Gold Is Building a Base Around $4,000
Gold has been finding a great deal of support in the region of $4,000. After a spectacular run higher, the metal came crashing back down, and that reversal damaged much of the enthusiasm and positive sentiment that had built up toward the tail end of the rally. What is striking is that the market has now returned to the same negative sentiment that defined the entire advance up until that final surge — people are once again very negative on gold.
The rally clearly got ahead of itself. Silver, for example, broke out above $50 and shot all the way up to $120 after having been stuck around $30 for a couple of years, so it plainly overshot. Much of that buying was fueled by the noise in the Gulf leading up to the Iran war; it was fairly obvious that something was going to happen, and that anticipation drove money into gold. When the war actually broke out, however, it turned into a classic "buy the rumor, sell the fact" episode, because the event had already been priced in. That is what started the correction.
The correction was then deepened by supposedly hawkish comments from the new Fed chair, Kevin Warsh, about how aggressive the Fed would be in its single-minded focus on returning inflation to 2%. On the back of that rhetoric, the market flipped from expecting two or three rate cuts to expecting two or three rate hikes, which put further downward pressure on gold and simultaneously pushed the dollar higher.
Despite this, the correction should be viewed as a buying opportunity. Gold trades slightly below $4,000 at times but never by much, and it keeps recovering, which suggests $4,000 may now be the new base. There was no lasting base established at $5,000, but there were solid bases at $2,000 and $3,000, and $4,000 now looks like a similarly firm floor. From here, gold is likely to make another run at $5,000 and eventually take out its high — if not this year, then by next year the price could reach $6,000. Many investment banks have essentially settled on the same price target. Using $4,000 as a launching platform for further record prices would be an entirely satisfactory outcome.
Real Rates, Not Nominal Rates, Are What Matter
A central error in the market's current thinking is its faith that the Fed can crush gold with tight money in the style of Paul Volcker. That is not going to happen. The market is pricing in rate cuts that are unlikely to actually occur, and even if those cuts do happen, they will occur alongside much higher inflation. That combination means real (inflation-adjusted) interest rates will actually be lower.
This distinction is crucial. Real rates matter far more than nominal rates; in many cases, nominal rates are essentially irrelevant and real rates are all that counts. Even if the Fed nudges nominal rates upward, real rates are going to fall considerably. If inflation stays elevated while rates lag behind it, purchasing power quietly erodes even while markets celebrate. Real interest rates determine whether wealth is actually being preserved, and that is the point many investors miss while fixating on every Fed soundbite and headline policy announcement.
Silver's Setup Looks Very Strong
Silver's dynamics look very strong. It is unlikely to fall back below $50, because $50 represented resistance stretching all the way from 1980 through 2021 — a level that overhung the market for decades. Once that resistance finally broke, the price overshot dramatically. It is doubtful that buyers will get another chance to purchase below $50, since that would simply be too good an opportunity for those who missed out. Anything below $60 is probably a decent buy. Silver is currently slightly above $60, though the lowest print seen recently was around $56 and change. Those who want to own it will likely have to pay up a little. And this is not just a gold-and-silver story — pretty much everything is going to go up.
Silver tends to deliver its biggest moves precisely after convincing investors that the opportunity has already disappeared. A former multi-decade resistance level can become long-term support, which changes how downside risk should be evaluated. Retail investors usually wait for the perfect pullback, while larger buyers accumulate during uncomfortable consolidations rather than chasing headlines. Missing those transition periods can permanently raise an investor's average entry price.
Inflation Is Massive — and AI Is Adding to It in the Short Run
The inflation being experienced right now is massive. Even if AI eventually helps offset some of it through productivity growth, those benefits are years away. In the short run, AI is actually putting upward pressure on prices. Consider computers and Apple specifically: the company just implemented the biggest price increases in its history, roughly 15% to 25% across basically every product. On top of that, the buildout of AI is driving enormous demand for energy and raw materials. All of this piles upward pressure onto prices — in addition to the fact that the Fed is creating a lot of inflation to finance deficit spending.
What Would Restart the Bull Market?
Question: What does it take for the bull market to resume — a rate cut, a bank default, another conflict, or some other trigger event?
