Gold fell sharply after recent geopolitical shocks, dropping just below $4,000, and it now trades around $4,282 to $4,300. On the charts this looks like the bottom of a saucer, which points to sideways movement and price weakness, not a broken trend. Sideways action lets the market absorb selling before the next move up. The danger for investors is confusing a normal correction with the end of the trade built around a failing money system.
The best guess: the bull market resumes about December, after a period of consolidation. This bull run is roughly 2 years old. Past gold bull markets have lasted 10 years or more.
Why gold's price could go to infinity
This run may not just last 10 years - it could last forever, because the currencies used today probably will not still exist in 10 years. If today's money becomes worthless, gold's price measured in that money could go to infinity. What replaces it could be central bank digital currencies (CBDCs), tax credits, tokens, new dollars, new euros, or new Japanese yen. Nobody knows the exact form.
The current system looks unsustainable. This is not a lone view - people from the Federal Reserve and famous economists have said the same. It is widely accepted that government debt has reached an unsustainable level. The question is when it ends, not if. When it ends, a new system gets built. It could be gold-backed, a new currency, or financial repression where money can only be spent through some kind of coupon, like the old Russian coupon that worked almost like money itself.
The practical point: if you hold physical assets in your own name that you can touch, you can negotiate and act with them. Someone holding only a cash bank deposit of a million may suddenly find it very hard to move that million into anything seen as betting against the currency.
Currency deaths are common
Germany in the 1920s is the clear case - the currency went to infinity, and anyone holding real assets came out ahead. More recent examples: Russia, whose currency was wiped out 20 or 30 years ago, plus Yugoslavia, Brazil, Argentina, and now Turkey, where the currency drops about 30% a year.
The bigger threat to gold holders is not a price crash but the currency underneath the price collapsing. Currencies get replaced while gold keeps its buying power, which makes fixed price targets meaningless. Very few currencies live as long as the dollar, the British pound, or effectively the euro (counting the Dutch mark and Netherlands guilder behind it). Most currencies survive about 30 years; few last 100.
The 60/40 portfolio is the wrong strategy now
The classic 60/40 split (60% stocks, 40% bonds) does not fit the current setup. A better mix is 60/20/20: 60% in equities, 20% in gold, and 20% in other things that can include government bonds. My actual current equity weight is around 50%. The bond portion should be short-dated - one, two, or three-year bonds. Thirty-year bonds carry far too much risk now.
Diversification only protects you when assets move differently under stress. If stocks and bonds fall together, gold can act as the portfolio's independent anchor. The problem with 60/40 is that the "safe" bond side now carries duration risk - long bonds are very sensitive to rising yields.
Central banks are quietly shifting
Banks worldwide see the risk of holding too much of one asset, mainly Treasuries. China holds far less gold as a share of reserves than most countries - about 8%, at market value. Many Western countries sit at 60, 70, or 80% of reserves in gold. China has a long way to go if it wants to raise its gold share, so its record gold buying will likely continue and support the price. A recent Financial Times article noted China bought record dollar value amounts of gold this year. Central banks are selling fiat to buy real assets before trouble hits fixed income.
In the short run - meaning months, not days - the market expects one more US interest rate rise before year-end. When markets expect higher short-term rates, people sell precious metals, because metals pay no yield while cash on deposit could earn a quarter percent more by year-end. After that, rate rises are seen as finished, with no more rises expected after next year. Once rate rises are seen as over, gold - having already fallen in anticipation - tends to stabilize and then rise. So it is mainly a matter of getting this next rate rise out of the way before gold climbs, with a bull market likely starting toward year-end.
The contradiction is timing: short-term rate fears push gold down at the same time long-term reserve buying supports it. Watching only Fed policy makes you miss the institutional buying happening at the same time.
Rising yields and the confidence problem
Yields keep rising no matter what policymakers do. Neither the Fed chairman's job nor the Treasury's job is one worth wanting, because there is no clear answer for either. All they can do is hope their actions keep market confidence. Right now confidence is enough. The danger is if an action gets read as emergency action - then all hell can break loose.
The UK gilt market is very close to another Liz Truss moment. There is fiscal deterioration, budget warning lights everywhere, and a sovereign credibility crisis could hit any day. Things may crack in the UK before the USA. Raising rates is supposed to help yields but has had the opposite effect - the Fed has lost control of the bond market.
Custody: who legally controls your assets
Given the direction of things, it makes sense to hold assets close to home, meaning assets where you keep a choice. If a third-party custodian - a bank, an insurance company, or the government - holds your assets, you have no choice when they decide to tax them or confiscate them. Confiscation by governments, which would be called a bail-in, is not unknown in history.
Cyprus and Greece are examples. In Greece, the European authorities protected themselves and got repaid 100% on Greek bonds while small investors got paid a tiny fraction of what they were owed - a personal loss for me. Russia effectively confiscated Western assets in the Rosneft situation: anyone holding those shares had them forcibly sold for just 30% of market value, and blame can fall on the US government, JP Morgan, or the Russians. If assets sit with a third-party custodian, you never know. Physical gold coins in your hands at least leave you the choice of whether to hand them over.
Many people worry about a repeat of the 1930s, when precious metals were confiscated. Even so, physical ownership still gives you a choice, though it carries risk. Everyone should own part of their assets physically in their own name - not all of them. A home already counts, since the land is registered to you. Getting shares registered directly in your own name is worth doing, though it is administratively complicated and time-consuming. The easy alternative is owning physical precious metals. You can buy from precious metal dealers, or in many places - certainly in Switzerland - have your bank buy gold bars or coins held in custody, then physically withdraw them.
The key difference is between owning an asset on paper and having direct control over it. Physical metals held yourself cut intermediary exposure, though they add storage, security, and liquidity concerns. Once metal is withdrawn from custody and placed in a bank safety deposit box, only you know the contents - the bank does not.
Energy: falling oil hides rising gas
Oil has come off its peak, from about $106 a few weeks ago to $92 now. Natural gas is rising sharply at the same time. This split points to supply chain disruptions and coming winter demand, since Europe needs a lot of natural gas. Even with oil falling, rising gas signals inflation pressure building. In the US there is a reverse link between the two: when oil prices rise, producers pump more shale oil and get a lot of gas as a byproduct, which pushes gas prices down - partly because they lack enough LNG facilities to export it. When oil falls, gas rises. Energy stress does not need crude to spike; climbing gas and electricity costs can still hit inflation-sensitive portfolios.
Copper: a second warning signal
Copper just hit an all-time record price in the last few days. On a chart going back to 1989, it sits at $6.79, literally a record. Three years ago, in 2023, it was around $3, roughly half of today's level. The main driver is data center demand. The copper is not used by the data centers themselves but by the power delivery around them - companies building power lines and generators to bring electricity to new data centers springing up everywhere, plus the endless copper demand as electricity rolls out to new buildings worldwide. Copper signals that demand now outruns supply.
The way to play this is not to buy the metal itself but to buy companies that produce copper. Many copper producers also produce gold, and many gold producers also produce copper. So a gold investor wanting side exposure to copper can find plenty of overlapping producers. The lesson is to get exposure through producers rather than assuming the metal price tells the whole story.
