Gold’s structural repricing is slowly making its way into history books. After surging to nearly $4,700 an ounce, the yellow metal retreated after Federal Reserve Chair Kevin Warsh put another rate hike back on the table—yet its resilience against real yields is the trend to observe.
For the first two decades of this century, a 1-percentage-point rise in U.S. real rates coincided with a roughly 14% decline in gold. Between March 2022 and October 2023, five-year real yields surged more than 4 percentage points. Gold should have fallen about 55%, yet instead, it rose 7%.
As central banks swap Treasuries for bullion amid fiscal dominance and de-dollarization, the upside is migrating toward physical metal and its high-torque cousin silver.
The Broken Playbook
Gold’s 1970s turbulent bull market is the comparison often mentioned when assessing the current trend’s potential.
That era delivered 46% annualized gains on the collapse of Bretton Woods and deeply negative real yields. The 1999–2011 supercycle saw gold “become financialized, lifted along with other commodities by Chinese demand,” according to UBS analysis published in the Financial Times. The current rally, begun in 2018, has returned 19% annualized—but its drivers changed in February 2022.
When Western governments froze Russia’s reserves, the financial world was left evaluating its options. If $640 billion of fixed income becomes inaccessible overnight, gold was the best pick. Emerging market central banks have since lifted gold to 11% of reserves from 5–7%.
“This might be the fifth year in a row that central banks are buying around 1,000 tons of physical gold in a year. That’s one-third of world mine production,” said Willem Middelkoop, founder of the Commodity Discovery Fund.
With U.S. public debt at $32 trillion and deficits running 6% of GDP at full employment, UBS sees “early signs of fiscal dominance” in rising term premia.
“This is the last part of this dollar-centered world which started 82 years ago,” Middelkoop warns. The value of gold in central bank vaults, he noted, “is now larger than the value of all U.S. Treasuries.”
Generational Boom, Silver Squeeze and Nearshoring
Middelkoop argues the sector is “in a very early part of a generational boom market in commodities,” emerging from a 12-year bottoming pattern in miner valuations.
Silver, trading near $66 after retracing to its $55 breakout level, is his preferred vehicle. “Silver is a steal,” he said.
“I wouldn’t be surprised to see silver moving back up to $100 over the next few months or quarters.”
His long-term target is $500, based on decades of production deficits, silver’s role as “the best conductor,” and a reversion toward the historic 10:1 gold-silver ratio.
Looking at the domestic majors, Middelkoop also notes historically compressed valuations as an opportunity.
Barrick Mining Corp. (NYSE:B) or even Newmont Corp. (NYSE:NEM) have price-earnings ratios of 11, 12, maybe 13,” Middelkoop said. “Historically, the price-earnings ratios for gold miners were always 20, 25 at least.”
Yet, investors seeking strict exposure to nearshored assets in top jurisdictions might have to wait longer. According to Bloomberg, after clearing the recent joint venture obstacle, Barrick is delaying its North American asset spinoff for 2027.
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