How does a gold rush end?

Gold 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 a hundred dollars an ounce. It jumped twelve percent or so just on Monday, and gold is well into the five thousand dollars.

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? This is On Hedge, the Markets and Finance podcast from the Financial Times and 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.

Rob, this this sounds bad, but what are you wearing? Well it's funny. I am wearing a jacket and tie, but I am also wearing hiking boots because of the snow, which may sound like an awkward combination. That that had been made fashionable by one of the most fashionable men in the 20th century, Gianni Angeli. Uh-huh. And it became a fashionable thing to do because of that. So I'm just Rocking that style today.

So ra 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. There are we oughta put up a plaque in the FT offices to how wrong I have been about gold. There ought to be like an interactive exhibit.

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 like to a large extent this is like a visual story. So if you're listening, pull up a chart, right? Just punch it into a search engine, ask for like a gold chart, a silver chart. You 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 sixty five percent. That is a lot. So far this year, it's up another sixteen percent, one six. So it's trading at about five thousand one hundred dollars an ounce. Silver, meanwhile, has been like really boring forever. It's basically traded at twenty to thirty dollars an ounce for like forever. In twenty twenty five it added a hundred and fifty percent

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 fifty percent. It's it's well over a hundred dollars an ounce. It's about a hundred and eleven dollars 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?'Cause 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. It is not debasement. And uh 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 be a little bit more.

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 theme. 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. And 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 bank have basically given the bond market a huge shot of Novocaine. 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. I just am not buying. 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 gonna be replaced by metals.

I mean, okay, sure. Whatever. I mean we all know they're gonna 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 i is Bitcoin. Do 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. 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 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 there's the the dollars that got seized from Russia when it um properly invaded Ukraine in twenty twenty two. 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 f 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. Fine. But according to the m my good friends at the World Gold Council, and they are my good friends, I'm not I'm not being sarcastic about that.

Between twenty twenty four and twenty twenty five, global central bank purchases of gold, which were very high in twenty twenty four and in the two years prior to that, fell by more than a third. Mm. And this 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'cause the price keeps going up.

Right. You know what I mean? You just 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? uh into your vault or whatever. So uh actually the latest run in gold. The you know, over the last year or so it's quite hard to explain in terms of central bank bonds.

One of the things that goes some way to explaining this is the changing nature of safe haven. Right. It'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 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 for the central bank there. But it's only so big, there'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 it's almost like a situation where

Normally the idea is that gold goes up when something bad happens and people are nervous. But 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 m have one point of dissent and one point of clarification to your what you said. Most of which ninety percent of which I agree with. But the point of dissent is I'm not y you 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 c I see how you're reading the data. I see the data also. We're gonna have to disagree about that. That's point number one.

The 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. You know what I mean? Uh 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 a not a good inflation head. But gold does really well when people just generally feel like hell about the state of the world in really miserable moments. Like the nineteen seventies or during the great financial crisis or during a stock market crash, gold does well. So yeah, 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 f 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 on a screen in front of you

The line just hockey sticks higher, right? This isn't like a smooth ascent. It just goes whee. It's not even a hockey stick, it's like a right angle. And and you 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 like stuff going on that doesn't feel very healthy. So like as I say, on Monday, the silver price rocketed and then tanked and then rocketed again and ended up the day pretty much like where it started. But at a certain point in the day it was up twelve percent in a day.

My worry, I guess, is Things that go up twelve percent 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's that there are just lines on charts that make me go, Ooh, no, don't mark. If you look at a fifty year chart K D of gold and silver in inflation adjusted terms. So we're just taking inflation out of There are historically big spikes in price.

like the one we are seeing now. One around nineteen seventy nine, eighty, one around two thousand eleven. And the thing is, those past two incidents were horrendous times to buy gold and silver. You know, if you went anywhere near gold in two thousand eleven and you held for any considerable amount of time, you got smoked. Similarly in the eighties. So that chart is not very appetizing to a kind of fuddy duddy.

uh value person such as myself. It is Uh 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 at 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 a bit of a time out here. Nah, not this time. So just before I came down to the studio to to record this, I got a note in from City, the the big investment bank.

They were saying they've upgraded their uh zero to three month price forecast from a hundred dollars an ounce to one hundred and fifty dollars 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 that sort of metric, that would take you to about one sixty, one seventy dollars an ounce, or even up to three hundred dollars an ounce, which is what we had in nineteen seventy nine. 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 than gold does. But 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 which is important here. Right. So I I've been reading this guy called Alexander Campbell this morning, who has a substack called uh Campbell Ramble. And he makes a very kind of w uh uh 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. At 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 by product of looking for other metals like gold or whatever else, copper, or 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 gonna go bananas, as it already is. I find myself wondering, yeah, 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 ticks.

There's gotta 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 gonna see someone fall over or like hit the alarm and say, This is really hurting. 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 we gotta lock this stuff in now at whatever price. 'Cause we got panels to make or we got cars to make, you know. Fairly soon we're going to have a decision on whether silver gets taken in scope

for new US 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 onto 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 and that again, i it that's why I think Silver is acting like a like a meme stock. Do you remember that thing in twenty twenty one when like 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 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 and and 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 gonna get some drawdowns. You're gonna get some up and down action that could get painful if you're buying at at at this point. Let's talk about what can break the spell. What 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 I I 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 ten years ago. And in the case of silver, the supply demand dynamic might be a little different than it was ten or fifteen years ago. So I j I just want to put that out there.

But w what breaks the spell? Well, as we've written in the newsletter, as my colleague Hack 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 gonna happen. Wha what Come on now, Katie. Good things happen sometimes. Midterms, you know, maybe we get a s a deeply split government.

In the United States, at which point it's impossible for America to screw anything more up. Right? Anyway, world peace. World peace is risk number one to gold. So let's assume world peace is not gonna happen. 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 ten percent for I don't know, whatever reason, make up your reason. There's gonna 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 gonna take anything away from the gold and silver bugs. They are having a party. They've got I've been wrong. I tip my hat to them. They are my daddy.

You may Boston sports fans will know that's what that's a reference to. Okay, I don't. So for that reason I'm gonna say we're gonna be back in just what sec with long shorts.

Okie dok, 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 long 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 uh'cause you spent some time in the UK, is there an equivalent football team that like English football team that I I guess it would be m it w 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. I get was it Man City that was just uh like an endless streak of dominating everything and everyone just got heartily tired of it, yeah. Oh right, so you're that person. Interesting. So I I'm not sure but I think I'm long the Melania movie. Like so I g 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 mm part of the of of the matrix'cause I I love

a bad movie. I have very low standards. I'm a very basic and bad person. But 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 and punch walls. But anyway, have you been to see it? Unhedged 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 Erstadt. Our executive producer is Jacob Goldstein. We had additional help. 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. Just go to FT.com/slash unhedged offer. I'm Katie Martin. Thanks for listening.