Axel Merk argues that gold’s rally reflects structural forces — tariffs impeding currency flow, unsustainable US deficits, and the end of Pax Americana — rather than short-term noise, with the Iran war causing temporary headwinds via higher real yields but ultimately feeding the longer gold thesis as governments inevitably mishandle supply shocks. He contends the Fed under incoming chair Kevin Warsh (whom he’s followed over a decade) matters less than it used to, and that the real long-term driver for gold is fiscal: neither party shows political will to reform entitlements, and the proposed budget cuts domestic spending without touching the core problem. He dismisses wealth taxes as unworkable (wealth is mobile), rejects AI as a disinflationary savior for gold bulls, and pushes back on gold-camp conspiracy thinking — arguing policymakers mostly mean well but are hostages of a system that can only be fixed by constitutional spending limits.
Why gold rallied and then stalled: Merk points to understated drivers including tariffs impeding the “exorbitant privilege” currency machinery, the return of the speculator after years in meme stocks/SPACs/crypto, and deleveraging from the Iran volatility surge. The recent headwind is rising real interest rates — oil-driven long rates went up while long-term inflation expectations didn’t follow.
Kevin Warsh and a diminished Fed: Merk says Powell has been “presenting the Fed on the silver platter” to Warsh, echoing Warsh’s productivity-boom talking points since December. Warsh’s biggest impact will be behind the scenes — returning the Fed to targeting rates via treasury operations instead of paying interest on reserves, shrinking the balance sheet, and pulling the Fed out of fiscal-adjacent credit allocation like the MBS buying that started in the financial crisis.
Unsustainable deficits as the core gold thesis: Merk says he’ll sell his gold “when fiscal discipline comes back to Congress” — a joke, because the new budget cuts non-defense domestic spending but contains no entitlement reform, and neither left nor right wants one. He cites Milton Friedman’s argument that only constitutional spending limits work, because any deficit pushback just frees room for another spending program.
Dollar weaponization and fragmentation, not replacement: The alternative to US dominance isn’t the EU or China taking over — it’s global fragmentation, fewer deals, less wealth, less growth. The weaponization of the dollar (accelerated by Russian central bank sanctions after Ukraine) incentivizes unfriendly countries to divest dollar holdings, and gold benefits — though Merk is skeptical bilateral gold-settled trade will actually materialize at scale (“I believe it when I see it”).
Miners and silver risk profiles: Merk argues miners would remain very profitable even if gold dropped 30%, and calls mining “cheap” versus expensive software, though ETFs are structurally unsuited for funding mining companies. He holds substantial gold and gold miners but keeps silver exposure limited because silver’s industrial component makes it “amazingly volatile” on top of already-volatile gold, and the big vaults dislike silver because of its low value density versus gold’s ~$5,000 per ounce.
Money supply acceleration and the inflation outlook: US commercial bank credit — which makes up roughly 80% of broad money — is growing near 7% annually, above Hanky’s 6% golden growth rate consistent with 2% inflation, while the Fed switched from QT to QE in December and has already bought about $45 billion in Treasury bills. Hanky and John Greenwood used the quantity theory of money to predict the 9% inflation peak (it hit 9.1%) when others blamed supply chains, and he sees the same monetary dynamics making inflation Trump’s Achilles heel.
Strait of Hormuz and oil price scenarios: Physical Brent is trading around $125/barrel versus paper futures just under $100, with Hanky expecting the “paper market to get mugged by reality” and scenarios running up to $350/barrel if the strait stays closed into summer. Iran has counterintuitively increased oil exports and revenue since the war began, with 180 million barrels already floating to Chinese teapot refineries supplying about 1.8 million barrels/day through roughly late July.
Commodity super cycle driven by hoarding and inelastic supply: Hanky lists concrete moves — ferro vanadium up 90% since December 2025, tantalum up 173%, niobium up 29%, lithium hydroxide up 44%, aluminum up 20%, steel up 16% — driven by precautionary inventory building under Trump’s tariffs, sanctions, and seven foreign military interventions in the past year. Supply cannot respond quickly: damaged Gulf facilities need up to two years to repair, some shut-in wells may be permanently damaged, and Venezuelan production won’t snap back despite Maduro’s removal.
