(Kitco News) – The incoming Democratic Congress will have no choice but to embrace the AI buildout if they want the revenue to fund their spending priorities – and that spending will likely weaken the dollar and boost gold, according to Kevin Grady, president of Phoenix Futures and Options.
Grady said he was surprised to see the market’s initial reaction to the midterm results.
“Yesterday was the meltdown, and I was actually surprised at the rally the other day,” he said. “I think that just exacerbated the sell-off yesterday.”
He said the Democrats’ calls to stall data centers is shortsighted, and he expects them to walk back a lot of their stronger statements as the economic realities sink in.
“Today they're coming out and saying anything that's been permitted already will be able to continue and go forward,” he said. “That covers all of '27 to '28. They have a lot of policies that they're trying to enact; they have a lot of things they want to try to do. You can't do that without revenue. I think they're going to start realizing once they start crunching numbers, ‘Wait a minute, if we just stall this, we're not going to be getting the revenue on data centers.’ I think there's going to be agreements made, and middle ground made.”
Turning to Friday’s employment data, Grady said he sees more rate hikes on the way.
“I think you're going to see higher rates,” he said. “I think this [payrolls] number does solidify that, and I think they're going to try to find a level where they're comfortable with it. We'll look at what the CME FedWatch number is after today's data. But I think that another rate hike is coming, and I think that [Warsh] is trying to show that he's impartial."
Grady cautioned against leaning too hard on the day’s economic indicators, however. “I don't like looking at monthly data and making decisions on markets,” he said. “Like, ‘gold's going to move here, because of that number that came today.’ I just disagree with that logic. I think a lot of people tend to say, ‘Oh, this number today, it means this for gold.’ I totally disagree with it. I think it's more about the long-term trends.”
On Iran, Grady does think the midterms give Trump an opening to cut a deal – but it could also result in him digging in his heels against Democratic opposition.
“There's two sides here,” he said. “He could say right now, ‘Okay, we're just going to come to a deal.’ But I think that he has two years now to basically get this situation corrected. I think he's going to try to strangle Iran as much as he can.”
Grady believes that the agenda of the incoming Democratic Congress comes with a hefty price tag, and if enacted, those policies will weaken the dollar and boost gold.
“If you look at the price tag on a third of what they're talking about, it would crush the U.S. dollar,” he said. “Ultimately, I think that's a bullish thing for gold.”
“That's a long-term story, but I think those are the people that are investing in gold right now,” he added. “I think that gives gold a floor.”
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