Gold is jumping, driven by China’s post-holiday buying spree, and it’s signaling a broader shift in the global economy.
The Gold ETF (GLD) is up 44% this year and riding a nice uptrend. Volume is picking up as it gains in popularity.
Silver and mining stocks are poised to follow. With tariffs hitting and the dollar falling, foreign investors are pulling funds back home, and the old “buy U.S. assets for safety” playbook is losing its edge.
Gold’s recent surge is no fluke. Spot gold hit $3,500 per ounce in May 2025, up 59% from its 2024 low of $2,200. China’s central bank added 160 tons to its reserves in 2024, per the World Gold Council, and their buying resumed post-holiday with a vengeance. Gold was up $100 yesterday alone.
Other central banks—India (70 tons), Turkey (50 tons)—are also stockpiling. Why? The U.S. dollar’s grip is slipping. Two months ago you could buy a euro for $1.02. Today it costs $1.13. The villa you wanted in Tuscany just got 10% more expensive.
And it’s not just the dollar. Global debt stands at $315 trillion, or 330% of GDP, per the IMF. With U.S. tariffs disrupting trade, countries are hedging against dollar weaponization.
Gold, a currency without a flag, thrives in this environment. Supply is constrained—global mine production grew just 0.5% in 2024 to 3,600 tons, while demand hit 4,900 tons. This imbalance supports prices pushing toward $5,000 by mid-2026.
Silver’s story is equally compelling. Trading at $33.38 an ounce as I write this. It is up 21% over the past year but lags gold’s rally. The gold-to-silver ratio is 102:1, well above the historical average of 60:1, suggesting silver is undervalued.
Silver’s dual role as a precious and industrial metal fuels its upside. Industrial demand—solar panels, EVs, electronics—rose 7% in 2024 to 690 million ounces, per the Silver Institute. Total demand (1.2 billion ounces) outstripped supply (1 billion ounces) for the third straight year. Tariffs will crimp supply chains, tightening silver’s market further. If gold hits $5,000, silver could climb to $83 an ounce based on the historic silver to gold ratio. That would be a 155% return. The last time this situation played out about 13 years ago the price of silver went up 250% in eight months.
Miners offer more leverage
The VenEck Gold Miners ETF (GDX) trades at a price-to-earnings ratio of 20, compared to 25 for the S&P 500, despite gold’s rally.
A 10% rise in gold prices can boost miner profits by 20-30%, as fixed costs amplify margins. For example, Newmont’s Q4 2024 earnings rose 45% year-over-year on a 12% gold price increase. Yet, miner valuations remain subdued—Barrick Gold’s forward P/E is 9, half its 2023 level. With gold and silver prices firm, miners could deliver 2-3x the returns of the metals over two years.
Some like Avino Silver and Gold (ASM) could be a ten bagger. You'll remember I told you to buy it under $1 just a few months ago. It hit $2.50 today. (Full disclosure: I own ASM.)
What’s driving this? Beyond China’s buying, global uncertainty is key. U.S. tariffs are killing trade and as far as I can tell no new deals have been signed.
Foreign investors, particularly in Asia and Europe, are repatriating capital—Japan’s pension funds sold $50 billion in U.S. Treasuries in 2024, per Bloomberg. This reverses the “flight to safety” narrative that once propped up the dollar and U.S. assets. The U.S. debt-to-GDP ratio (122%) and $1.7 trillion deficits undermine confidence. In tough times, the dollar no longer automatically rallies—gold and silver do. Geopolitical risks—Middle East flare-ups, China-Taiwan tensions—further bolster hard assets.
The Fed’s in a trap. Inflation has been falling but rate cuts (fed funds at 4.5%) could stoke it higher. Raising rates risks recession. Silver benefits from industrial demand, while miners amplify both trends. Risks exist—stronger-than-expected U.S. growth could lift the dollar, capping metal prices—but the macro setup leans bullish for precious metals.
How to play it? Allocate 5-10% of your portfolio to physical metals via ETFs like GLD which tracks gold or SLV which tracks silver. For miners, GDX offers broad exposure, or pick quality names like Newmont or Agnico Eagle. Smaller miners like Hecla (silver-focused, $6/share) carry higher risk but bigger upside.
All the best,
Christian DeHaemer
Outsider Club
