My real problem with these bulletins on the on-off debasement trade is that it misconstrues the notion of ‘safe haven’ and therefore of ‘debasement’. This fuzzy concept, made popular by the business media, reflects an annoying verbal tic, that investors will flee to gold whenever there is '“bad” event— geopolitical conflict or depression or inflation or an asteroid strike on our planet.
We should see it n much narrower terms: gold (and, to a lesser extent, silver) is a hedge against global—repeat global—inflation in an era when central banks have lost credibility. And only in those conditions. Are we in that era? No, not unambiguously. Central Banks (and the Fed matters by far the most because it is the guardian of the purchasing power of the dollar, a de facto global store of value) still have pretty solid reputations everywhere.
The reason we saw the manic run-up in precious metals in 2025 and early 2026 coincided with the period when there was a belief that the Fed’s independence was in jeopardy and by extension that we could be entering a period of financial repression. RB cites instances when Powell hinted unexpectedly at a willingness to be coerced into easing—or at least willing to have his mind changed— expressed with the usual window-dressing of policy-speak. That is the key point.
So why gold? Because gold is still seen across the world and across cultures everywhere as a near-currency. Its importance derives from its historical—indeed mythic—status as currency or backing currency. Does it deserve to be treated as the store of value of last resort? That can be debated, but in the absence of any other and amidst swirling charlatanism around crypto, I would still be keeping my options on gold. (And, by the way, I am not convinced by RB pulling yet another trove of charts of real rates in 1y-3y sector of the US government yield curve that shows them falling rather than rising because there are all model-derived, using interpolations of the breakeven term structure, and are not observables. The short-end of the yield curve is also riddled with Fed’s constant meddling in the repo market and I see little information value there.)
For all these reasons, I am not a big believer in the flows explanation that RB also offers—there could be some validity at the margins that some central banks have sold (or considering selling) gold to buttress their USD reserves in anticipation of further intervention. Or that retail traders are essentially momentum investors. But I wouldn’t fetishize either of those those explanations.
I want to briefly delve into the current crisis : We have rising inflation due to world events and supply interruption . Do we raise interest rates to "fight" inflation and damage the economy or do we do nothing until all blows over or do we resort to easing as a way to help out with the economy in selected sectors . The first choice will lead to a strong dollar and the other choices will lead to debasement and a weaker dollar . Which is best for business and the people ?
The compositional shift matters more than the flow story. ETF holdings in GLD alone grew from ~840 tonnes in Aug 2025 to over 1,050 by January — that's retail and momentum tourists, not the sticky sovereign bid that drove 2022-2024. Central bank buying averaged ~1,000 tonnes/year for three years and barely flinched through this drawdown; it's the marginal ETF holder puking. The "debasement trade" didn't break gold — it just temporarily re-weighted the holder base toward hands that were never going to sit through a 10% drawdown in the first place.
Surprised to see you place the start of the debasement trade post Powell’s speech 2025. Dalio has been extremely vocal about the debt cycle, USD debasement and gold thesis. Many have had this trade on for years…
Agree with the analysis. Gold has been trading like a risk asset lately, but we expect it to outperform the S&P when/if there is a larger correction later this year.
We began buying physical gold coins, mostly American gold eagles in 2001, when spot gold was below $300./oz and continued to buy even still today. It was a good move that helped our retirement portfolio as the price has risen by about 1,674% and protected our purchasing power. People can say what they want to about owning physical gold but it’s worked for us and we have no complaints.
The main flaw in the analysis lies in the time horizon of the historical data used. A more appropriate comparison would be the 1971–1980 decade—a period similarly defined by elevated geopolitical volatility. During those years, gold delivered a staggering 32% annualized return, yet 37% of monthly closes were negative.
Recency bias, particularly at the end of a long-term cycle, is invariably associated with catastrophic losses.
This is the cleanest framing I've seen of why gold's safe haven function broke during this specific shock. The "contaminated, not gone forever" framing captures exactly what happens when an asset's holder base shifts faster than its fundamental properties.
The one operational signal worth adding for anyone tracking the normalization timeline: ETF flow data from GLD and IAU is the cleanest read on when the weak-handed positioning has exhausted. When outflows stabilize despite continued price pressure, the marginal seller has cleared and the holder base is reconsolidating around the long-horizon allocators who don't react to six-week drawdowns. That's typically when safe haven properties reassert.
Thanks Robin, I agree with your point. Do you think we’re moving away from a single “safe haven” toward a more fragmented set of assets depending on the type of shock? And which assets do you see providing the most reliable protection today?