The catalyst could be some bad economic numbers, such as a weak jobs report. Beyond that, the failure of the Fed to hike rates — or even the first hike — could serve as the trigger. There is genuine doubt, however, that the Fed will hike at all. If policymakers were truly so gung-ho about tightening, why didn't they hike at their first meeting? Why is the balance sheet still expanding? Why is the money supply still growing? The Fed talks about restraint while its liquidity indicators send a far more complicated message. Investors should pay closer attention to expanding money supply and balance sheet trends than to carefully crafted policy speeches, because markets ultimately respond to where liquidity actually flows, not to where officials claim they want inflation to go. Savers who ignore this often discover too late that their purchasing power vanished long before the headlines acknowledged it.
There is also the matter of the five task forces set up to study the problems. Setting up task forces is usually what you do when you don't want to do anything about a problem but want to pretend that you are. It can become an excuse for inaction — everyone waits for the task force to deliver a recommendation, and by then inflation could be much higher and the economy much weaker.
Election-Year Politics as a Catalyst
Political timing may matter as much as monetary mechanics. With July beginning, the election season effectively starts over the summer ahead of fall elections. To the extent that the Republicans are low in the polls — which they certainly are — there is a stronger incentive for some type of stimulus, some kind of freebie to give voters something to take into the voting booth. That stimulus could itself become a catalyst for precious metals. Governments frequently prefer postponing difficult choices, and stimulus becomes increasingly attractive as elections approach. Investors focused only on campaign promises may overlook the inflationary costs that arrive months later. There are, in short, many black swans lurking behind the bushes.
Bitcoin Has Stolen Gold's Thunder — but That May Reverse
A real crash in Bitcoin could be a catalyst for gold, because it would highlight the difference between the two assets. Bitcoin has overshadowed gold and stolen some of its thunder. Importantly, many people have avoided buying gold precisely because they assumed gold would lose out to Bitcoin, so they went looking for some other inflation hedge — or bought neither. Once the myth that Bitcoin is "digital gold" finally dies, that will be good for actual gold.
Question: Have some Bitcoin holders been hurt so badly that they've stopped trusting not just "digital gold" but the original gold as well?
Since the previous conversation, Bitcoin has fallen from around $90,000 to roughly $58,000. Much of the marketing spin behind Bitcoin has been to denigrate gold and talk up its supposed problems — claims that gold isn't really scarce, that nobody knows how much exists, that there are gold asteroids, that you can never be sure a given piece is real, and that it is easy to fake. This relentless trashing of gold has been part of Bitcoin's promotional narrative. A collapsing investment narrative often changes capital flows faster than changing fundamentals ever do. Bitcoin's biggest competitive advantage may have been perception rather than proven resilience during prolonged monetary uncertainty. When confidence in one inflation hedge weakens, investors naturally reassess alternatives they previously ignored rather than abandoning protection altogether. The real question is not which asset generated bigger headlines, but which one survives repeated confidence cycles.
The Myth That Gold Is "Useless"
Decades of negative campaigning against gold may have distorted investor behavior more than market fundamentals themselves. This messaging has taken its toll on potential buyers who don't see gold's real value. People say "gold is useless" and that "it's all just perception — people merely think it has value." Ironically, that description perfectly fits Bitcoin, but it does not fit gold. People fail to understand that gold has genuine use: there is gold jewelry, and there is gold in consumer electronics, so nearly everybody already owns and uses gold in their daily life without realizing how much value it holds. Gold has properties that are unique to it and not shared by other metals, and there are circumstances where gold is required and nothing else can be substituted for it.
Question: How high is the monetary premium? If gold lost its monetary role and were used solely for electronic or industrial purposes, wouldn't its value be a fraction of the current price?
It is genuinely hard to say what gold would be worth if no one wanted to use it as a store of value, because that store-of-value aspect is nearly impossible to strip out of gold — it objectively is a store of value, because gold is eternal. The biggest risk to a portfolio may be believing a narrative repeated so often that it feels like fact. Gold's value is rooted not only in monetary history but also in unique physical properties that modern technology continues to rely upon — a foundation few financial assets can claim once confidence in paper promises begins to weaken. Investors who dismiss this may be confusing popularity with durability.
