Gold's big repricing is slowly becoming the stuff of history books. After surging to nearly $4,700 an ounce, the yellow metal pulled back when Federal Reserve Chair Kevin Warsh hinted at another rate hike. But the real story isn't the dip—it's how gold has stopped following the old rules.
For most of the 2000s and 2010s, a 1-percentage-point rise in U.S. real interest rates meant gold fell about 14%. So when five-year real yields jumped more than 4 percentage points between March 2022 and October 2023, gold should have dropped roughly 55%. Instead, it rose 7%. That's not a blip; that's a broken playbook.
Central banks are swapping Treasuries for bullion, driven by fiscal dominance and de-dollarization. And that shift is pushing upside toward physical metal—and its feistier cousin, silver.
The Broken Playbook
To gauge where gold might be headed, analysts often look back at its wild 1970s bull market. That era delivered 46% annualized gains after the collapse of Bretton Woods and deeply negative real yields. Then came the 1999–2011 supercycle, when gold "became financialized, lifted along with other commodities by Chinese demand," according to UBS analysis published in the Financial Times.
The current rally, which started in 2018, has returned 19% annualized. But its drivers changed dramatically in February 2022. When Western governments froze Russia's reserves, the financial world had to rethink its assumptions. If $640 billion of fixed income can become inaccessible overnight, gold suddenly looks like the safest bet. Emerging market central banks have since boosted gold to 11% of their reserves, up from 5–7%.
"This might be the fifth year in a row that central banks are buying around 1,000 tons of physical gold in a year. That's one-third of world mine production," said Willem Middelkoop, founder of the Commodity Discovery Fund.
With U.S. public debt at $32 trillion and deficits running 6% of GDP even at full employment, UBS sees "early signs of fiscal dominance" in rising term premia. Middelkoop puts it more starkly: "This is the last part of this dollar-centered world which started 82 years ago." He also notes that the value of gold sitting in central bank vaults "is now larger than the value of all U.S. Treasuries."
Generational Boom, Silver Squeeze and Nearshoring
Middelkoop believes the sector is "in a very early part of a generational boom market in commodities," emerging from a 12-year bottoming pattern in miner valuations.
Silver, trading near $66 after retracing to its $55 breakout level, is his preferred vehicle. "Silver is a steal," he said. "I wouldn't be surprised to see silver moving back up to $100 over the next few months or quarters." His long-term target is $500, based on decades of production deficits, silver's role as "the best conductor," and a reversion toward the historic 10:1 gold-silver ratio.
Looking at the domestic majors, Middelkoop also sees historically compressed valuations as an opportunity. Barrick Mining Corp. (B) or even Newmont Corp. (NEM) have price-earnings ratios of 11, 12, maybe 13," he said. "Historically, the price-earnings ratios for gold miners were always 20, 25 at least."
Yet investors seeking strict exposure to nearshored assets in top jurisdictions might have to wait longer. According to Bloomberg, after clearing a recent joint venture obstacle, Barrick is delaying its North American asset spinoff to 2027.
