Fed To Cut ‘In A Big Way’: Will Market ‘Breakdown’ Follow? | Tavi Costa
Speakers
Tavi Costa
— CEO, Azura Capital
David Lin
— Founder & Host, The David Lin Report / ex-Anchor, Kitco News
Summary
Tavi Costa argues the world is in the early stages of a major hard-asset and commodity bull market, driven by fiscal dominance, dollar devaluation, reaccelerating inflation, and likely Fed rate cuts. He is bullish on gold, silver, miners, energy, commodities, and emerging markets, especially Latin America and Brazil, while viewing tech and the Magnificent 7 as frothy and overvalued. He expects capital to rotate from tech 'spenders' into 'earners' like energy, infrastructure, materials, and mining.
- Costa says gold, silver, and mining are early in a multi-year bull cycle, not a bubble.
- He sees tech and Magnificent 7 valuations as frothy and vulnerable to balance-sheet deterioration.
- He expects fiscal dominance and twin deficits to weaken the dollar and support hard assets and commodities.
- He is constructive on energy, infrastructure, materials, copper, and eventually agricultural commodities.
- He calls emerging markets one of the most asymmetric opportunities, favoring Latin America and Brazil, including Brazilian banks.
- He expects the Fed may skip a near-term cut but will lower rates substantially in 2026.
- He warns the biggest challenge for mining investors will be holding shares through a bull market.
- He sees junior miners and M&A as later-stage beneficiaries.
Ideas
Gold miners early-cycle, deep valuation discount.
Costa says the mining industry is only at the beginning of a cycle: capital spending is depressed, few major projects are coming online, onshoring/AI demand is rising, and producers are earning huge margins with AISC around $1,300 versus $3,600 gold. Mining equities still trade as if gold were $1,500-$2,200, and GDX remains about 60% below its 2011 relative level versus gold.
Tech and Mag 7 frothy, overvalued.
Costa says the tech space and Magnificent 7 are frothy and expensive, with EV/free cash flow rising while aggregate net cash balances fall. He warns their balance sheets could shift from net cash to debt and that risk does not justify current valuations, making them 'spenders' whose capital should rotate toward cheaper earners.
AI arms race drives infrastructure spending.
Costa identifies infrastructure as one of the three 'earner' categories as AI becomes an arms race and onshoring drives construction spending. He says construction spending could double from about 7% to 14% of GDP, with trillions of dollars and redirected tech free cash flow flowing into infrastructure.
Materials benefit from AI/onshoring spending.
Costa lists materials, including mining, as one of the three 'earner' categories that should benefit from the AI/onshoring infrastructure buildout. He also notes government capital infusions into strategic materials companies will affect valuations, even though he dislikes the macro implications.
Gold bull early, potential $5,000.
Costa sees gold in the early stages of a major bull market, with central bank buying, dollar devaluation, fiscal dominance, and reaccelerating inflation supporting hard assets. He thinks consensus long-term gold projections near $2,500 are too low and sees a plausible path to $5,000 within five years.
DXY breakdown likely; dollar devaluation.
Costa believes the dollar must weaken over the next 3-5 years because fiscal dominance forces lower rates and devaluation, with twin deficits and an overvalued dollar inconsistent with current conditions. He points to one of the largest DXY declines since the 1970s and sees a plausible major technical breakdown and long-term downtrend.
Emerging markets asymmetric, underowned, dollar tailwind.
Costa calls emerging markets one of the most asymmetric opportunities because they are underowned and the two biggest historical risks—higher US yields and a stronger dollar—may reverse over the next 5-10 years. He expects capital exhausted in US markets to rotate abroad, with gold historically leading EM, and he sees Latin America as a prime beneficiary.
Energy cheap, profitable, AI/onshoring beneficiary.
Costa is very constructive on energy because it has lagged other asset classes, companies are making money, and valuations are among the cheapest in history. He also sees energy as a major beneficiary of onshoring and AI infrastructure spending.
Inflation, dollar devaluation favor hard assets.
Costa argues inflation is reaccelerating and fiscal dominance will force the Fed to suppress rates and allow inflation to run hotter, causing the dollar to devalue versus other fiat currencies. That policy backdrop should be very positive for hard assets, which he prefers over frothy tech valuations.
Latin America cheap, commodity-heavy, capital beneficiary.
Costa expects Latin America to be one of the biggest beneficiaries of dollar weakness and capital rotation because its economies are heavily commodity-based across energy, mining, and agriculture. The region is cheap versus the US and underowned, and he prefers liquid names there.
Brazil valuation gap extreme, commodity upside.
Using Brazil as his key example, Costa argues the valuation disparity between Brazil/Latin America and the US is among the worst in history. Brazil's commodity-based economy should benefit from the weak-dollar/EM rotation, and he thinks investors can use liquid Brazilian names to get major valuation upside without taking illiquidity risk.
Brazilian banks cheapest, benefit from EM rotation.
Costa highlights Brazilian banks as trading at one of their lowest multiples ever and says they should directly or indirectly benefit from the same dollar-devaluation, capital-rotation, and commodity-driven Latin American recovery. He prefers them as liquid exposure rather than taking illiquidity risk in junior miners.
Silver extremely bullish; ratio near 80.
Costa views silver as one of the most bullish setups of his career because the gold/silver ratio near 80 is historically extreme and almost no one is pounding the table on silver. He says silver's lag versus gold is normal, and if the Fed cuts rates aggressively, silver should be far above the $40 area.
High-quality junior miners cheap, M&A coming.
Costa says junior miners remain very cheap and the real M&A cycle has not started. He argues 95% of mining companies are likely worth zero, but the 5% with high-quality assets will win; juniors performing even when gold dips signals institutional capital is accepting more risk, and Crescat has been deploying into that select 5%.
Copper extremely cheap after pullback.
Costa says copper had a huge pullback and now looks extremely cheap, positioning it as a key beneficiary of the commodity rotation, returning liquidity, and inflation.
Commodity rotation underway; own neglected commodities.
Costa argues we are in a commodity-cycle rotation driven by returning liquidity, reaccelerating inflation, and a weaker dollar, and that capital should rotate from expensive tech into neglected commodity areas. He says copper looks extremely cheap, energy looks cheap, and the rotation into energy and agricultural commodities has not yet taken the spotlight.
Agriculture rotation not yet spotlighted.
Costa expects agricultural commodities to participate in the commodity-cycle rotation; he says the rotation has not yet put the spotlight on energy and agricultural commodities. The thesis is earlier-stage and less detailed than his precious-metals and energy calls.
Up Next
This The David Lin Report video, published September 10, 2025, features Tavi Costa discussing GDX, XLK, MAGS, PAVE, XLB, GLD, DXY, EEM, XLE, Hard assets, Latin America, EWZ, Brazilian banks, SILVER, GDXJ, COPPER, DBC, DBA. 17 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Tavi Costa · Tickers: GDX, XLK, MAGS, PAVE, XLB, GLD, DXY, EEM, XLE, Hard assets, Latin America, EWZ, Brazilian banks, SILVER, GDXJ, COPPER, DBC, DBA