Silver has undergone a major structural change that most observers have failed to appreciate. Earlier this year there was a significant breakout in which silver ramped from roughly $30 an ounce to over $120. It then suffered a large pullback that coincided with the beginning of the Iran war, falling back below $70, and it is currently trading nearer to $65. The critical detail is that since silver blew through the $50 level, it has not come close to returning to it. That $50 zone represented fifty years of resistance, and breaking decisively through it produced an overshoot. The subsequent decline has back-and-filled much of that overshoot, but the breakout itself remains intact — which is precisely why the price has not fallen anywhere near $50 again.
Is the current price a buying opportunity, or is caution warranted, and what is the long-term trajectory of silver? Silver is going much higher. Anything between $60 and $65, and probably anything under $70, represents about as good a long-term buy as one is going to get. Ultimately the price is headed well above its prior peak. It will take some time to climb back up there, but once it does, silver is headed toward $200 an ounce and higher.
In the language of technical behavior, what happened to silver is a failed breakdown rather than a failed rally. Markets celebrated the pullback, but long-term support never actually broke. Despite extreme volatility, silver has stayed far above the decades-long resistance zone that many believed was impenetrable. The overlooked point is that panic selling failed to reverse the structural breakout. For those focused on preserving wealth, failed breakdowns often matter more than spectacular rallies.
Why Metals Fell During War — and Why That Logic Is Backwards
Why did both gold and silver fall in the aftermath of the Iran war starting, and trend sideways since, when precious metals are supposed to be safe-haven assets that skyrocket during conflict? Several things must be put in perspective. First, gold and silver had rallied so substantially in the run-up to the war that they were due for a pullback, and the war simply provided the catalyst. Part of the pre-war strength came from the market anticipating and pricing in that some kind of conflict was coming, so by the time the war actually began it became a case of "buy the rumor, sell the fact."
The thinking dominating the markets was that anything perpetuating the war kept the Fed on hold, kept oil prices high, made rate cuts less likely, and even raised the possibility of rate hikes. That put metals on the defensive, because everything is currently trading off of expectations for what the Fed will do with rates.
But this misses the bigger picture. Even if the Fed hikes rates, that is not necessarily bearish for gold if inflation is rising faster than the hikes — because it is real rates, not nominal rates, that drive gold and silver. Even if the Fed pushed nominal rates up to 10% while inflation ran at 20%, the result is a negative 10% real yield. There is no incentive to hold dollars and lose 10% of your purchasing power every year; the incentive is to hold gold and silver instead and retain purchasing power.
This is the central contradiction. The Fed insists rates matter most, yet purchasing power tells a different story. Investors became fixated on potential rate hikes while largely ignoring the inflationary consequences of prolonged conflict and higher energy costs. Nominal rates grab the headlines, but real yields determine whether savers actually preserve wealth. Anyone focusing only on Fed statements risks missing the larger monetary picture.
War Is Inflationary — Which Makes It Good for Metals
Once the market works off the excess and overbought condition that had built up, metals are going higher. Eventually there should be a "recoupling," where investors recognize that war is good for gold and silver rather than bad. The reason is not the war itself but the way governments pay for war — by printing money and running bigger deficits. Wars also divert resources that would otherwise produce consumer goods toward military hardware. During wartime, fewer goods are produced for consumers to buy while more money is printed to pay for the fighting. That combination — less stuff, more money — is a textbook recipe for inflation, and inflation is good for gold and silver, not bad.
The deeper truth is that inflation, not war itself, is the hidden driver of precious metals demand.
Gold Overtaking Treasuries as a Reserve Asset
Gold surpassed US Treasuries as a reserve asset near the end of last year, a fact recently put back in the spotlight by a report from the European Central Bank. How significant is this development, and is it a sign that the gold bull market is still in its early stages? This is very significant, and the trend is going to continue — and it will be highly problematic for the United States. To the extent that central banks prefer gold to dollars, they are not buying Treasuries. And if foreign central banks are not buying Treasuries, someone else has to. The government still has to sell them, so to attract replacement buyers it may have to offer much higher yields. The problem is that the United States cannot afford to pay those higher yields.
Central banks are quietly changing their reserve preferences while most investors remain focused on daily price moves. Gold overtaking Treasuries as a reserve asset signals a shift in institutional trust, not merely a passing commodity trend. The uncomfortable question is who will absorb future government debt if official buyers keep stepping back. Savers face the risk of currency dilution if monetary authorities themselves are forced to become buyers of last resort.
