Why I Own Gold — and Why I Welcome Lower Prices
I have no intention of buying physical silver back into my account. What I do, instead, is buy gold every month that I generate surplus cash — which is most months — and I am essentially indifferent to the price. I do not own gold to make money. I own it to maintain my purchasing power. That distinction matters enormously, because it changes how I interpret every price movement.
This is why falling gold prices are, for me, a godsend. It is genuinely odd that people who profess to want to accumulate more gold would prefer to pay higher prices rather than lower ones. It is as though everyone walked into a giant store, the store announced a sale, and in response everyone walked out. That is an odd but extremely common belief. For a disciplined accumulator, lower prices are a gift, not a setback. At age 73, I am not entirely sure why I still do this, but I would genuinely like to become substantially wealthier — and part of the path to that wealth, from my point of view, is the simple preservation of purchasing power, which I accomplish through gold.
The Trick of the Measuring Stick
When people tell me the gold price is "down," my honest internal reaction is: Really? This is almost always a question of time frame. I began saving in gold in the year 2000, and if my memory serves me, gold was around $253 an ounce when I started. Today it is above $4,300. And yet people insist on explaining to me that gold is down.
The deeper point is that the measuring stick — the dollar — is quietly losing value. When I take the various items I buy today and price them in gold against what I paid for gold when I began saving in 2000, I am struck by how cheap everything has become. Housing is cheap. Cars are cheap. Gasoline is cheap. Food is cheap. Everything is cheap — everything, that is, except tax. People who frame "success" in dollars rather than in purchasing power are using a ruler that keeps shrinking, and that is precisely why gold feels expensive to them even as it has multiplied many times over.
The Bullish Signal Nobody Wants to Admit
I think people are genuinely disappointed in gold and silver right now, and I regard that disappointment as one of the strongest bullish signals available — even though almost nobody wants to admit it. Savers who chase momentum tend to buy confidence and sell value, which is exactly backwards.
Are we in something like the 1970s bull market, or could precious metals underperform the dollar for years the way some read the 2011 top? My answer begins with the word "could." Of course anything could happen — I am all over that word. But when someone says "could," it would be far more useful if they explained the specific set of circumstances that would actually have to occur. Here is my view of the underlying reality:
- I believe the US dollar loses roughly 75% of its purchasing power over the next ten years.
- I do not believe the United States will get a handle on government debt — or, if it ever does, not for a very long time.
- I do not believe we will get a handle on unfunded entitlement liabilities.
If we fail to address debt and entitlements, the only way to fund the nominal value of those obligations is a combination of artificially low interest rates and money printing — quantitative easing. Both of those conditions are very good for gold.
The Conditions That Would Make Me Sell
I am perfectly willing to be told I am wrong. If you can show me that the political will exists in the United States to run a balanced budget, and that the political will exists to fund roughly $120 trillion in unfunded entitlement promises, and that we will have a real interest rate — meaning the US 10-year Treasury yield exceeds the rate at which the dollar deteriorates — then I will sell my gold.
But those three conditions precedent will, in my estimation, occur on "the 12th of never." That is the heart of the matter: every bearish case for gold quietly requires assumptions about fiscal restraint and positive real returns that markets rarely sustain for long. The biggest risk to wealth may not be inflation at all — it may be the belief that policymakers will suddenly become disciplined. Investors who wait for that certainty usually end up paying peak valuations.
Gold Versus World-Changing Companies
Some people respond differently. They argue, reasonably, that gold does not anticipate the future, and that they would rather own a world-dominating business — Microsoft, Apple, SpaceX — something capable of creating real, quantum increases in value. I genuinely understand that argument and I do not dismiss it.
My reason for not doing it is personal and honest: I do not know how to value Microsoft, Apple, or SpaceX. I am not gifted enough in technology to understand the value being offered by such companies at their current market capitalizations. If there are people smart enough to do that valuation work, and they wish to preserve purchasing power through equities in companies that can change the world, I respect it completely. But for me, I will stay in gold — and I want to be clear that hard money and world-changing companies are not really competing in the way many investors assume. Preserving purchasing power and maximizing upside are two different games, and portfolio mistakes happen when people confuse the two.
Mining Stocks: Cheaper by the Day
Do I still find the best-of-the-best miners — Wheaton, Franco-Nevada, Agnico — attractive at current commodity prices, given that they are printing money and making acquisitions? Yes, and the striking thing is that they keep getting cheaper and cheaper. Their market caps are shrinking at the very same time that they are paying down debt and building up cash in the treasury. That combination is wonderful.
There was a time — roughly five or six weeks ago — when it was getting harder to argue, in front of a more generalist audience, that Franco-Nevada, Wheaton, and Agnico belonged in a new portfolio allocation. But it is not hard at all to say it now. Look at the most recent quarters for any of the three. Look at the balance sheets. Look at how they will perform at this gold price — and I expect higher gold prices still. Given all that, it is very difficult for me to understand why a conventional investor — someone whose investment precepts are set by reading something like The Intelligent Investor by Ben Graham — would not own these stocks.
Price Versus Value, and the Laziness Edge
Forming an opinion about value requires work, and most people are fundamentally lazy. The idea that money is made on the delta between price and value makes them unhappy, because they would rather track what something is selling for — and whether that trend is up or down — than do the work of figuring out what it is actually worth. I would put it bluntly: knowing the price of something is irrelevant if you have no opinion about its value and its expected value.
