Gold’s spectacular bull market since its mid-2022 bottom at 1600, amid the most brutal monetary tightening by the Fed since the Volcker era under JayPo (now branded as a “loco” and a “major loser” by President Trump) has climbed seminal macro walls of worry. A surge in the US Dollar Index to 110 in Jan’25 did not kill gold’s bull run nor did tough love sledgehammer rate hikes after Powell discovered that post Covid inflation was not transitory.
Biden White House’s decision to weaponize access to the dollar funding market and seize the Kremlin’s foreign assets to punish Putin for the invasion of Ukraine triggered deep angst in Beijing, Tehran, Pyongyang, Havana and Caracas that the opponents of Uncle Sam’s geopolitical diktat could no longer use a weaponized US dollar as a reserve asset.
The history of the human race since the age of the Pharaohs three millennia ago shows that gold is the ultimate medium of exchange, store of value, unit of account and hedge against inflation, war and revolution. This lesson has been re-learnt the hard way by this generation as the bubble of American exceptionalism was gutted by the King of MAGA. After Trump unleashed a trade war and recklessly bullied the Fed Chairman to slash interest rates, the US dollar finally lost its post-Bretton Woods cachet for the world’s central bankers.
The dollar is now bleeding and on the ropes on Planet Forex. The US Treasury bond market’s plumbing has gone ballistic. The credit markets face Lehman scale contagion risk. The PBOC has launched a financial Pearl Harbor on Uncle Sam with its epic bullion pivot. Gold surged 9% to $3500 an ounce this week.
Gold has now replaced Mag-7 as the world’s most crowded trade and its nemesis was certain the moment Scott Bessent hinted at a kinder/gentler twist in US-Chinese relations. While any trade rapprochement with China will be cynical and tactical, gold is now a pawn in the lethal game of nations. Goldman Sachs now has a $4,000 an ounce year end price target. Trump has fatally undermined the world’s credere, or belief in the greenback. Without belief, there is no credit.
Gold is revered not only by Hindu brides, Chinese CCP bosses, African dictators and Arab petro sheikhs but now has also attracted institutional money from Wall Street. The latest gold frenzy was ignited by US investor aghast at the collapse of the US dollar as their President engaged in a public catfight with his central bank chieftain, exactly as in some sordid Third World hellhole as Trump calls the dark alleys of the planet.
The action is now in the gold tracker GLD and US/European buyers will accumulate 250 tons on every dip. Gold is up 30% in 2025 as the smart money scrambles to execute equity overlay hedges. This is no longer about sanctions or inflation but the collapse of trust at the pinnacle of America’s monetary pyramid. My call? Gold scales $5000 an ounce before this cycle is done.
Also published on Medium.
