The never-ending rally in gold’s no different from any other phenomenon in being unamenable to monocausal analysis.
But that doesn’t dissuade market participants from offering up explanations that purport to get at the “real” reason for the run-up. “I’ll tell you what’s going on,” goes the pronouncement, with heavy emphasis on “I’ll.”
Gold, like almost no other asset, stirs an emotional response in investors. Quite often that manifests in declaratory language like what we often hear in pitched political debates.
You might hear, “What’s going on with the bond market?” or “What just happened in the vol complex?” But when it comes to gold, the apprehensive interrogative gets dropped in favor of the confident declarative. “Gold’s up because China’s buying.” “Gold’s up because the dollar’s collapsing.” Or, my favorite: “Gold’s up because somebody knows something.”
Ironically, that latter explanation’s probably the most accurate these days. “Somebody” does indeed know “something,” where “somebody” is everybody and “something” is that the world’s been set ablaze for the umpteenth time this decade, and the arsonist behind the latest conflagration is none other than the President of the United States.
Hot on the heels of a monumental (and I do mean monumental) 2025 surge, gold’s off and running in 2026 with a world-beating 7% rally in just two weeks. The next closest non-commodity asset on the YTD cross-asset leaderboard is emerging market stocks.
The chart’s simple but my goodness is it ever remarkable: Gold’s up 155% since the end of 2022, and more than 210% since the March 2020 lows.
Would-be gold aficionados can doubtlessly regale you with a lot of inside-baseball color to illuminate gold’s ongoing luster, but I’d suggest Occam’s razor has a part to play.
In just the past two weeks, Trump kidnapped Nicolas Maduro at gunpoint (gold rose 2.7% the next trading day), served grand jury subpoenas to the Federal Reserve (gold rose 2% the next day), insisted the US will seize Greenland “whether they like it or not” and repeatedly threatened to bomb Iran (again) ostensibly to protect protesters whose lives are sacred in Tehran if not so much in Minneapolis.
Trump ran for office in 2024 on a promise to restore a sense of order both at home and abroad. I don’t think it’s a stretch to suggest he’s done the opposite, and although tariff inflation fears have so far proven misplaced, you do have to wonder whether the combination of Trump’s run-it-hot fiscal policy and unapologetically overt pressure campaign on the central bank might eventually manifest in higher inflation, lower real yields, a weaker dollar or all three.
Of course, gold’s overbought currently (the 14-week RSI’s been above 70 since September and the 14-day RSI topped 80 on multiple occasions over the past four and a half months), but to some observers, our not-so-brave new world’s conducive to a structural gold bull.
“Gold is the best-performing asset of the 2020s on war, populism, the end of globalization, fiscal excess and debt debasement,” BofA’s Michael Hartnett remarked in his latest, noting that between T-bill-buying for reserve management and MBS purchases, the Fed and Trump are poised to add $600 billion of fresh liquidity in 2026 between them.
The table above will be familiar to some readers: It shows the history of major gold bull markets looking back half a century.
Pullbacks are “always strong” in overbought bull markets, but the “case for a higher allocation to gold is intact,” Hartnett went on, reminding investors that the average price gain in the four gold bull markets shown in the table is nearly 300%. That’d mean gold peaking above $6,000.
In a note published earlier this month, Strategas Securities, the market strategy arm of Baird, wrote that in an “increasingly polarized geopolitical, economic and social world, structural exposures to real assets should likely increase.”
Gold, the note read, “is not rising because it is speculative or even as an inflation hedge,” but rather “because fiat-based systems are fatigued.”
Thank you for the analysis. Would be interested in your view on Silver, that second shiny material that has gone crazy.
Silver’s a crapshoot. I’ve never been able to bring myself to entertain that soap opera — and it’s always, always a soap opera. I’ve missed out on some web traffic by refusing to document bouts of silver drama over the years, but to me silver articles feel like click bait, and I can’t publish click bait. That’s not to cast aspersions at folks who are interested in silver, it’s just that from an editorial perspective, it feels too much like chasing clicks for my liking. And I’ve never owned any silver that isn’t jewelry.
Well the crazy du jour , ‘tariffs if you don’t hand over Greenland’, sure won’t hamper golds rise next week
Gold has always been something of an uncertainty hedge, and it may continue to run–in fits and starts–until some global clarity is restored (which means perhaps not for some time.) I do believe that a lot of the activity is occurring in Asian markets, particularly China, although I cannot cite any hard data for you at the moment.
I’ve never understood gold, but your ‘uncertainty hedge’ makes sense.
The Chickens’ of Fractional Reserve Banking coming home to roost!
I don’t understand why the monumental gold rallty is not obvious. Look at Hartnett’s BofA chart. T-bill, dollar currency, and S%P. All 3 are dollars. Gold is not a dollar and is often negatively correlated. Greenland, Venezuela, Iran warishness has been a function of Trump’s craziness. As Biden / Powell stumbled in 2022 Trump looked like he could win in 2024, after the mid term was over and gold bottomed.
To make this obvious NOW WITH CRAZY TRUMP IN CHARGE. Let’s say I run Guyana’s money. I have money pouring in. Where do it put it as a small powerless country now under the DONroe doctrine. I have over 1000 km of jungle border with Venezuela, and the US navy is shooting-skeeting with fast boats off mt cost. That navy could wipe me out on any day. I put my money in gold – I should store it in Switzeland or China. I (John Taylor) can’t believe gold is moving up so slowly! .
If you, (John Taylor) would agree to a custody arrangement that entrusts the Party in Beijing with your gold, then I (Heisenberg) would not agree to an arrangement where you manage my gold.
Also, I’m not sure Guyana’s the best example here. They’re bedeviled by a chronic shortage of USDs. I don’t think the fix for that is swapping already scarce USDs for gold and locking the metal up in a Chinese vault.
The point i s Gold is the non-U.S. safety, allowing a country or an investor to avoid Trump and his erratic acquisitve desire. You own gold and you are safe from Trump.
The financial sanctions imposed by Biden on Russia reinforced that belief in some countries.
“I think the markets will brush it off as political noise and gesturing,” said Richard Steinberg, chief market strategist of Focus Partners Wealth, in an interview Saturday. “I don’t see a scenario where the market thinks we are buying Greenland.”
That summarizes a common view among investors which has been proven right when it comes to asset prices. But it looks (to me anyway) that there is some doubt creeping in around whether we can continue to assume that the president is all bark and no bite. In that context, starting or adding to a gold position may make sense.
Hard to tell if this is the moment he goes full crazy. Unless he’s planning marshall law (or marshall law light) for the midterms this seems really stupid. Like has he not read greek mythology or history?????
Last time i positioned for “he finally went all the way crazy” – liberation day- it turned out he was just having a good time and wussed out as soon as he got the tap on the shoulder. We shall see. It would be fitting that he goes full caligula when i finally stop hedging for it.
Safe to assume POTUS is not a mythology aficionado, nor a great historian. Liberation Day had an expiration date (TACO). Unfortunately, the next expiration date is November (maybe – all predictions wrong or your money back).