How does a gold rush end?

0:08Gold and silver have gone absolutely bananas. There's really no other term for it. These precious metals have been on the up for some time with some really big gains in price over 2025. But at the start of this year, kaboom. Proper old school rip your face off rallies. There just seems to be no limit to these things. Silver is now trading well above$100 an ounce. It jumped 12 % or so just on Monday. And gold is well into the$5 ,000. If that all feels like too much too fast to you, then I'm minded to agree. But at the same time, you stand in the way of this thing at your peril. Today on the show, are precious metals close to the top or are we just getting going?

0:57This is Unhedged, the markets and finance podcast from the Financial Times. I'm Pushkin. I'm Katie Martin, a markets columnist at the FT in very soggy London, raining all the time. And I'm joined down the line from super chilly New York City by Mr. Robert Armstrong of the Unhedged newsletter. Rob, this sounds bad, but what are you wearing?

1:21Well, it's funny. I am wearing a jacket and tie, but I'm also wearing hiking boots because of the snow, which may sound like an awkward combination. Were it not that that had been made fashionable by one of the most fashionable men in the 20th century, Gianni Angeli, who famously wore hiking boots with a suit after he twisted his ankle skiing. And it became a fashionable thing to do because of that. So I'm just rocking that style today. So, Rob, since you said in September last year that you were short gold, it has doubled in price. So, listeners, when we say this show is not investment advice, we mean it is not investment advice.

2:08We ought to put up a plaque in the FT offices to how wrong I have been about gold. There ought to be like an interactive exhibit of how incredibly incorrect I have been about this asset. So, you know, I'm just I don't know. Sometimes you get things wrong. I got this one as wrong as you can possibly get something wrong. The thing, Katie, is like it's still a head scratcher for me. I still don't quite get it, but I'm starting to get it. I mean, there are there are arguments that I find a bit more convincing. So let's get stuck in. And to a large extent, this is like a visual story. So if you're listening, pull up a chart, punch it into a search engine, ask for a gold chart, a silver chart.

2:56You will see what we're talking about. So scores on the doors are as follows. Gold had a good year last year. It was up 65%. That is a lot. So far this year, it's up another 16%, 1.6. So it's trading at about$5 ,100 an ounce. Silver, meanwhile, has been like really boring forever. It's basically traded at$20 to$30 an ounce for like forever. In 2025, it added 150%. So that's like serious money. But so far in 2026, and January is not even out yet as we record this, it's added another 50%. It's well over$100 an ounce. It's about$111 an ounce last time I checked. This is not normal. Rob, to the extent that you are getting your head around this stuff, what do you think is going on here?

3:54Because you can paint your own adventure onto precious metals. What do you think is going on? Can I just say what I think it isn't, Katie, as a way to start? That's a good place to start. It is not debasement. And debasement is not the lowest floor of your house. It is the idea that because governments are wildly indebted, they will ultimately be forced to print currency and devalue everything in order to get out of their debt problems. So you better own gold or silver or real estate or this or that. The problem with the debasement thesis is that there is no sign of it in the bond market. And if we were in a global panic about bonds, I think you would see something in the bond or the currency markets.

4:47And I just don't see it. I don't think that the fall in the dollar is actually that big a deal in historical terms. Market-based measures of future inflation are absolutely placid. Long bond yields are a little higher, but not much. You just don't see it. And look, I acknowledge there's a lot of people who say global central banks have basically given the bond market a huge shot of Novocain. So it is basically unable to respond to anything and just sits there with its mouth hanging open. But still, I cannot believe that I would search high and low in the fixed income and currency markets and find no evidence of this debasement and yet gold triples or whatever.

5:35I just am not buying that. Yeah, this idea on very excitable bits of the internet that says that, you know, fiat currency is over, right? So like dollars and pounds and euros and yen and all this sort of thing, like normal currencies are dying and they're going to be replaced by metals. I mean, OK, sure, whatever. I mean, we all know they're going to be replaced by Bitcoin, Katie. Well, funny you should mention my favorite thing, Bitcoin. Have you noticed like the whole thing for Bitcoin bros and Bitcoin girls for years has been this is a dollar debasement trade. The dollar is over. What you need in your life is Bitcoin.

