We finished the month firmly in the green, even after Friday’s sell-off. I made no portfolio changes and continue to expect gold and silver to trend higher.
Gold advanced at an annualized rate of approximately 57% last quarter, but experienced a sharp acceleration from January 1 through Thursday, which was clearly unsustainable. Silver’s advance was even more extreme, which explains why it declined more sharply during Friday’s pullback.
Gold continues to be accumulated by central banks as insurance against fiat currencies. The more money central banks create, the greater the long-term risk of currency debasement. Against that backdrop, gold and silver remain attractive stores of value.
There has been growing discussion that the U.S. dollar may lose its status as a global reserve currency due to persistent deficits and rising debt levels. While such a shift would likely unfold over time rather than overnight—as was the case during the 2008 financial crisis—there are signs that structural stresses are building.
Geopolitical developments have reinforced these concerns. Following Russia’s invasion of Ukraine, dollar assets held abroad were frozen, raising fears among other nations about similar vulnerabilities. China, for example, has reduced its holdings of U.S. Treasuries, reflecting growing unease with U.S. fiscal and geopolitical policy.
Meanwhile, U.S. government spending continues to rise. Federal outlays significantly exceed revenues, requiring substantial ongoing borrowing. Debt levels are increasing rapidly, and long-term entitlement obligations remain largely unaddressed. These trends help explain why investors worldwide continue to seek refuge in hard assets like gold, silver, and copper.
If the dollar were to lose its dominant role in global trade, the artificial demand supporting it would diminish, creating serious challenges for the U.S. economy. In that environment, gold and silver are likely to remain in demand as alternative stores of value.
For these reasons, I remain comfortable maintaining our exposure to precious metals. Until meaningful progress is made on debt and deficit reduction, gold and silver should continue to serve as a haven for capital seeking protection from fiscal and monetary instability.
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