My real problem with these bulletins on the on-off debasement trade is that it misconstrues the notion of ‘safe haven’ and therefore of ‘debasement’. This fuzzy concept, made popular by the business media, reflects an annoying verbal tic, that investors will flee to gold whenever there is '“bad” event— geopolitical conflict or depression or inflation or an asteroid strike on our planet.
We should see it n much narrower terms: gold (and, to a lesser extent, silver) is a hedge against global—repeat global—inflation in an era when central banks have lost credibility. And only in those conditions. Are we in that era? No, not unambiguously. Central Banks (and the Fed matters by far the most because it is the guardian of the purchasing power of the dollar, a de facto global store of value) still have pretty solid reputations everywhere.
The reason we saw the manic run-up in precious metals in 2025 and early 2026 coincided with the period when there was a belief that the Fed’s independence was in jeopardy and by extension that we could be entering a period of financial repression. RB cites instances when Powell hinted unexpectedly at a willingness to be coerced into easing—or at least willing to have his mind changed— expressed with the usual window-dressing of policy-speak. That is the key point.
So why gold? Because gold is still seen across the world and across cultures everywhere as a near-currency. Its importance derives from its historical—indeed mythic—status as currency or backing currency. Does it deserve to be treated as the store of value of last resort? That can be debated, but in the absence of any other and amidst swirling charlatanism around crypto, I would still be keeping my options on gold. (And, by the way, I am not convinced by RB pulling yet another trove of charts of real rates in 1y-3y sector of the US government yield curve that shows them falling rather than rising because there are all model-derived, using interpolations of the breakeven term structure, and are not observables. The short-end of the yield curve is also riddled with Fed’s constant meddling in the repo market and I see little information value there.)
For all these reasons, I am not a big believer in the flows explanation that RB also offers—there could be some validity at the margins that some central banks have sold (or considering selling) gold to buttress their USD reserves in anticipation of further intervention. Or that retail traders are essentially momentum investors. But I wouldn’t fetishize either of those those explanations.
I want to briefly delve into the current crisis : We have rising inflation due to world events and supply interruption . Do we raise interest rates to "fight" inflation and damage the economy or do we do nothing until all blows over or do we resort to easing as a way to help out with the economy in selected sectors . The first choice will lead to a strong dollar and the other choices will lead to debasement and a weaker dollar . Which is best for business and the people ?
The compositional shift matters more than the flow story. ETF holdings in GLD alone grew from ~840 tonnes in Aug 2025 to over 1,050 by January — that's retail and momentum tourists, not the sticky sovereign bid that drove 2022-2024. Central bank buying averaged ~1,000 tonnes/year for three years and barely flinched through this drawdown; it's the marginal ETF holder puking. The "debasement trade" didn't break gold — it just temporarily re-weighted the holder base toward hands that were never going to sit through a 10% drawdown in the first place.
Could you explain why anyone but gold tradrers should care about the price of gold?
Surprised to see you place the start of the debasement trade post Powell’s speech 2025. Dalio has been extremely vocal about the debt cycle, USD debasement and gold thesis. Many have had this trade on for years…
Agree with the analysis. Gold has been trading like a risk asset lately, but we expect it to outperform the S&P when/if there is a larger correction later this year.
We began buying physical gold coins, mostly American gold eagles in 2001, when spot gold was below $300./oz and continued to buy even still today. It was a good move that helped our retirement portfolio as the price has risen by about 1,674% and protected our purchasing power. People can say what they want to about owning physical gold but it’s worked for us and we have no complaints.
Super powerful storytelling with that last chart.
The main flaw in the analysis lies in the time horizon of the historical data used. A more appropriate comparison would be the 1971–1980 decade—a period similarly defined by elevated geopolitical volatility. During those years, gold delivered a staggering 32% annualized return, yet 37% of monthly closes were negative.
Recency bias, particularly at the end of a long-term cycle, is invariably associated with catastrophic losses.
I own IAUI, totally happy. Will stay the course.
This is the cleanest framing I've seen of why gold's safe haven function broke during this specific shock. The "contaminated, not gone forever" framing captures exactly what happens when an asset's holder base shifts faster than its fundamental properties.
The one operational signal worth adding for anyone tracking the normalization timeline: ETF flow data from GLD and IAU is the cleanest read on when the weak-handed positioning has exhausted. When outflows stabilize despite continued price pressure, the marginal seller has cleared and the holder base is reconsolidating around the long-horizon allocators who don't react to six-week drawdowns. That's typically when safe haven properties reassert.
Thanks Robin, I agree with your point. Do you think we’re moving away from a single “safe haven” toward a more fragmented set of assets depending on the type of shock? And which assets do you see providing the most reliable protection today?