A Tech Melt-Up Lifted the Dollar and Gold Still Would Not Fall

Stocks surged as Meta’s Muse breathed life into the AI trade and crude oil fell on hopes for a US-Iran diplomatic opening. Gold prices would have none of it.

• Meta's new AI app topped the US download charts, lifting chipmakers and busting the bearish pattern that had governed stocks since August
• The rally drew capital into US-listed technology and strengthened the dollar, yet gold, silver and Bitcoin all advanced
• Small-cap stocks sat the whole thing out, a reminder that a tech story is not a growth story

Stocks found a genuine catalyst at the start of the week. Meta's new artificial intelligence (AI) app, Muse, arrived at the top of the US download charts, and the market drew the obvious inference about what serving that kind of retail demand will require. Chipmakers and the rest of the AI infrastructure complex powered higher, carrying the bellwether S&P 500 with them and breaking the sequence of lower highs and lower lows that had defined the tape since August's peak. The tech-heavy Nasdaq 100 cleared its own consolidation and now sits within reach of the highs it set in June.

Metals and bitcoin refuse to retreat

The US dollar has firmed too, hinting that capital may have been attracted to US-listed technology names. It rose to a two-month high against an average of major currency peers. Meanwhile, benchmark 10-year Treasury bond yields continued to hover near 19-year highs. In an impressive display of resilience, gold held its ground regardless, and silver with it.  Bitcoin went further still, pushing clear of the range containing it for the past four weeks to hit an eight-month high.

Oil prices continued to retreat after the Iranian delegation was admitted to the United Nations gathering in New York. With the conclave now ongoing, President Trump has praised conversations Tehran’s representatives, though no concrete breakthrough has appeared. This has produced five consecutive days of losses for the WTI and Brent price benchmarks, pulling them off the highs and toward the middle of wartime ranges.

That has not offered much relief for borrowing costs nor diluted traders’ hawkish Fed policy expectations for the months ahead. At least one more rate increase this year remains fully priced into Fed Funds futures. The rate-setting Federal Open Markets Committee (FOMC) seemed to endorse that last week with an update of the projection for the 2026 policy rate to 4.1% from 3.8% in June now. Two more rate hikes are priced in for next year, the first by March and the second by June.

Small-cap stocks are struggling as the AI trade blooms

The small-cap Russell 2000, where the AI narrative counts for little compared with the Nasdaq and the S&P 500, took no part in the two larger indices’ explosive rebound. It has been grinding lower since mid-August and is now locked in a narrow consolidation range after hitting a two-month low last week. Weakness in rate-sensitive and cyclical sectors like real estate and basic materials has been subsumed by surging technology shares in broader market averages, but not so for the Russell.

Taken together, all this makes for a conflicted backdrop. Surging technology stocks, a muscular dollar, and sticky Fed rate hike odds despite easing oil prices all point to an economy that’s heating up. Lackluster performance from the Russell alongside gold and silver’s refusal to retreat point in the opposite direction, warning that traders continue to worry about where broader macroeconomic trends may be leading.

All eyes turn to S&P Global PMI data

September’s purchasing managers index (PMI) surveys from S&P Global are in focus next as traders look for a cleaner read of what’s on the horizon. Forecasts point to a slight cooling in US manufacturing- and service-sector activity growth. That’s after services PMI hit its highest since December 2024 in August. Manufacturing PMI has pointed to steady growth for the past 3 months after a peak in May. Any downtick there would amount to the lowest result since March.

On balance, the economic backdrop seems to have steadied after an unpleasant August. Citigroup's economic surprise index turned sharply lower through last month before anchoring, and the Atlanta Fed's GDPNow model of third-quarter gross domestic product (GDP) has settled somewhere between its recent lows near 4% and its highs near 6%. Whether the PMIs suggest that growth remains on strong footing or slipping may emerge as a key catalyst, helping to reconcile clashing price action signals across markets. Whichever way the outcome lands, the markets may find the need for potent readjustment across a range of benchmark assets. 

Ilya Spivak, tastylive Head of Global Macro, has over 15 years of experience in trading strategy. He specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

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