Near-Term: Metals Rally Before a Bust
Gold and silver both peaked in January and spent the rest of the year moving sideways after a big run-up, which turned many people bearish. I think they are bottoming right now and will reverse to new highs. Some bears say silver must fall back to 50 or below and gold back to 3,500 or even 3,000 before it reverses. I reject all of that.
Over the next 3 to 6 months, before a global bust, gold could surge toward $7,000 and silver toward $200. These are scenarios, not guarantees, and the targets may get stretched in that time frame.
The Global Bust and Sharp Corrections
If the global bust follows that rally, expect very sharp corrections in both metals. Gold is less volatile than silver. Gold could drop 40 to 50%, silver 60 to 75%, though it might be less. If silver reaches 200, you may get your $50 from up there, not from today's price. If gold reaches $7,000, a 50% drop takes it to 3,500. These are not precise numbers.
If the stock market falls, say 80%, silver will be closer to that because it is more cyclical and volatile. Gold will beat the equity market, but that means little in an 80% drop; a 50% hit is still large. A 75% silver crash erases three quarters of an investment even after a spectacular rally. Being right on the long-term trend does not protect you from bad timing. Investors near retirement cannot spend future paper gains if they sell during the panic.
The Next Cycle: Commodities Lead
After the bust, the commodity area, including precious metals, will be the story of the next cycle, driven by all the money printing that comes in response and a hyperinflationary cycle. Every cycle has different leadership. Technology led this cycle, going back to 2008-09 and more so lately. The next cycle will have different leadership and a very different, industrial-based economy. Manufacturing will be the story, and commodities will be in heavy demand as the country builds out.
Gold could reach 20,000 in the early 2030s; from a base of 3,500 or 4,000 it could climb there, probably 2032 or 2033. Silver, if it backs up to $50, can go to $1,000 next cycle.
Oil, Inflation, and Interest Rates
Oil can go to $500 a barrel. It may first drop into the 30s during the global bust, starting from the 60s now. From there it could run to $500, which would be 2028 and beyond, probably between 2028 and 2034, moving from $30 or $40 to $500.
That is what drives inflation through the roof, because every commodity rises. Steel and copper go through the roof. Natural gas, which has been very low for a long time, could hit $40 or $50. Gasoline could reach $20 a gallon or more. Anything that goes into building plant and equipment will see strong demand with limited supply.
Inflation could reach 25% in the early 2030s, maybe worse elsewhere. That is bad for interest rates. In the early 1980s the long bond reached 15%, the 10-year a little above that, T-bills hit 21%, and inflation ran around 20 to 21%. This time, with 25% inflation, the long bond and 10-year could reach the high teens, and T-bill rates the mid-20s, or at least 23 to 24%. Those numbers do not square with a healthy economy or the ability to finance the budget.
Debt would be through the roof at the same time. We cannot fund or service our debt at 5%; servicing it at 25%, 20%, or 15% is impossible. That is where the real end comes.
The Money Printing Math
The problem comes when you goose the system. The Fed might need to print 20 trillion to pull us out of the bust, with central banks worldwide doing proportionally similar, giving perhaps 50 trillion in new money. With a lag of about a year, that boosts demand, and it builds from there. Manufacturing demand goes through the roof over three, four, or five years, and that demand far outstrips supply. New commodity supply cannot be built quickly; it takes a decade or longer, certainly seven or eight years. With elevated demand and limited supply, the only thing that can give is price, and price goes vertical.
Why Deflation Comes First
Everybody is worried about inflation now. By the end of next year, deflation could be the concern. As long as you have deflation, you have infinite ability to print money, because there is a lag before that money becomes inflationary again.
That is why I think there is one more cycle after this one. The Austrian school, the Peter Schiffs of the world, think we are down for the count this time. This bust will be nasty, maybe bigger than 2008-09, a 2008-09 on steroids, but they will print their way out one more time. That is what creates the hyperinflationary environment that eventually shuts down the printing press.
The printing press can stabilize a debt-heavy system until inflation makes further money creation dangerous. Once you get double-digit interest rates and double-digit inflation, you cannot print money, because that pours gasoline on the inflationary fire. By the end of this decade, they will have to face the fact that they cannot print more and do not have enough to fund the debt, never mind other programs.
The Ponzi Scheme Reaches Its Limit
The collapse likely comes in the mid-2030s. They will borrow from Peter to pay Paul to keep things going, while real living standards fall because of inflation. This Ponzi scheme has been building for 80 or 90 years and is finally reaching its finite limits. Much of the market performance of the last 44 years came from leverage, and that leverage is about to reverse in a big way.
Coming out of the last great depression in the 1930s, each cycle increased the stimulus and the debt. We have reached the point of no return where only the printing press can kick the can down the road. Once hyperinflation takes the printing press away from the Fed and every central bank, you are back to reality: limited resources and unlimited demands on them.
The Gold Reset
Trump, or Bessent, brought Judy Shelton into the Treasury. She is very much a gold-backed dollar and gold-backed bond person, so they are thinking in that direction. A gold-backed dollar sounds like monetary discipline until a financial emergency demands unlimited liquidity.
My problem is timing. If a bust is near, they will be occupied dealing with it. Backing the dollar right before a bust would be big trouble, because you could not print to infinity or do what you need to do. The reason the money printing is predictable is that their choice will be between letting the system collapse or printing; they will have no choice. But if you tie their hands with a reset backed by something limited like gold, they cannot create gold out of nowhere. So the bust likely interrupts any thoughts of a reset, and the reset happens further down the road, maybe not until well into the next cycle or even the collapse that follows.
Why Policymakers Won't Act Early
Would the government step in earlier with the printing press to keep the drawdown to real terms instead of 80% nominally? If you sat down with Kevin Warsh, Scott Bessent, Donald Trump, or Christine Lagarde, none would think a global bust is imminent. They would say they have things under control, and I think they believe it. Very few policymakers have any inkling we are close to this. They worry about a recession, about something fast and furious, but they feel they have the safeguards and procedures to respond, especially given 2008-09 and 2020. They know the playbook and feel confident.
Because of 2008-09 and 2020, and to a large extent 2022, they do not want to go back to zero interest rate policy (ZIRP) or to expanding the balance sheet in those big ways. Powell said this while Fed chair; Kevin Warsh has said it emphatically. They know those were mistakes and are working their way out now.
So if this starts rolling downhill, their first response will be timid and reluctant. As it rolls faster they will put some stimulus in but keep saying that playbook is gone and they will not do massive money printing. That hesitation can deepen the stress and eventually force them to reverse course. Prepare for changing policy rather than assuming central banks act immediately or consistently.