Permanence Itself Is a Source of Value
Gold's permanence gives it an advantage almost no other asset can replicate. Gold doesn't decay, doesn't rot, and nothing happens to it, so by the very definition of its own physical properties it is a store of value. Even when gold is used, it can be reused; whatever has been done with it, it can be melted down and started over. This makes it unlike other commodities: wheat that is eaten is gone and cannot be eaten again, and gasoline that is burned cannot be reused, but gold can be used over and over and over again and never loses its value.
Gold also escapes technological obsolescence. A newly bought computer becomes obsolete in a few years because a better computer arrives, so the original one loses value. But there is no "better gold" waiting to be developed that would render existing gold obsolete. When you buy gold, it doesn't lose any value. The gold owned today can still be used a thousand years from now by someone else, which means gold effectively represents the present value of an eternity of use cases. You can hold something in your hand that will still be valuable in a hundred or even a thousand years — very few possessions can claim that. As an illustration, when a ship that sank 600 years ago is discovered, the only thing likely to still be of value is the gold, because everything else has disintegrated into the sea.
Most investments begin depreciating the moment they are purchased, yet gold follows an entirely different economic logic. Permanence itself carries financial value because it removes the technological obsolescence affecting nearly every manufactured asset. That distinction becomes increasingly important during long inflation cycles, when preserving purchasing power matters more than chasing rapid returns. Wealth is often protected by endurance rather than excitement.
Central Bank Demand Is Still in Its Early Stages
At present, there is not much monetary premium in gold, because very few people — if anyone — are actually using it as money, so almost no monetary premium exists beyond central banks. Central banks are using gold as a reserve asset, and that usage has been growing recently. Historically, however, central banks hold a very low percentage of their reserves in gold, so demand for gold as a reserve asset is not currently large. That demand is growing precisely because central banks are underinvested in gold — they have too much fiat on their balance sheets. Demand for gold as a central bank reserve is therefore likely to rise, not fall. Likewise, demand for gold in private hands as an investment, which is also historically low right now, could rise as well.
Central banks continue to hold far more paper reserves than hard assets despite increasing geopolitical uncertainty, which suggests official gold accumulation may still be in its early stages rather than approaching exhaustion. Retail investors often obsess over daily price swings while sovereign institutions quietly adjust reserve allocations over many years. Following institutional balance sheet trends rather than financial television can produce a very different long-term outlook.
Tokenization Could Remonetize Gold
New financial technology could unexpectedly strengthen gold's monetary role instead of replacing it. There will likely be more demand for investment gold from both institutions and individuals, and gold may in fact be remonetized. Ironically, one of the forces behind that remonetization could be tokenization and blockchain, which allow gold to be tokenized in the same way the dollar can be tokenized.
People are enthusiastic about stablecoins and putting dollars on the blockchain because it is more efficient than a checking account or a bank wire. But even greater efficiency is gained by tokenizing gold. Once gold is tokenized, it becomes the perfect medium of exchange — easy to buy, sell, and settle in. There is no need to physically send gold, box it up, or ship it; ownership of the token is simply transferred instantly, and the gold sitting in a vault in Switzerland that belonged to one party now belongs to another. Rather than losing its monetary premium, gold is therefore more likely to gain the monetary premium that it doesn't really have right now.
The next monetary shift, in other words, may not replace gold with technology; it could instead make gold easier to use than ever before. Blockchain could modernize physical gold rather than rendering it obsolete through digital alternatives — a possibility that challenges years of assumptions that innovation automatically favors fiat-backed digital systems over tangible assets. Investors should watch where payment infrastructure actually evolves, not just where speculation flows.
On a Government-Issued Gold Bond
Question: What about Judy Shelton's plan for a gold bond to be issued on the 4th of July — will it float?
The US is not going to start issuing gold bonds, at least not unless it has to, because doing so would amount to an admission of failure — essentially a surrender. Obviously, if the government issued bonds redeemable in gold, it could secure a better interest rate than on dollar-denominated debt. However, the obligations would grow, because the government would have to go buy the gold if it doesn't already have it, and the true size of the reserves is unknown. The US could pledge its gold reserves, but that would then require an audit so that people could be certain the gold is actually there.
