Silver and Gold Targets
My ceiling this cycle is $7,000 on gold and $200 on silver. It would not surprise me if those prove too low, but I am confident on the $200. That silver figure has moved up in steps: $125 going into January, then $170, then $200 at the end of May.
I cannot reach the $300, $400, $500 numbers that Michael Oliver talks about, and certainly not $1,000. For me, $1,000 silver is probably a 2032 or 2033 event, though the margin of error there is huge. Four people on this show have named $1,000 silver: Michael Oliver, Lynette Zang, Francis Hunt, and me. Michael Oliver said silver reaching $1,000 within one year would not shock him - he did not call for it outright, but his targets are high. I do not think he is crazy or discount his experience, and it is possible he exceeds my expectations this cycle.
Why Metals Correct - and Why That Is Normal
Metals always get hit in a big market correction, in a recession, or in this case a downturn bigger than a recession. So the biggest gains may come only after the first bust, from a lower level. That could shift the timeline by about two years either way.
Silver ran from $50 to $122, a parabolic move that happened so fast it took months to correct. I did not know it would take six to eight months to get going again. That plunge from $122 was not proof silver failed - it was a violent reset that shook out weak hands.
I was bullish on silver and gold three or four years ago and took heat for it. Gold got going before silver. Silver sat in the mid-$20s, trading between the high teens and mid-$20s, got to $30, then backed off. People did not believe it had legs. When it finally broke out, they jumped in at $60, $70, $80 - not $30 or $40 - and now they are upset they lost money. The market has a way of bringing things back to discipline once they get parabolic. People who complain today should remember: tell someone at the start of last year that silver would hit $65 and they would call it a lie or life-changing. We are at $65 now, and everybody is crying.
I am confident the $5.56 level was the correct correction bottom and the turn has begun. Silver is coming out of a small pullback. The next stop I see is $72, though Michael is likely higher. There will be more pullbacks, but they should last days, not months.
Currency Debasement Behind Gold
Currency plays a role in gold. Price it in different currencies and returns differ. The dollar has been up over the past year and gold still ran, so debasement has not driven it near-term. But the big move from $4,500 here to $7,000 will be largely currency. I have the dollar falling to about 83 over the next six to nine months or less, and that is a big part of the move to $7,000.
Rates matter too. I think rates peaked yesterday - I do not usually call things to the day, but it looks like max pain and max bearishness were reached, and what Bessent announced today helps. I have rates falling for the next 18 months, starting gradually, with the 10-year possibly reaching zero. The first move, from the 4.60-4.70 area down below 4, helps gold and silver rise while rates fall. Then a faster move to 3 or below drives the final push toward those metal targets. Rates falling while monetary assets rise challenges the idea that gold needs a strong economy. Currency depreciation quietly erodes purchasing power even when nominal portfolios rise.
Japan: The Wild Card
The US essentially intervened in the yen market, which many read as stopping Japan from selling off a chunk of its treasuries. Japan is in a precarious spot: a net oil importer that brings in the vast majority of its hydrocarbons, most from the Middle East. It has been hit, though it made deals with Iran to get oil through the strait. The yen is dropping and Japanese bond yields have risen to historically high levels.
Japan is the wild card in the bust. It maintained zero interest rate policy forever and made it look like monetary theory was extinct - as if you could print money forever without inflation. I am a monetarist. Japan's homogeneous society and other factors kept inflation in check for a while, but what we see now is what should have been expected. Now it is breaking out, and rates will follow, because rates track inflation. Japan postponed the monetary response, but it is coming, and I do not think they have the room to handle it.
I have the yen to the dollar going to 0.0085, up from around 0.00635 now, over the next six to eight months. The dollar will be down against the euro, the yen, the Canadian dollar, and the Aussie dollar. Japan is very overleveraged to its policy. Leverage works both ways: on the way up it enhances returns, as we see across our markets; on the way down it decimates you, as in 2008. Small changes in yields can produce outsized losses across leveraged portfolios.
Global Debt and the Bust
My reason for expecting a bust is $330 trillion-plus in global debt. China is a big part, along with the US, Japan, and all western countries. I am not calling for a sovereign crisis, because governments have the printing press. The danger is private debt: commercial real estate, private equity, and private credit are all candidates. Once something triggers and this rolls over, a lot of problems will show up. Commercial real estate is another shoe to drop.
Passive investing has convinced people the stock market is a high-interest savings account - put money in, wait, and keep making more. That paradigm is changing fast. A portfolio built for permanent expansion behaves very differently when leverage unwinds.
Where to Invest, and the Psychological Trap
I have my 0% Treasury call, but it starts very slow. We are in a strange place. My target for XLF, the financial ETF, is 90 - more than a 50% move from here. When you run the numbers, there are still two and three years of returns ahead that could happen in a matter of months, so weigh both time and upside. Some people should get out because I could be wrong - understand the risk this late in the game. But if there are 30, 40, 50% returns left in some areas, jumping out now carries its own risk.
The trap is psychology. Many have been nervous since 2020, especially institutions. If you get out early and a final parabolic run comes, it sucks you back in - you tell yourself you missed 30, 40, 50% and people say there are two or three years left, so you get back in at the top. If you decide to exit early, do not get swept up in the emotion.
Treasuries sit at the top of the list of things that protect you in the bust. Very few things will not go down; treasuries should be one, from the very short end all the way out. Long duration is where you make the most money if rates fall during the bust, but it is also where you get more volatility if I am wrong. The most expensive mistake is selling too early, then buying back because everyone else looks richer.
