The Setup: A Correction Within a Larger Bull Market
Gold is currently fighting to hold significant support around the $4,000 level. It occasionally trades a little below that mark, but never by much, and it keeps recovering back above it. This behavior suggests that $4,000 may be forming a new base. We previously established a base at $2,000, then another at $3,000. We never managed to build a base at $5,000, but the resilience of the $4,000 level now looks solid enough to serve as the next launching platform. From there, another run at $5,000 is likely, and the old high will eventually be taken out. If not this year, then by next year, $6,000 gold is a very likely move — a target that a number of major investment banks have independently arrived at as well.
The recent weakness is best understood as a consolidation, not a reversal. The key question is not whether gold goes higher, but when this consolidation ends.
What Drove the Run-Up and the Pullback
Several forces fueled the earlier rally and then triggered the correction:
The Middle East and the Iran war. In the lead-up to that conflict, it was fairly obvious that something was going to happen. That expectation drove heavy buying into gold, producing a big run-up. But when the war actually broke out, it turned into a classic "buy the rumor, sell the fact" event — the conflict had already been priced in, so the news itself sparked selling rather than more buying. That began the correction.
Silver's overshoot. Silver had been stuck around $30 for a couple of years. When it finally broke out above $50 — a level that had acted as resistance all the way from 1980 through 2021 — it shot straight up to around $120. That was a dramatic overshoot, and it naturally had to come back down.
Hawkish Fed rhetoric. Supposedly hawkish comments from the new Fed chair, Kevin Warsh, about how aggressive policymakers would be in their single-minded focus on returning inflation to 2%, flipped market expectations sharply. The market went from pricing in two or three rate cuts to pricing in two or three rate hikes. This pressured gold and simultaneously pushed up the dollar.
Why the "Volcker" Scenario Won't Happen
The market has bought into the idea that the Fed can crush gold with tough, tight money reminiscent 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 some cuts do happen, they will arrive with inflation running much higher than it is now.
This is the crucial point that most investors miss: nominal rates are largely irrelevant; real rates are all that count. In many cases nominal rates simply do not matter. Even if the Fed nudges up nominal rates, real rates are going to be a lot lower because inflation will be so much higher. Falling real rates are deeply bullish for gold, regardless of what the headline policy number does.
Investors who chase central bank rhetoric instead of watching actual liquidity conditions frequently sell near support rather than near opportunity. Emotional swings tend to peak after prices have already repriced geopolitical risk, which is precisely what happened here. Sentiment has reversed dramatically to the downside, which is itself a contrarian signal.
Silver: Former Resistance Becomes New Support
Silver's dynamics look very strong. It is unlikely to fall back to $50. That $50 level was the resistance that overhung the market for four decades, from 1980 through 2021, and once it was finally broken, the metal way overshot. Now that former ceiling is poised to act as a floor.
The chance to buy silver below $50 is probably gone — that would simply be too good an opportunity for everyone who missed out, so it is unlikely to be offered again. Anything below $60 is a pretty good buy. Silver is currently trading slightly above $60; the lowest it reached during the correction was about $56 and change. Anyone who wants to own it will have to pay up a little rather than wait for a perfect pullback.
The broader lesson: silver often delivers its biggest moves right after convincing investors the opportunity has already vanished. When multi-decade resistance flips into long-term support, it changes how institutions evaluate downside risk. Retail investors tend to wait for the perfect pullback, while larger buyers accumulate during uncomfortable consolidations. Missing those transition periods can permanently raise an investor's average entry price.
Inflation Is Broad, and AI Makes It Worse in the Short Run
It is not just gold and silver — nearly everything is going to go up, because the inflation we are experiencing right now is massive.
Artificial intelligence is often assumed to be deflationary, but that benefit lies years in the future. In the short run, AI is actually putting upward pressure on prices. The enormous demand it creates for energy and raw materials to finance the build-out is inflationary. A concrete example: Apple just implemented the biggest price increases in its history, roughly 15% to 25% across essentially every product it makes. On top of that, the Fed is creating a great deal of inflation to finance ongoing deficit spending. All these pressures compound.
What Could Trigger the Next Leg Higher
Several potential catalysts could reignite the bull market:
- Bad economic data, such as a weak jobs number.
- The Fed's failure to hike rates — or, paradoxically, even its first hike — could serve as a catalyst.
There is real doubt the Fed will hike at all. If policymakers were genuinely determined to tighten, several pointed questions expose the contradiction: Why didn't they hike at the very first meeting? Why is the balance sheet still expanding? Why is the money supply still growing? The rhetoric of restraint is contradicted by the liquidity data. Markets ultimately respond to where liquidity actually flows, not to where officials claim they want inflation to go. Savers who ignore that distinction often discover too late that their purchasing power vanished long before the headlines acknowledged it.
The task-force excuse. Policymakers have set up five task forces to study the problems. Setting up committees to study a problem is usually what you do when you don't actually want to act — it lets you pretend to be doing something. That becomes an excuse for inaction: "We're waiting for the task force to give us a recommendation." By the time any recommendation arrives, inflation could be much higher and the economy much weaker.
Election-year politics. With November elections approaching and the campaign season heating up over the summer, political incentives come into play. To the extent that one party is low in the polls — as the Republicans certainly are — there is greater incentive to deliver some kind of stimulus, some "freebie" for voters to carry into the voting booth. That stimulus could itself be a catalyst. Election-year incentives shape decisions long before voters notice the consequences, and governments generally prefer postponing difficult choices while stimulus grows more attractive as elections near. Investors focused only on campaign promises may overlook the inflationary costs that arrive months later.
