likely last longer than previous TACO cycles because a state visit generates multiple days of headlines, photo ops, and announcement ceremonies. I'd expect the optimism to persist through the weekend, possibly into early next week.
But the structural picture won't change:
- The Strait remains closed.
- Iran insists on sovereignty over Hormuz.
- The IRGC controls the waterway physically.
- Nuclear talks aren't on Iran's table.
- Aramco's CEO said normalization could take until 2027 even if the Strait opened today.
- Yesterday's CPI confirmed the oil-to-inflation passthrough is accelerating (3.8% headline, 2.8% core, both above consensus).
- Zero rate cuts are priced for 2026.
- The Fed is frozen.
Ali Wyne at the International Crisis Group captured the dynamic: "The war in Iran has given President Xi sources of leverage that he would not have anticipated having at the beginning of this year." The US needs Chinese rare earth minerals to rebuild its missile interceptor supply depleted by the war. Trump arriving in Beijing needing things from Xi is leverage for China, not for America.
Analysts at Brookings and Peterson Institute both said the realistic best case is that "both leaders leave Beijing without triggering a fresh crisis." If not making things worse is the best-case outcome, the TACO rally that follows is built on diplomatic theater, not structural change.
The decline in precious metals and mining stocks should truly pick up speed once this Beijing optimism fizzles out. The corrective bounces have been getting weaker and shorter. Given the proximity of resistance levels in the S&P 500 Index, the market needs one more round of false hope before it gives up on a quick resolution. Beijing is that round. Once it passes and the Strait remains closed, the war remains frozen, and the next inflation prints confirm the passthrough is still accelerating, there's nothing left to hope for. That's when the real selling begins.
Silver and Platinum: Third Time in a Week
Silver surged nearly 4% today. Platinum up over 3%. Palladium up over 2%. Gold: flat.
This is the third time in a week that the thinner precious metals have outperformed gold sharply. Monday it happened and reversed completely (in gold’s case) in one session. Today is a repeat.
The CME Group's research explains the mechanics: gold's market is roughly 6.5 times the value of silver mining output and 35 times that of platinum and palladium. Even a small rotation of speculative capital from gold into the thinner metals moves their prices dramatically while barely registering in gold.
That's what's happening. Speculative froth is concentrating in the markets with the least liquidity. It looks like strength. It isn't. In many cases when this pattern has appeared in the past months and years, it preceded a decline in the broader precious metals complex.
Technically Speaking
Gold price has been topping for several days now. The pattern is similar to what we saw in April, but on a smaller scale. No wonder – the preceding rally was also much smaller.
The 61.8% Fibonacci retracement held the rallies in check in each case – no breakout held. Even if we get a TACO-rally-based upswing in PMs, the latter is likely to reverse rather sooner than later. The oil trade is unlikely to get back to “normal” anytime soon, and rising crude oil and USD prices are likely to put huge pressure on… Pretty much everything else.
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Thank you.
Sincerely,
Przemyslaw K. Radomski, CFA