Mercifully for me, I have competed for 50 years against people who never bothered to develop a perception of value. I joke that, as a 73-year-old fat, balding guy, I can win the 100-meter dash — provided I am the only one who shows up to run. That is honestly how equities markets often feel. I monitor discussion groups about a given company and find endless chatter about 200-day moving averages, price, analyst reports — a great pile of material that has nothing whatsoever to do with what the thing is worth. Over time, I cannot help but outcompete that. When balance sheets improve while valuations fall, institutions and patient capital tend to notice well before the headlines do, and that period of boredom is precisely when wealth quietly transfers toward patient buyers.
"Let the Oil Flow": Peace, Markets, and the Human Cost
Donald Trump said, "Let the oil flow." Does that mean prosperity and happiness lie ahead, given how positive the markets look right now? If there is genuinely a cessation of hostilities, then at the very least we will have less unhappiness. I doubt anyone will be particularly satisfied with the deal itself, but if a deal exists, people will at least stop killing each other and can go on trying to live better lives.
I have not seen the details, and given the track record of all three parties to the agreement — Israel, the United States, and Iran — particularly their record with public statements that turn out not to be true, I genuinely wonder whether anyone will adhere to the terms. I hope they will, for many reasons, and first and foremost the humanitarian one. While the public fixated on oil prices, interest rates, and equity markets, thousands — perhaps tens of thousands — of people perished in this conflict. The consequence of that scale of death is that the neighbors and children of the dead are traumatized and left hostile toward whomever they believe was responsible. So let us put that human reality first, and hope the treaty holds. Markets price relief instantly, but trust is rebuilt painfully; cease-fires can calm assets long before the underlying incentives actually change.
The Number the Media Missed: Export Concentration
Beyond the human toll, I hope normal commerce resumes worldwide, including through the Strait of Hormuz. It is worth noting that the media reported that about 20% of the world's hydrocarbons travel through the Strait. Oddly, they rarely mentioned that over 50% of the world's exported hydrocarbons move through it — which is the far more important figure.
North Americans were insulated from the threat of outright shortages, but we still felt pressure at the pump, because prices are set on world markets. Both the United States and Canada are exporters, so North American consumers had to compete with foreign consumers for that supply. Crucially, the oil industry had generated enough of a producing surplus that we got through the Gulf conflict with the oil price reflecting only the threat of shortages rather than real ones. Planes are flying, ships are sailing, and cars are operating — except in certain countries such as Sri Lanka. We made it through this crisis so far on the strength of public and private inventories.
Had the conflict gone on longer, oil prices would have moved very differently — because they would have been priced against real shortages rather than proposed or merely apparent ones. If you look at the drawdowns in stockpiles such as the US Strategic Petroleum Reserve and the Chinese reserves, it is clear we got by on inventories. I have no real sense of the true state of global inventories, but I suspect we were in genuine danger of beginning to ration oil by price — and if we got through it, we probably got through it by the skin of our teeth. Oil never actually disappeared; what nearly disappeared was the buffer that had been hiding the scarcity.
Why Oil Could Fall Sharply — Into the 50s or 60s
Many people argue this was a "$90-per-barrel problem" carrying a risk premium, and that if everything is resolved, oil should fall much lower, perhaps within six months. Is that right? I would expect prices to go much lower — and the reason runs through demand, not just the easing of risk premium.
One of the things that happens with $90, $100, or $110 oil is that you kill demand in poor countries. In the West, we grumble that the pump price went up, fill the tank, and carry on with our lives. In a place like Sri Lanka, a taxi driver simply parks his car. So $90 oil destroys demand, and I suspect that demand will take months to recover in markets like Pakistan, Sri Lanka, Malawi, and Bolivia. The consequence is that when oil flows freely again, it flows into a market that has, at least temporarily, two or three million barrels a day less structural demand. Against that backdrop, it would not surprise me at all to see the oil price fall into the mid-$60s, and it would not surprise me much to see it temporarily in the $50s.
This is not a forecast, but it is important to recognize that for consumers at the bottom of the economic pyramid, there is real demand elasticity with respect to price — and I think we have just tested it. Lower oil prices can therefore signal economic stress rather than abundance: poorer economies absorb the damage first, through reduced activity rather than efficiency gains, which creates a misleading impression of supply recovery when consumption has simply collapsed.
Oil Stocks: Wait Until They're Hated
How do I view oil stocks at this moment? It depends on the response, but I am holding off buying them. I expect that once oil truly starts flowing — if it starts flowing — the price of oil declines, and the price of oil stocks declines with it. I do not think you need to buy them now. I think you need to buy them when they are hated.
Here is the longer arc. I believe the prices we are seeing now will be matched or exceeded by 2029 or 2030 — not because of war, but as a consequence of deferred sustaining capital investment. As we have discussed in prior conversations, the oil industry was deferring over a billion dollars a day in sustaining capital. That may not affect production in 2027 or even 2028, but beginning in 2029 we will face shortages driven purely by that underinvestment.
So the picture I see is this: if there really is peace, and cargoes north of the Strait of Hormuz flow into a market that is structurally weak from demand destruction, the oil price could easily go substantially lower across the balance of 2026 and 2027. By 2029, I suspect oil will be back to around $90 — but in constant dollars. If the dollar loses 7 or 8% of its purchasing power, then what looks like $90 oil is really nominal $110 or $115 oil. In that context, oil stocks are good buys, but they are going lower first. You do not need to buy them today; you need to buy them when nobody wants them.
Today's cheap energy can become tomorrow's expensive supply if investment keeps disappearing. Deferred capital spending manufactures shortages years later — long after the headlines have moved on and investors have lost interest. Markets tend to reward current cash flow while underpricing future production gaps, and that disconnect can badly punish portfolios built entirely around recent price trends.
