Gold just breached the $3,500 mark like it was long overdue, and this isn’t a simple market overreaction to President Trump’s constant jabs at Fed Chair Jerome Powell. No, this is about something far more significant—a tectonic shift in global fiscal and monetary policy that’s driving gold’s meteoric rise. The real catalyst here isn’t Trump’s rhetoric; it’s the deepening erosion of confidence in fiat currencies and the looming global monetary reset.
A Global Easing Cycle is Coming, and Gold is Front-Running It
We are witnessing the birth of a synchronized global easing cycle, with central banks worldwide—except, notably, the Bank of Japan—already setting the stage for aggressive rate cuts. As central banks reach for the rate-cut lever in a coordinated effort to stimulate economies, gold is not simply reacting. It’s positioning itself as the preemptive hedge against what’s coming. Investors aren’t waiting for the central banks to act; gold is already pricing in the coming storm.
The problem is far deeper than just Trump vs Powell. This is about the structural breakdown of trust in fiat currency systems. We’re now facing a world where real interest rates are either deeply negative or far too volatile to rely on for long-term stability. When the nominal—be it the U.S. dollar, the euro, or the yen—loses credibility, investors inevitably turn to something physical. Gold, with its inherent stability and history as a store of value, remains the ultimate safe-haven.
Gold’s Breakout: More Than Just a Technical Move
This surge isn’t just another technical breakout. When adjusted for inflation, gold has now decisively surpassed its 1980 peak—set during the height of stagflation and geopolitical turmoil. That’s a generational shift in trust, signaling something much more profound than just another market rally. The gold market is reflecting the breakdown of the fiat system itself, not just a reaction to political noise.
If you look at the S&P 500 in gold terms, the message is even clearer: we’re back at levels seen during the Covid crash lows. The narrative of “greed vs. fear” has shifted sharply toward fear, and it’s not going away anytime soon. The market is adjusting to a new reality, one where gold holds the line against systemic risk and mounting geopolitical tensions.
The ETF Story: Retail Still on the Sidelines
Gold ETFs have been a key driver of this rally, but there’s still significant juice left in the tank. The value of assets in State Street’s gold fund has hit new highs, but the real story is in the number of shares outstanding. Retail participation remains well below the panic levels seen during the early days of the Covid crisis. This suggests that the broader public hasn’t yet piled into gold en masse. When U.S. investors start to feel the pinch of their 60/40 portfolios crumbling under the weight of both equities and bonds, they will begin to flock to gold as the last remaining asset with no liabilities attached.
The Bond Market Tells the Truth
The bond market has already started to signal distress, with front-end yields sliding as expected in a slowdown. But long-end yields are rising—an unusual development that is sending a powerful message. This isn’t just about recession fears; it’s about a fracture in confidence in the system itself. When investors dump Treasuries in a slowdown, it’s not just a fear of economic contraction—it’s a broader concern about the stability of the U.S. financial system. The Fed’s 50-basis-point emergency rate cut last September only exacerbated the problem, steepening the yield curve and turbocharging gold’s rally.
The Currency Response Phase is Coming
The dollar’s decline isn’t over yet. As the currency weakness persists, don’t be surprised if the ECB and the BoJ eventually act. A runaway euro or yen would devastate their export-driven economies, and the central banks will be forced to act. The response could take the form of dovish pivots, quantitative easing restarts, or even the discussion of capital controls. Once these measures are implemented, the floodgates for global liquidity will open once again, pushing gold to even higher levels.
Goldman’s $4,000 Gold Target: Is It Conservative?
Goldman Sachs has set a target of $4,000 for gold by mid-next year, and based on the current trajectory, that doesn’t seem too far-fetched. In fact, it may even be conservative. This isn’t a typical bull run driven by speculative fever; it’s a flight to safety, driven by the systemic vulnerabilities of fiat currencies. The gold market is pricing in a world where the credibility of central banks and fiat currencies continues to erode, and until something substantial changes—something that’s unlikely to happen soon—gold bugs aren’t just speculating. They’re getting in early.
Bottom Line: A Flight to Safety, Not a Bull Run
This is not a typical bull market. It’s a flight from the instability of fiat currencies to the only asset left that carries no counterparty risk: gold. The fiat regime is leaking credibility, and as long as that’s the case, gold will continue to rise as the ultimate hedge against policy chaos. The markets may not have fully grasped the scale of this shift yet, but gold is already preparing for a world where the traditional financial system’s contradictions are finally catching up with it.
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