De-dollarization is “utter nonsense”: Hanky flatly rejects the thesis, noting EUR/USD sits at 1.17-1.18 — still above his 1.20-1.40 fair value range, meaning the dollar remains ultra strong. Over 2,500 years there have been only 14 dominant international currencies, and once a currency is king it’s very hard to knock off the throne; petrodollar recycling began because there was nowhere else to put the money, and that liquid-capital-market reality still holds despite marginal moves like France repatriating gold from New York and Russian reserves being frozen.
China as the commodity elephant and geopolitical winner: Russia and China are the clear beneficiaries — Russia because it produces the oil, helium, fertilizer, and aluminum being disrupted, and China because it has been hoarding oil, gold, and silver while dominating the “three M’s” of mining, metals, and material science. Hanky claims Chinese control of rare earth exports could shut down the West in 6-9 months, and Chinese central bank gold buying has resumed big time after a brief pause.
Luke Groman and Craig Tindel argue the US is in a “Wile E. Coyote moment” where closing the Strait of Hormuz — now under a double blockade — will force a violent repricing as the physical world collides with financial markets, with Roman predicting a “Tom Hanks COVID moment” in coming weeks when investors realize supply chains are far more broken than priced. Tindel details how China refines 50-98% of nearly every metal, chemical, and gas, could shut down the West in months by restricting rare earths and sulfuric acid (silver runs a ~5,000 ton annual deficit with 70% coming from China), and warns that damaged Gulf facilities like aluminum smelters take 12+ months to restart while Nvidia’s 2028 chip roadmap requires 250,000 tons of copper annually against current 30-40,000 ton usage. Roman calculates China’s 2024 record $990B trade surplus would have balanced at roughly $22,000/oz gold and the 2025 surplus at ~$26,000/oz — arguing Bessant is deliberately letting gold rise as the only way to devalue the dollar and reshore, while they’re 50%+ in cash and physical bullion because “if you don’t hold it, you don’t own it.”
Strait of Hormuz and the end of the petrodollar recycling loop: Roman says closing Hormuz forces foreigners to sell dollar assets to buy finite commodities, and the pipes for a pro-yuan-through-gold arrangement are already built — China has the infrastructure set up and the switch is “really not a very hard switch at all.” He calls it a “very suboptimal” way to end the dollar’s post-1971 reserve status but “a highly effective” one, flagging a week where decades happen.
China’s refining chokehold and the “for want of a nail” dynamics: Tindel explains how sulfur and helium disruptions compound because sulfuric acid refines roughly 70% of the world’s silver via the copper/lead/zinc process, and that BHP caved in three weeks to CNY payment demands after a Chinese buyer strike in late 2024. Gallium — key to microwave energy weapons that dropped drones in Venezuela — is one of many materials China can weaponize via licensing, and Tindel thinks this is why Trump moved on Venezuela and Iran.
Treasury market is what Trump actually watches, not stocks: Roman points to three breaches of the 10-year yield above 4.4% in a single week in late March, each followed by a Trump “taco,” plus a shockingly bad two-year auction and the single biggest Treasury buyback ever at $15 billion in one day. Trump has said he’s willing to let stocks fall, but Bessant is laser-focused on keeping the Treasury market “functioning” so the bond market’s veto can be overridden — until rare earths, copper, or aluminum physically aren’t there.
Gold revaluation math and the dollar-gold realignment thesis: Roman says global central banks stopped reserving Treasuries 12 years ago and gold now exceeds Treasuries in global reserves for the first time in 30-35 years. At $22,000/oz China’s 2024 trade would have balanced; at $26,000/oz their 2025 trade would have. Tindel, a 40-year market veteran who stopped believing revaluation would happen, now thinks it’s “the most probable it’s been in the last 40 years” — possibly anchored on a gold/silver/commodity mix — citing Rubio’s comment that in five years not everyone will be using the dollar.
Portfolio positioning for stagflation as “emerging market currency crisis in a developed market”: Roman runs over 50% cash and physical gold bullion, arguing the Fed must inject liquidity into commodity spikes to keep nominal yields affordable because US entitlements plus interest already exceed 100% of receipts at near-record receipts. He recommends physical bullion specifically (not ETFs) because international law and property rights are “being stretched to be polite,” plus well-capitalized companies in electrical infrastructure, industrials, and commodity bottlenecks — noting Chinese stocks are cheap and competing well but remain sentiment pariahs.
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