The Fed as Buyer of Last Resort — and Why That Is So Inflationary
In the alternative scenario, it may be the US central bank that ends up buying the Treasuries foreign central banks no longer want. But that route is highly inflationary, and the distinction is crucial. When, for example, the central bank of Poland buys Treasuries, it must use dollars already held in its reserves — so that purchase is not inflationary. But when the Federal Reserve buys Treasuries, it creates new dollars out of thin air. If the Fed starts printing all this money to absorb the Treasuries that other central banks no longer want, the dollar gets killed and prices go through the roof.
The most important monetary shift may occur long before headlines admit it exists. If foreign demand for Treasuries weakens, balance-sheet expansion by the central bank becomes the politically easier option — and that path debases the currency.
The Disconnect Between Mining Stocks and the Metals
Gold and silver miners have barely outperformed the metals, and many have reported record earnings yet seen their stocks fall as a result. Why does this disconnect exist, and what will it take for the trend to reverse? Investors still don't believe the price of gold. They still expect it to fall, suspecting that gold and silver are in a bubble. Because of that, they are unwilling to price these higher metal prices into the long-run assumptions that ultimately drive the valuation of mining stocks. At some point, however, that perception will change. Reality will set in, analysts will accept that gold and silver prices are not only not going to come down but are going to keep rising, and they will then have to completely redo their earnings forecasts and stock valuations. The whole market is built on perception.
This leaves investors exposed. Markets continue valuing many miners as though elevated metal prices are temporary, despite record profitability. That disconnect sets up the potential for a sudden repricing once consensus expectations finally catch up with reality.
Speculative Stories vs. Proven Cash Flow
The same psychology explains why speculative narratives command premiums while proven cash flow gets ignored. Consider the valuations investors assign to AI companies, or the valuation just placed on SpaceX. SpaceX does not even earn money — it is still losing money — yet investors don't care, because they are so optimistic about the future that they are willing to pay 100 times revenues just for a chance that the story works out. Meanwhile they refuse to gamble on gold stocks that are already earning a great deal of money, preferring instead to gamble on a company like SpaceX that earns nothing. It is purely a matter of perception, but at some point investors will turn toward the certainty of precious metals miners as more valuable than rolling the dice on a company like SpaceX.
The broader pattern is that investors routinely pay extraordinary valuations for future possibilities while discounting businesses generating cash today. This is where the analysis shifts from macroeconomics to market psychology — narrative often overwhelms fundamentals. The overlooked risk is chasing fashionable sectors after optimism has already been fully priced in. For long-term capital preservation, selective ownership of undervalued assets can matter more than chasing momentum.
How to Position in the Miners
Where should one be positioned in gold and silver miners — owning the biggest and best producers and ETFs plus physical gold, or moving further out on the risk spectrum into developers and explorers? The preferred approach is to buy individual names and do real research, because there are many inefficiencies in this space. The best and brightest analysts are not necessarily assigned to metals and mining, so a good portfolio manager generally has a leg up. Rather than buying everything indiscriminately, it is better to be selective — buy what looks cheap and promising, and avoid what looks expensive or too much of a crapshoot. There are plenty of opportunities not only in the big companies but in the mid-tiers as well.
Many junior companies will, at some point, be worth a great deal more even if they don't develop as fully as hoped, simply because investors will eventually become more willing to speculate in the sector. When the "hot money" comes in, prices go way up. That makes it a great opportunity to be invested now, ahead of that wave of speculative capital flooding into overlooked mining shares.
The Fiscal Math and the Vanishing Middle Class
A recent observation noted that in May the US government spent $628 billion yet collected just $335 billion in taxes — meaning balancing the budget would require nearly doubling taxes. Since that won't happen, massive money printing will cover the shortfall and effectively double consumer prices instead. If that level of inflation lies ahead, what could it do to the American middle class, and is physical gold and silver one of the remedies to protect purchasing power? The middle class is getting wiped out — that is exactly what is happening. It is why consumer confidence is at record lows and why the president's popularity is at a record low. It is the source of the affordability crisis. People can't afford things, but not fundamentally because things are more expensive — it is because people are poorer. And they are poorer because the government took their purchasing power, robbing them through inflation to cover its spending.
The arithmetic is stark: there is at least 50% more government now than before COVID, yet taxes have been cut. So how is all this extra government being paid for? It isn't free. Every time someone goes to the store and pays higher prices, those higher prices are how they are actually paying for government.
The affordability crisis, in other words, is less about prices rising and more about purchasing power falling. Government spending vastly exceeds tax receipts, creating a gap policymakers appear unwilling to close through conventional means. Inflation functions like a tax, most visible to households living paycheck to paycheck.
Why Inflation Hits Economic Classes So Differently
Inflation does not affect everyone equally. Some people benefit from it because they own large amounts of assets that are also being inflated. To them it doesn't much matter that food or gas is more expensive, because those are small expenditures in the scheme of their wealth. But for someone living paycheck to paycheck — spending a large share of income on the necessities of life — sharp price increases in those necessities are a very big deal. That is exactly what is happening: the middle class is disappearing, or what remains of it is, because it has been eviscerated for decades.
