Transcription
Let me start with the most important thing I have learned in 40 years of watching markets. George Soros taught me this, actually. He said it is not whether you are right or wrong that matters. What matters is how much you make when you are right and how much you lose when you are wrong. And what that really means is that the size of your debt has to match the conviction of your evidence. And right now, sitting here in June 2026, I am telling you my conviction is about as high as it has been on any macro trade I have studied in the last decade. Not because I am optimistic, not because I like gold. I do not make money being an optimist or a pessimist. I make money being a realist, too. And the reality of what is happening to the global monetary system right now is something that I think very few retail investors are genuinely appreciating.
So, let me take you back. Let me take you back to the beginning of this year. Gold was sitting around $4,300 an ounce. Silver was somewhere around $80. And then the Iran conflict escalated dramatically in late February, and gold shot briefly above 5 or 600, and silver went above one. Every single retail investor on the planet felt like a genius for about 3 weeks. And then what happened? A correction. Gold fell almost 20% from those highs. Silver fell 35%, and people lost their minds. The headlines started, "Gold is over. The safe haven trade is dead. Inflation is easing. The Fed is done. Gold has no yield, too." And everybody who bought near the top was sitting there in pain, looking at their accounts, wondering what they had missed.
And I want to tell you what you missed, because what happened is exactly what has always happened. And if you understand the mechanism, you will never be surprised by it again. When a geopolitical shock hits, the first thing that moves is oil. Oil is the transmission mechanism for every geopolitical crisis in the modern world. 20% of global oil supply runs through the Strait of Hormuz. When that region gets disrupted, oil moves up fast and hard. And when oil moves, it does not immediately push inflation higher. What it does first is push inflation expectations higher. And that distinction matters enormously, because the Federal Reserve does not respond to inflation. The Federal Reserve responds to inflation expectation. And when inflation expectations rise, the Fed freezes. They cannot cut rates. They cannot do anything. They just sit there and watch. And when the market realizes the Fed is stuck, bond yields go up. When bond yields go up, the dollar strengthens. And when the dollar strengthens and you can earn 5% sitting in a US Treasury, the question every institution in the world is asking is very simple: Why would I sit in gold, paying me nothing, when I can sit in a Treasury, paying me 5%? And the answer is that in the short run, a lot of them will not. And that is exactly what happened. That is why gold dropped. That is why silver dropped even harder. It was not a collapse in the thesis; it was a mechanical, predictable response to a very specific sequence of events that has played out the same way in 1973, in 1979, in 1991, in 2001, and in 2022.
Now, here is where it gets interesting. Here is where the setup that I am watching right now is different from everything that came before it. Because every single one of those prior episodes, every one of them, resolved the same way. Gold initially dropped, and then it went to higher highs every single time. And the reason it went to higher highs every single time is because the underlying structural problem that gold is responding to never got fixed. It just got papered over. And in 2026, the underlying structural problem is not just unresolved; it is dramatically worse than it has ever been in my lifetime.
Let me give you one number that I want you to sit with for a moment. One number. The United States government is currently paying $1 trillion a year in interest on its debt. $1 trillion. That is more than the entire defense budget, more than Medicare, more than Medicaid, more than every aircraft carrier, every fighter jet, every soldier, every nuclear submarine in the entire United States arsenal combined. The country is spending more money just to service the interest on what it already owes than it spends protecting itself. And the debt is sitting at roughly $36 trillion right now. That number does not go down. It never goes down. It only goes up. And the pace at which it is going up is accelerating, not decelerating. And if you want to understand why gold has gone from $250 an ounce in 2001 to over $4,000 an ounce today, the answer is not complicated. The answer is that the world has been slowly, steadily, increasingly losing confidence in the ability of the United States government to manage its fiscal house. And that process is not over; in fact, I would argue we are somewhere in the middle of it.
Now, I want to talk to you about something that I think is the single most most important structural change in the gold market in the last 3 years. And it is something that most retail investors have completely missed, because it is not exciting. It does not make good headlines. But it is the foundation underneath everything else I'm going to tell you. Central banks are buying gold at a pace we have never seen before in recorded history. Three consecutive years above 1,000 tons of net central bank purchases, 3 years in a row. Before 2022, the average was around 473 tons per year, going all the way back to 2010. We are buying more than double the historical average. And this is not speculative money. This is not hedge funds or retail traders. This is the treasuries of sovereign nations. China, India, Poland, Turkey, Singapore, Czech Republic, they are all pulling their reserves out of US Treasury bonds, and they are putting them into gold. Because when you weaponized the dollar in 2022, when you froze Russia's dollar reserves after the Ukraine invasion, every single central banker in the world who was not already aligned with Washington sat up and thought very carefully about what it meant to hold their nation's wealth in a currency controlled by someone else, too. And the answer that many of them arrived at was the same answer that every civilization in 5,000 years of monetary history has arrived at: Gold cannot be frozen. Gold cannot be sanctioned. Gold does not have a counterparty. Gold is nobody else's liability.