6:16Do you know what Bitcoin has done in the middle of this big kind of massive party that's going on in gold and silver? I don't know. That's right, listeners. Nothing. It is going nowhere. So that's just another poke in the eye for the whole debasement trade nonsense when it comes to Bitcoin. But we have talked about this on the show before, right? There is this urge, whether that's among big central banks or big asset managers or reserve managers all around the world to hold something that's not dollars for a variety of reasons. You know, there's the dollars that got seized from Russia when it properly invaded Ukraine in 2022.

6:53Two, there's, you know, more recently, there's all of the Trump stuff. And there is all of this sort of attack on the independence of the Federal Reserve, the central bank, right? So there's a bunch of reasons why you might not want to hold dollars. So there's a lot of central banks out there saying, I'd actually quite like to hold more gold instead. Like, I'm not getting rid of all my dollars. I'm just buying more gold. And that pulls silver up with it, too. Fine. But according to my good friends at the World Gold Council, and they are my good friends, I'm not being sarcastic about that, between 2024 and 2025, global central bank purchases of gold, which were very high in 2024 and in the two years prior to that, fell by more than a third.

7:38And this actually makes tons of sense. If you're a central bank and you have like a value allocation to gold, you don't have to buy any more of the stuff because the price keeps going up. Right. I mean, you just sit there and watch your gold reserves that you already have increase in value. Why would you buy? Why would you drag more of this stuff into your vault or whatever? So actually, the latest run in gold, you know, over the last year or so, it's quite hard to explain in terms of central bank buying. One of the things that goes some way to explaining this is the changing nature of safe havens, right?

8:16It's the stuff that investors buy when they're nervous about things. Now, normally the dollar would do the lion's share of that work in the financial system. So bad stuff happens, people buy dollars. People are getting more nervous about doing that for obvious reasons. So what else do they buy? Now, the other normal safe havens, normal haven currencies are the Japanese yen, which has been doing actually really badly for a variety of other reasons. So that's kind of out of the running. There's the Swiss franc, which has gone absolutely to the moon and is problematic for the central bank there. But it's only so big.

8:51There's only so many Swiss francs to go around. So it does mean that some of that pressure gets forced into gold. And I think what's happened here is you've got some of this grand theory about the role of the dollar in the financial system. But what you've also got on top of that is a huge dollop of just outright naked speculation. There's just a lot of people, whether that's like hedge funds or other funds or individuals and retail investors who cannot get enough of this stuff. They saw what happened to the price of gold last year and they're saying, yes, please, I'll have a bit of that. So it's almost like a situation where normally the idea is that gold goes up when something bad happens and people are nervous.

9:35But right now what you've got is gold and silver are going up based on fear and greed, which is like a really heady cocktail. And it just means it's very difficult to see what stops it. I'd like to have one point of dissent and one point of clarification to what you said. Most of which, 90 % of which I agree with. But the point of dissent is I'm not, you gestured towards a big flight from the dollar as a safe haven. I don't believe that's happening. I just want to put that on the record. I see how you're reading the data. I see the data also. We're going to have to disagree about that. That's point number one.

10:17The clarification or the distinction I would like to make is between two kinds of fear. And I agree with you. gold is kind of like fear in physical form. But I think you should distinguish or we should distinguish between fear of inflation and fear of debasement, which I don't think historically has a very strong relationship with gold. There are decades in which gold underperforms the money supply or the rate of inflation or all this stuff. It's just not a good inflation hedge. But gold does really well when people just generally feel like hell about the state of the world in really miserable moments.

11:04Like the 1970s or during the great financial crisis or during a stock market crash, gold does well. So the thesis I find more sympathetic about gold than the debasement thesis is the one you mentioned, which is speculation, line go up. We're in a very speculative market. We're in a very leveraged market. People will chase anything. But number two, I'm more sympathetic to the idea that people are just afraid right now. And when people are afraid about the state of the world, they buy gold. So I was talking to a fund manager earlier about all this stuff. And he was pointing out that, like, again, if you call up one of these charts, a gold chart or a silver chart on a screen in front of you, the line just hockey sticks higher.