The New Fed Chair and the Inflation Dilemma
What about new Fed chair Kevin Warsh? At the last FOMC meeting rates were left unchanged and Warsh gave a speech. Is this "meet the new boss, same as the old boss," or will he really shake things up and do something good? He is not going to shake anything up, and he is not going to do anything. He is talking tough now to arrive with credibility — the "new sheriff in town" who is going to clean up the streets and is serious about inflation and price stability. But at the end of the day he will not act, because if he genuinely tried to get inflation down to 2%, he would create a massive recession. He would cause stocks, real estate, and bond prices to crash. He would force the US government into major spending cuts or tax hikes and could easily precipitate another financial crisis. A great many bad things would have to happen to achieve that objective.
He does not have the guts to do it. Instead he will do what Powell did, what Yellen did, what Bernanke did, and what Greenspan did — print money and create inflation. Warsh himself said inflation is a choice, and he is right: his predecessors chose inflation, and he will make the same choice, because making the opposite choice is politically a non-starter. Consider that the president already laid into Powell for what he did; imagine the reaction if Warsh started hiking rates aggressively, shrinking the balance sheet, pushing mortgage rates up, letting housing prices fall, and continued tightening straight into a recession. The political fallout would be intolerable.
This is the heart of the matter. Markets celebrate asset inflation, yet millions experience it as a decline in living standards. Policymakers face a dilemma: genuinely defeating inflation could require accepting painful economic contractions and falling asset prices. Leaders routinely promise price stability while avoiding the policies necessary to achieve it. The biggest risk, then, may not be inflation itself but the political incentives surrounding it — aggressive inflation control would trigger consequences elected officials find nearly impossible to tolerate. Investors relying solely on official assurances may badly underestimate how much future monetary accommodation is coming, because policy choices tend to follow political realities rather than economic ideals.
A Bubble in Everything
Regarding the big three indices and the extreme overvaluation visible across metrics — the Shiller PE ratio, the Buffett indicator, price-to-sales, price-to-book — are we due for a large correction and a longer sustained bear market in big tech, and what are the overall thoughts on the broad market? The market is as overvalued as it has ever been. Unless one belongs to the "this time it really is different" camp — always a dangerous camp that costs people a lot of money — the conclusion is unavoidable. A bubble is a bubble: if it walks like a bubble and quacks like a bubble, it is one. There is a bubble in AI, no question, and a bubble in tech. In fact there is a bubble in nearly everything affected by interest rates and cheap money; it all seems overpriced, with the lone exception of mining stocks and precious metals. The only thing that does not seem to be in a bubble, in other words, is the very stuff worth owning.
Every major bubble eventually reaches the stage where participants insist traditional valuation metrics no longer apply. Years of cheap money distorted pricing across multiple asset classes, leaving investors vulnerable to a painful mean reversion. The warning sign is not enthusiasm itself but the growing gap between underlying fundamentals and market expectations. Wealth preservation often begins by recognizing excess before consensus finally acknowledges it.
The Burst Crypto Bubble and MicroStrategy's Desperation
The crypto bubble has, for certain, already burst — though not all the air has come out yet, because many people still refuse to recognize both that it was a bubble and that it has popped. The evidence is visible in MicroStrategy, which is getting hammered, trading at roughly a 20–25% discount to its Bitcoin holdings. Its preferred stock ("stretch") is trading more than 10% below par. For three weeks in a row, the company has deliberately destroyed shareholder value by selling its own stock at a discount and using the proceeds to buy more Bitcoin. This is an asinine maneuver, because it actually reduces the amount of Bitcoin per share — shareholders own less Bitcoin after the purchase than before it.
So why would he do something like that? It is a desperate move to prop up the price of Bitcoin. He is the buyer, and he is willing to keep buying Bitcoin even if it destroys value for his own shareholders in the process. This story is finished — put a fork in it; it is done.
What stands out is that the crypto bubble, while not necessarily the biggest bubble, is the most insane and irrational of all. Most bubbles start with something real and then become excessive. Bitcoin and crypto start with nothing — it is all sizzle and no steak. At least SpaceX has some steak somewhere; crypto does not.
The broader lesson is that when an asset requires increasingly aggressive support mechanisms, investors should ask what that support is trying to prevent. The question becomes one of sustainability: whether demand remains organic once financial engineering becomes necessary to hold prices up. The deeper issue is not volatility but whether underlying value can justify expectations during a prolonged downturn. Long-term investors must learn to separate compelling narratives from durable fundamentals.