Now, let me bring this to silver, because silver right now might actually be the more interesting trade. And I say that carefully, because silver is volatile. Silver is not for the faint of heart. Silver can cut you badly if you do not understand what you own. But structurally, the case for silver right now is one of the most compelling I have seen in a very long time, and here is why. Silver is not just a monetary metal. Silver is an industrial metal, and the industrial demand for silver is going through a structural transformation that has nothing to do with inflation or central banks or geopolitics. It has to do with the energy transition. Every single solar panel built on this planet requires silver. Every electric vehicle requires silver in its circuitry. Every 5G tower, every data center pushing AI workloads, every semiconductor fab running at full capacity, they all require silver. And at the same time, silver supply has been in a structural deficit for five consecutive years. We are consuming more silver every year than we are mining. The inventories that were built up over decades are being drawn down. And unlike gold, there is no central bank sitting on a pile of silver that can release supply into the market when things get tight. When silver gets tight, it gets tight fast, and the price moves. That result from that kind of tightness are not 10% moves. They are 50% moves. Sometimes 100% moves. And the setup right now, with silver having corrected 35% from its highs, while the structural supply deficit has not moved an inch, is exactly the kind of asymmetric entry point that I spent my entire career looking for.
Let me tell you what asymmetric means to me, because I think the word gets thrown around too casually. Asymmetric means the downside is defined, and the upside is open-ended. It means that if I am wrong, I lose a little, and if I am right, I make a lot. And the way I build asymmetric positions is not by being clever; it is by waiting. It is by having the discipline to sit on my hands when something is overextended in one direction and wait for the reversion. Right now, gold is sitting significantly below its 200-day moving average. Now, for those of you who are not technical traders, that the 200-day moving average is not some mystical indicator. It is simply the average price of an asset over the last 200 trading days. It is the line that every major institution, every central bank, every sovereign wealth fund, every pension manager uses as a reference point for whether something is cheap or expensive relative to its recent trend, too. And when gold drops significantly below that line historically, over the last 10 occasions that has happened, gold has been positive 100% of the time over the following 12 months, with an average return of around 8%. But that is the average. The outliers, the times when the gap between the price and the 200-day average was really large, like it is right now. Those were not 8% recoveries. Those were 100% recoveries. Those were 100% recoveries.
And now I want to walk you through the four phases of what happens after every major crisis shock to gold and silver. Because understanding these phases will change the way you look at your portfolio forever.
Phase one is the panic. This is the first two to four weeks after the initial shock. Retail investors are selling, the headlines are screaming, the media is full of fear, and the smart money, the people who have been through this before, they are doing nothing. They are sitting quietly, watching, waiting. They are not buying yet. They are not selling. They are watching, because experienced money knows that the first wave of panic is never the bottom. The bottom comes later.
Phase two is the suppression. This is month two through roughly month four or five. The panic has calmed a little. The headlines are slightly less hysterical, but gold is still down. Silver is still down. And this is the phase that destroys retail investors, because they look at their portfolio, they see red, they read a headline saying "the gold trade is finished," and they sell. They lock in their losses at exactly the worst possible moment. And I want to be very direct with you about something here. The people who are selling gold and silver right now in this phase are selling it to someone. And the people buying it from them are not retail investors who panicked. The people buying it are central banks. The people buying it are sovereign wealth funds. The people buying it are the institutional money that has a 10-year time horizon and is loading up at prices that in five years they will look at and wonder why they did it not buy more.
Phase three is the structural bid. This is when central banks are consistently buying. The miners start reporting record profits. The smart money that sat patiently through phases one and two is now positioning. Recovery begins quietly, and retail is still scared. Retail is still reading the headlines from phase two, still licking their wounds, still telling themselves they will buy back in when it gets safer and safer in markets. Almost always means higher. By the time retail investors feel safe about gold again, they will be buying it at $6,000 an ounce, too. And the people they will be buying it from will be the same institutions and central banks that bought it from them at $4,300 when they panicked.
Phase four is the breakout. Price moves above the pre-crisis high, new all-time highs, the cycle completes, and the media that spent phase two telling you "gold was over" is now writing cover stories about why gold could go to $10,000 an ounce. And at that point, the trade is largely over for the patient money. The patient money is selling into retail euphoria, and the whole thing resets.