11:50This isn't like a smooth ascent. It just goes. It's not even a hockey stick. It's like a right angle.

11:59And what this chap was saying to me is, look, that sort of price action, those sorts of patterns on charts simply do not happen without a fair amount of leverage, which means that a lot of people out there, probably retail investors, you know, mom and pop investors and people like me and you. are borrowing money to get themselves some exposure to gold and silver prices. That's when you get stuff going on that doesn't feel very healthy. So as I say, on Monday, the silver price rocketed and then tanked and then rocketed again and ended up the day pretty much where it started. But at a certain point in the day, it was up 12 % in a day.

12:42My worry, I guess, is things that go up 12 % in a day cause accidents. It's just never good to have that much volatility in anything. So I think there's a lot of retail excitement, and I think there's a lot of leverage, and I think there are just lines on charts that make me go, ooh, no, don't like that. If you look at a 50-year chart, Katie, of gold and silver in inflation-adjusted terms, so we're just taking inflation out of it, There are historically big spikes in price like the one we are seeing now. One around 1979-80, one around 2011. And the thing is, those past two incidents were horrendous times to buy gold and silver.

13:32You know, if you went anywhere near gold in 2011 and you held for any considerable amount of time, you got smoked similarly in the 80s. So that chart is not very appetizing to a kind of fuddy-duddy value person such as myself. But what I'm finding in this sort of moment that we've got in gold and silver is that normally my inbox fills up with very sensible people, very sort of buttoned up investment banks saying, whoa there, everyone, this is all getting out of hand. Let's just, you know, take a bit of a time out here. Nuh-uh, not this time. So just before I came down to the studio to record this, I got a note in from Citi, the big investment bank.

14:15they were saying they've upgraded their zero to three month price forecast from$100 an ounce to$150 an ounce. So they think this thing that is chunky. And they say if you look at the sort of way that silver normally trades in relation to the price of gold, then if you go back to that sort of metric, that would take you to about$160,$170 an ounce, or even up to$300 an ounce, which is what we had in 1979. So this is another thing that people keep saying to me is that when this stuff moves, it moves. Like gold and silver prices can really shift because, you know, okay, silver has rather more of a kind of industrial use case than gold does.

15:07But really these things, when they're trading just like precious metals, then there's not really many fundamentals that matter here. if you like. So when the price jumps, it can really jump. And when it falls, it can really fall. And right now, it's really jumping. We should probably talk, Katie, about the industrial side of silver demand, which is important here, right? So I've been reading this guy called Alexander Campbell this morning, who has a substack called Campbell Ramble. And he makes a very kind of well-defined case that, especially with solar demand, Silver goes into solar panels. That demand is increasing as more and more solar capacity gets built.

15:51At the same time, he makes this argument that the supply of silver is not that elastic, meaning actually the price goes up. Not that much more silver comes out of the ground because most silver that comes out of the ground is a byproduct of looking for other metals like gold or whatever else, copper. You get some silver with that. So the supply doesn't respond. So his argument is we have rigid supply, growing demand. Here we go. It is on, right? The price is going to go bananas as it already is. I find myself wondering, so as you say, like silver is really important in solar panels. I understand it's really important in electric vehicles and in the big fancy computers that make AI tick.

16:42There's got to be a lot of companies out there that need to buy silver to make their widgets work that are really feeling the pain here. I just sort of wonder, you know, when we're going to see someone fall over or like hit the alarm and say, this is really hurting us. Campbell makes the point in his blog that the silver futures market is going bananas. So people are clearly really scrambling for supply of that stuff. And I would guess that's industrial users rather than speculative users being like, we got to lock this stuff in now at whatever price because we got panels to make or we got cars to make.

17:16Yeah. The other complicating factor there is that fairly soon we're going to have a decision on whether silver gets taken in scope for new U.S. rules on critical minerals. So there's been quite a lot of stockpiling of silver, like industrial users getting hold of as much of this stuff in advance as they can and holding on to it because they think it's going to be painfully expensive in future. What that does is it means there's not that much silver kicking around as almost like a free float. So the amount that's actually there and available for trading that people are willing to let go of and allow to be traded is quite small.

