Gold's Relentless Rise Is The Strongest Sign Yet That The World Is Fracturing
Gold & silver's recent ascents have been relentless, like nothing the world has ever seen before.
If I had a gram of gold for every time I’ve heard someone predict a correction in gold since the beginning of September I might have more gold than Fort Knox. Gold’s ascent has been nothing short of relentless, absolutely unstoppable; since the breakout at the end of August gold has risen nearly $1,000/oz!!
Gold (Daily)
Technical analysts were beginning to call gold “overbought” in early September. Yet, it has only grown more and more overbought over the last six weeks.
What is driving this relentless repricing of mankind’s oldest form of money?
Gold (Weekly)
Obviously, there is no single answer to such a complex question. However, we can begin to piece together many clues that are available to us.
Last week’s tit-for-tat back and forth between the U.S. and China temporarily roiled global financial markets (including cryptocurrencies). However, for now it appears a relative calm has been restored.
If calm is restored, why is gold making new highs on a daily basis?
At this point, it’s clear that the main driver of the gold price since 2022 is China. China views gold as a strategic monetary anchor—not a speculative asset. The PBoC and state media (notably Xinhua and People’s Daily) often describe gold as a “strategic asset of national importance.”
Gold is seen as the foundation of trust in the renminbi (RMB), particularly as China seeks to internationalize the RMB via trade settlement, central-bank swaps, and Belt & Road initiatives. It is also increasingly clear that Beijing views the U.S. dollar system — SWIFT, Treasury market, Fed policy — as a tool of coercive power (sanctions, reserve freezes, etc.).
Gold offers “neutral reserves”: it cannot be digitally frozen, carries no counterparty risk, and is universally recognized. Thus, gold accumulation is part of China’s long-term dedollarization strategy and a hedge against financial warfare.
China is waging a war without guns.
With October’s back and forth between China and the U.S. over tariffs and rare earths, it seems that China is losing patience. Its gold purchases may be accelerating, as evidenced by nightly gap higher opens when Asian markets begin to awaken.
Additionally, recent Federal Reserve speakers aren’t exactly inspiring confidence in the strength of the U.S. economy and the U.S. dollar:
“The broad message of all the labor market data is one of weakening in demand, relative to supply … monthly job creation went from an average of 111,000 in the first quarter to 55,000 in the second, and the latest official report for August was 22,000.” ~ Fed Governor Waller
“Although several data points indicate that the labor market may be roughly in balance, we also know there has been a sharp drop in job creation since May, which suggests risks to the labor market going forward.” ~ Michael Barr
“Rising downside risks to employment have shifted our assessment of the balance of risks.” ~ Fed Chair Powell
“A slowdown in U.S. hiring poses economic risks … job creation is below trend given the pace of economic growth.” ~ Fed Chair Powell
Because trade tensions (especially U.S.–China dynamics) have shifted recently, FOMC member Stephen Miran recently argued that the downside risk (left tail) to labor and growth has become “fatter.” In other words, the probability of adverse labor or economic outcomes has increased.
Stronger gold/silver buying from Western investors who are becoming increasingly aware of the looming financial repression is now competing with Asian/central bank buying. The recent ~$900/oz rally in gold since the end of August roughly coincides with lower expectations for the U.S. employment market, and dashed expectations for a Russia/Ukraine peace deal.
The following quote from U.S. Secretary of Defense Hegseth raises the specter of a much larger confrontation between the East and West in Ukraine:
“European leaders are sending a clear message to Russia; now is the time to end this tragic war, stop the needless bloodshed, and come to the peace table. If this war does not end, if there’s no path to peace in the short term, then the United States, along with our allies, will take the steps necessary to impose costs on Russia for its continued aggression. If we must take this step, the U.S. War Department stands ready to do our part in ways that only the United States can do.”
Gold and silver’s recent rise is not an accident.
Silver (Daily)
Precious metals are telling a story. It’s a story of a changing world order and a restructuring of the global monetary system.
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