Now, I want to address something directly, because I know some of you watching this right now are sitting in losses on gold or silver, too. Maybe you bought near the highs in January or February of this year. Maybe you are down 20%. Maybe you are down 30% on silver, and you are feeling a combination of pain and frustration and maybe some self-blame, too. And I want to tell you that those feelings are completely normal, and they are also completely useless. Pain and frustration and self-blame do not help you make better decisions, too. The only thing that helps you make better decisions is understanding what you own and why you own it, too. And if the reason you bought gold or silver was because you understood the structural case, the debt, the central bank buying, the supply deficit in silver, the de-dollarization trend, all of the things I have been walking you through, then nothing about the current pullback has changed that case, not one thing. The US debt is still over $36 trillion dollars and growing. The central banks are still buying. The silver deficit is still there. The dollar is still, as I said in my own January interview at Morgan Stanley, toward the top of its historic purchasing power range, with foreigners massively overloaded in dollar-denominated assets. The thesis has not changed, only the price has changed. And a lower price for a thesis that is intact is not a reason to sell; it is a reason to study your position sizing and decide whether you have room to add.
Now, let me talk to you about something that is genuinely new in this cycle, something that was not present in 1973 or 1970, and I think it is one of the most important factors that could make this particular move in gold and silver more powerful than anything we have seen before. I am talking about the dollar itself. The US dollar has been the world's reserve currency since 19, that is 82 years, and for most of those 82 years, holding dollars was rational. The United States had the largest economy, the deepest capital markets, the most liquid bonds, and a track record of at least attempting to manage its fiscal house responsibly. None of that is as true as it used to be. The fiscal trajectory of the United States is now genuinely alarming by any historical standard. A trillion dollars a year in interest payments, deficits that are structural and seemingly permanent, a political system that seems constitutionally incapable of addressing the underlying problem. And foreigners, as I have been saying, are sitting on a mountain of dollar exposure that they accumulated over decades, too. And some of them are starting to ask whether that exposure makes sense at current levels. When that selling starts in earnest, when foreign holders of US Treasuries begin to rotate meaningfully out of dollars, two things happen simultaneously. The dollar falls, and gold, which is priced in dollars and serves as the alternative to the dollar in reserve portfolios, goes up. Not 5%, not 10%. When that kind of structural dollar selling begins, the moves in gold are generational.
Now, I am not here to tell you that is definitely happening. I am not in the prediction business. I spent 30 years watching the greatest investors in the world. The one thing they all have in common is they do not make predictions. They build cases. They size their bets according to the evidence, and then they follow the evidence wherever it leads, even if it means changing their mind. Soros taught me that, too. The willingness to change your mind quickly when the facts change is not a weakness. It is the single most valuable trait in macro investing, and right now, too. The facts are telling me that the case for gold and silver over the next 12 to 18 months is as strong as anything I have seen since gold was sitting at further $1,500 an ounce, and everyone had given up on it.
Let me give you a few very concrete data points that I am watching right now, because I do not want this to be abstract. I want you to walk away from this video with specific things you can track yourself.
First, watch the gold-to-silver ratio. Right now, it is sitting around 75:1. What that means is that it takes 75 oz of silver to buy 1 oz of gold. Historically, that ratio has averaged somewhere between 4:1 and 60:1 over long periods. When silver is undervalued relative to gold, the ratio is high. Right now, it is high. Historically, when the ratio compresses back toward historical norms from elevated levels, silver outperforms gold dramatically on the if gold goes to $60 real land, and the ratio compresses to 50:1, silver would be sitting at $120. That is 50% higher than where it is right now. Even if gold only goes up about 40% from current levels, that asymmetry, that is what I am looking at.
Second, watch the real yield on the 10-year US Treasuries. Real yield means the interest rate after you subtract inflation. When real yields are positive and rising, gold has a headwind, because you are getting paid to sit in bonds and you are giving up nothing by not owning gold. When real yields are falling or negative, gold has a tailwind, because sitting in bonds is losing you purchasing power, and gold starts to look very attractive by comparison. Right now, with the Fed stuck, inflation still sticky, and oil-driven inflation expectations starting to build again, the direction of real yields is something to watch very carefully. If they start to fall, that is one of the most powerful catalyst for gold I know.
Third, watch central bank data. Specifically, watch the quarterly reports from the World Gold Council. When central banks are net buyers above 1,000 tons a year, the structural floor under gold is very solid. If that number starts to drop, I want to know why. If it keeps rising, that tells me the dollarization trend is accelerating.
