Gold glitters, oil tanks and silver hits $41 an ounce! This trend is my friend

Gold’s 38% surge in 2025 to as high as 3570 an ounce in the New York spot market is not just about central bank anti-dollar reserve accumulation, expectations of a Fed rate cut at the September FOMC or inflation/deficit angst but also a very rational response to President Trump’s repeated assaults on the political independence of the Federal Reserve, which raises the likelihood of deliberate currency debasement at a time when the US Dollar Index has tanked 13% in the past 8-months, its worst performance since Jimmy Carter lived in the White House almost 50 years ago.

The prospect of tariff passthrough inflation, Lisa Cook’s ouster from the Fed board by Trump and the weakest US jobs data in 10-months amid an unsettled, violent, geopolitical climate in Ukraine, Gaza and North Korea has also contributed to the incredible resilience of the yellow metals fabulous bull run.

As in the 1970’s, the core essence of the Auric bull market is the world’s visceral fear of stagflation, which makes long-term bonds leprosy. The political crisis in France now means that French OAT debt now trades at 80 basis points above German Bunds, the widest credit spreads since the Euro sovereign debt crisis even as fiscal skepticism and higher inflation, led to the highest UK gilt yields since Tony Blair’s “Cool Britannia” heyday in 1998.

Goldman Sachs has written that if global investors switch even 1% of their strategic allocation from long maturity US Treasury debt to gold, a $5,000 target in 2026 an ounce will not be implausible. Gold and silver now become far more logical safe haven reserve assets in the Trump world with its rising risk of a vassal Fed, politicized rate, trade protectionism, geopolitical brinkmanship and the Mar-a-Lago Accords. Even Trump has now conceded that a peace deal in Ukraine will not happen anytime soon and thus the carnage in Dr. Tim Snyder’s bloodlands will continue.

Trump’s tariffs have also dealt a sledgehammer blow to the US Treasury bond market since the volume of cross border trade has plunged, leaving fewer dollars earned from Asian exports to be recycled as investments in Uncle Sam’s IOUs. Foreign holdings of US Treasury debt have now fallen to 23%, their lowest levels since the failure of Lehman Brothers in 2008 while Dr. Auric now boasts the highest share of global central bank reserves in a generation at 27%. The message to Wall Street and every investor is unmistakable. The fault, dear Brutus, is not in the stars but in the White House.

I used to hear my grandfather and father lament the secular decline in the mighty British pound, the reserve currency of the world in their lifetimes. I never thought I would live to see the erosion of King Dollar’s status as the planet’s safe haven reserve currency in my lifetime but it is now happening in real time.

Brent crude has now fallen below $67 a barrel in Singapore trading and the auguries for the OPEC+ decision this weekend does not look good. With European retail sales at a 3-year low, a clear slowdown in the US, China and India apparent, a supply glut this winter is inevitable.

Afterall, crude inventories in the West Texas Intermediate futures contracts, storage hub in Cushing, Oklahoma surge 2.1 million barrels last week alone. Not even the prospect of new sanctions on Russian oil exports or Indian refineries have enabled Brent to rise above $68 a barrel, even as Putin and Baby Kim joined Xi Jinping to witness the PLA’s New Age military hardware in Beijing.

Goldman Sachs, once a chest beating oil bulls now believes Brent crude will fall to the low 50’s some time next year. This has to be a scary prospect for the Gulf’s asset market as Saudi Arabia has now borrowed more money than either China or Mexico in the global debt market in 2025 with its recent $5.5 billion new issues of 5 and 10 year sukuk notes, priced 75 basis above US Treasury bonds. The Saudi Tadawul Index declined 2% in August and is now down 12% while the Saudi IPO market is in a deeply bearish twilight zone.