Bitcoin: The "Digital Gold" Myth and Its Consequences
A real crash in Bitcoin could itself become a catalyst for gold, because it would highlight the difference between the two assets. Bitcoin has overshadowed gold and stolen some of its thunder. When we last discussed it, Bitcoin was around $90,000; it has since fallen to around $58,000.
Importantly, many people have not bought gold or Bitcoin — but one reason they avoided gold is the belief that "gold will lose out to Bitcoin," so they went looking for some other inflation hedge instead. Once the myth that Bitcoin is "digital gold" finally dies, that is good for actual gold.
Much of Bitcoin's marketing spin has been built on denigrating gold — claiming it isn't really scarce, that no one knows how much exists, that there are gold asteroids, that you can never be sure it's real, that it's easy to fake. This narrative exists because promoters had to trash gold to elevate their own asset.
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. If 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.
Gold's Value Is Not "All Perception"
There has been a great deal of negative campaigning against gold, and it has taken its toll on potential buyers who don't see the real value. People say "gold is useless, it's all perception, people just think it has value" — but that description fits Bitcoin exactly, and it does not fit gold.
People wrongly believe gold has no use, even though gold jewelry is everywhere and gold is a component of consumer electronics. Almost everyone owns and uses gold in their daily life without realizing how much value it holds. Gold has genuinely unique physical properties that are not shared by other metals, and there are circumstances where gold is required and nothing else can be substituted for it.
The question of monetary premium. If gold lost its monetary role entirely and were used only for electronic or industrial purposes, would its value be a mere fraction of today's price? It is hard to say, because it is extremely difficult to strip the store-of-value function away from gold — objectively, gold is a store of value by its very nature. It is eternal.
Permanence as a Financial Property
Gold doesn't decay, rot, or change — nothing happens to it. By the very definition of its physical properties, it is a store of value. And even when you use gold, you can reuse it endlessly. Whatever you've done with it, you can melt it down and start over.
This sets gold apart from every other commodity. If you buy wheat and eat it, it's gone — you can't eat the same wheat twice. If you burn gas, you can't reuse it. But gold can be used over and over, indefinitely, without ever losing value. It also differs fundamentally from manufactured goods: a new computer becomes obsolete within a few years because a better one is developed, so the one you bought loses value. There is no "better gold" coming that will render your gold obsolete. These are values impossible to strip out of the metal.
Because of this permanence, the gold you own today can be used a thousand years from now by someone else. In this sense, gold 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 years, let alone a thousand — and very few things you own can make that claim.
The illustration is striking: when a ship that sank 600 years ago is discovered, the only thing likely to still hold value is the gold aboard. Everything else has disintegrated into the sea.
Permanence itself carries financial value because it removes the technological obsolescence that affects 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 Banks Are Under-Invested in Gold
There is not much monetary premium in gold right now, because very few people — if anyone — actually use it as money in daily transactions. The main monetary premium beyond that comes from central banks, which use 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 — they hold too much fiat on their balance sheets. There is not yet a large reserve-asset demand, but that is precisely because they are under-invested. Central bank demand for gold as a reserve is therefore likely to rise, not fall. In parallel, demand for gold in private hands as an investment — also historically low right now — is likely to increase as well.
The takeaway: official gold accumulation may still be in its early stages rather than approaching exhaustion. Retail investors fixate on daily price swings while sovereign institutions quietly adjust reserve allocations over many years. Following institutional balance-sheet trends rather than financial television produces a very different long-term outlook.
Tokenization Could Remonetize Gold
One of the most powerful and ironic possibilities is that new financial technology strengthens gold's monetary role rather than replacing it. Blockchain and tokenization could actually be the mechanism that remonetizes gold.
Just as the dollar can be tokenized, gold can be tokenized. People are excited about dollar-backed stablecoins on the blockchain because they're more efficient than a checking account or a bank wire. But you gain even more efficiency by tokenizing gold. Once gold is tokenized, it becomes the perfect medium of exchange — easy to buy, sell, and settle. You no longer have to physically hand over the metal, put it in a box, or ship it. You simply transfer ownership of the token instantly, and the gold sitting in a vault in Switzerland that was yours now belongs to the recipient.
Rather than losing its monetary premium to digital alternatives, gold is therefore more likely to gain a monetary premium it doesn't currently have. This 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 Government-Issued Gold Bonds
Regarding a proposal (associated with Judy Shelton) for the US to issue a gold bond — for instance on the 4th of July — this is unlikely to happen. The US will not start issuing gold bonds unless it has to, because doing so would amount to an admission of failure, essentially a surrender.
The mechanics do carry an obvious incentive and an obvious risk. By issuing bonds redeemable in gold, the government could secure a better interest rate than it gets on dollar-denominated debt. But the obligations would grow, because if the government doesn't hold enough gold, it would have to go buy it. In principle, the US could pledge its existing gold reserves — but that would likely force an audit so that people could actually confirm the gold is there.
The Central Warning
The biggest risk to a portfolio may be believing a narrative that has been repeated so often it feels like fact. Gold's value is rooted not only in monetary history but in unique, permanent physical properties that modern technology continues to depend on — a foundation few financial assets can claim when confidence in paper promises begins to weaken. Investors who dismiss that distinction may be confusing popularity with durability, and mistaking excitement for endurance.