And fourth, watch the miners. Specifically, watch the profit margins. When gold is trading above $4,000, and a major miner like Agnico Eagle has a cost of around first 400 per ounce to get gold out of the ground, that means they are making roughly $2,600 in gross profit on every single ounce they produce. That is a margin that most businesses in the history of capitalism have never seen, too. And yet, the miners are still trading at a significant discount to where their fundamentals say they should be. The reason for that discount is that the stock market still has a memory of what happened to miners in 2013 and 2015 when gold fell and miners fell even harder. People are scared of miners, and that fear, that persistent, irrational, historically anchored fear is exactly what creates the opportunity. Because when gold goes up again, and the miners start reporting those absurd profit numbers, and the institutions who are underweight miners start to catch up, the leverage that the miners provide to the gold price is not two times, it is three times, it is four times, sometimes more.
Now, let me step back for a second and talk about the bigger picture, because I think context matters enormously here. We are living through a period of genuine structural transformation in the global monetary order. The last time the world went through a transformation of this magnitude was in 1971 when Nixon closed the gold window and ended the Bretton Woods system. Before that, it was 1944 at Bretton Woods itself. These are not annual events. They are generational events, and they are characterized by enormous uncertainty, enormous volatility, and enormous opportunity for those who understand what is happening. What is happening right now is that the unipolar monetary world, the world where the dollar is king and everything is priced and settled and held in dollars, is slowly, messily, sometimes violently giving way to something else. What that something else looks like is not yet clear, but I can tell you with a high degree of confidence what the transition itself looks like. It looks like exactly what we are seeing: Elevated gold prices, central banks diversifying reserves, the dollar under structural pressure, volatility in bond markets, geopolitical fragmentation driving countries to hold more of their wealth and assets that no government can control. And in that environment, gold is not a trade. Gold is a structural position. Silver is a trade with a structural tailwind. And the miners are the leverage play for those who understand the risk and are prepared to manage it.
I want to finish by talking to you about something that I think is the most important idea in investing, more important than any specific stock or metal or trade. It is this: The difference between the investors who make life-changing money and the investors who perpetually chase and perpetually get hurt is not intelligence, too. It is not connections. It is not access to information. The information is all out there. Everything I have told you today is publicly available. The debt number is public. The central bank buying data is public. The supply deficit numbers for silver are public. The historical patterns of gold behavior after geopolitical shocks are all public. The difference is not information. The difference is behavior. The investor who panics when gold drops 20% and sells at the bottom is not acting on bad information. They're acting on fear. And the investor who sits patiently, who understands why the price dropped, who knows that the thesis is intact, and who has the emotional discipline to hold or even add to their position when everything feels wrong. That investor is not smarter than the person who panicked. They just have a better relationship with uncertainty. Uncertainty is not the enemy of good investing. Uncertainty is the prerequisite for good investing. Then it is precisely because some people are uncertain, and some people are scared, and some people are selling that the opportunity exists for those who have done the work to be confident in their thesis and patient in their timing. If everyone was certain that gold was going to $6, then gold would already be at six.
The last time I was this convicted about a setup in the metals was early 2024 when gold was sitting at $2,000 an ounce, and every single mainstream financial outlet was telling people that with interest rates at 5%, there was no reason to own gold. And we went from $2,000 to $5,600 in roughly 2 years. I am not telling you we are going to do that again from here. I am not in the prediction business. What I am telling, that the the structural conditions that drove that move have not gone away. In fact, on almost every measure I track, they are more extreme today than they were in early 2024. The debt is higher, the central bank buying is more established, the silver deficit is deeper, the dollar structural position is weaker, and the price, after a 20 to 35% correction from the highs, is more attractive than it was at the peak.
So, if you are sitting in red right now, stop looking at where you bought. That number is irrelevant. The only question that matters is this: If you had no position in gold or silver today, and you were looking at the setup I just walked you through, would you want to own some? Answer that question honestly, because that is the question that determines your next move. Not where you bought, not what your account looks like today, not what the headlines are saying. Just in looking at the data, looking at the structural case, looking at the historical patterns, does this make sense? I think it does. I have spent a lot of time on this. The evidence compels me, and I will follow the evidence wherever it leads. That is what I have always done. That is the only thing that has ever worked.
If you got something out of this, do me one favor: Share it with one person who you think needs to hear this. Not because it helps me, but because there are a lot of people sitting in red right now, feeling alone and confused and scared. And sometimes just understanding why something happened is enough to make you feel a little less crazy. Understanding does not fix the pain of a drawdown, but it does stop you from making the worst decision at the worst time. And that, in investing, is worth an enormous amount. Take care of yourselves, do your own research, never take a position you do not fully understand, and remember, the goal is not to be right. The goal is to make money when you are right and not lose too much when you are wrong.