17:55And that, again, that's why I think silver is acting like a meme stock. Do you remember that thing in 2021 when GameStop went bananas? and there was a bunch of like trashy US stocks that had small free floats that just went absolutely postal and people made loads of money, lost loads of money. It was a huge drama. Effectively, silver is trading like a meme stock now. And I think that means, you know, if you're listening to this and you're thinking, oh, I'm going to put my life savings into silver, good luck with that. But you should be aware that when things go up really, really quickly, like a meme stock, they can come down really, really quickly as well.

18:32and the volatility can be really high. And I wouldn't mind betting that silver does end up like carry on pushing higher, but you're going to get some drawdowns. You're going to get some up and down action that could get painful if you're buying at this point. Let's talk about what can break the spell. What can make this turn around? Because this is silly, right? What can stop the silly? I'm not sure it's quite as silly as you think it is. It's silly, but I'm... Right. I mean, I think there is a speculative element here, but I think having been very wrong about this before, I'm coming around to the view that there has been some kind of regime change where in the case of gold, gold has a different place in portfolios than it did 10 years ago.

19:22and in the case of silver, the supply-demand dynamic might be a little different than it was 10 or 15 years ago. So I just want to put that out there. But what breaks the spell? Well, as we've written in the newsletter, as my colleague Hak Young wrote in the newsletter, an outbreak of political sanity. The risk is world peace and justice and happiness and holding hands and singing kumbaya, at which point we all sell our gold and just buy stocks like normal people. Let's assume that's not going to happen. Come on now, Katie. Good things happen sometimes. Midterms, you know, maybe we get a deeply split government in the United States, at which point it's impossible for America to screw anything more up, right?

20:08That's ages, though. That's ages. You can get a lot more upside in gold and silver before then. Anyway, world peace. World peace is risk number one to gold. So let's assume world peace is not going to happen. And the other thing that might be slightly more likely, a few people have mentioned to me, is because you've got this element where at least a decent slice of what's happening in gold and silver is about leveraged investment. It's based on borrowed money. There's a lot of retail money in there. If for whatever reason we were to see a hit to the stock market, say stocks fell 10 % for, I don't know, whatever reason, make up your reason.

20:44There's going to be a lot of people who are kind of forced to sell out of their gold and silver positions to kind of make themselves whole again. But for now, I mean, I'm not going to take anything away from the gold and silver bugs. They are having a party. I've been wrong. I tip my hat to them. They are my daddy. You've been... God. Boston sports fans will know what that's a reference to. Okay, I don't. so for that reason i'm going to say we're going to be back in just one sec with long shorts

21:27okie doke it's time for long short that part of the show where we go long a thing we love or short a thing we hate rob what you saying i am long the new england patriots which is my American football team that has qualified for the Super Bowl, which you may know is a very important sporting contest we have here in America. And I'm especially along the fact that everyone else in the country outside of New England hates the Patriots. And I'm just basking in the rage of the rest of the country. Do you have, because you spent some time in the UK, is there an equivalent football team, like English football team?

22:08I guess it would be probably Manchester United at that phase when it was just winning every trophy and the rest of the country was like, we're sick of this. You might mean Man City, but okay. Yeah, yeah. I get, was it Man City that was just on like an endless streak of dominating everything and everyone just got heartily tired of it. Yeah. All right. So you're that person. Interesting. So I'm not sure, but I think I'm long the Melania movie. like so I gather like nobody's going to see it but I'm personally curious if it crosses into the so bad it's good kind of part of the matrix because I love a bad movie I have very low standards I'm a very basic and bad person but what I'd like to do is like watch it and come out thinking like lol and not thinking I want to set fire to things and punch walls But anyway, have you been to see it?

23:06Unhedged at FT.com. Tell us how it is. If it's so bad it's good, then I'm there. Listeners, we will be back on Thursday. God alone knows where the gold and silver price will be by then, but listen up. Unhedged is produced by Jake Harper and edited by Brian Erstad. Our executive producer is Jacob Goldstein. We had additional help from Topher Foreheads. Cheryl Brumley is the FT's Global Head of Audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free and a 30-day free trial is available to everyone else.

23:45Just go to ft.com slash unhedged offer. I'm Katie Martin. Thanks for listening.

24:02We'll be right back.