The market was thrown a curve ball that will take time to digest
This article first appeared on SchiffGold.
I have been a precious metals bull since 2010. In the wake of the Great Financial Crisis, the only plausible explanation for what happened came from the Austrian School of Economics and people like Peter Schiff. Too much debt, endless deficits, money printing (QE), and the inability of politicians to make hard choices. The outcome seemed obvious: a debt spiral, runaway inflation, and dollar collapse. So what to do?
I bought my first gold and silver in late 2010. I felt immediately vindicated in 2011, watching both metals blast higher as it seemed we were on the eve of the day of reckoning. I quickly learned that inevitable does not equal imminent. Combine that with a speculative mania that got ahead of itself, and the market topped as everyone piled into the trade. The USD was still the cleanest shirt in a dirty hamper for most investors.
The metals endured a brutal bear market from 2011 through the end of 2015. While 2015 marked the bottom, it was not a smooth ride from there. There were lots of false starts, hard pullbacks, and frustration. Even after the Covid price pop in 2020, what seemed like the perfect storm for metals: completely unsustainable deficits plus rising rates did not lead to the great metals re-pricing.
Then 2024 hits, and gold finally finds its groove: higher highs and higher lows. In 2025, the debasement narrative takes hold again (just like 2010), which led to the massive bull market we just witnessed. The move seemed unstoppable. Near the end of 2025, I started growing nervous, it felt like 2011 all over again. I went back to all the data I track:
The data was clear: the debasement narrative still held up, the thesis was still intact. The market had finally woken up to something that seemed obvious over a decade ago. Demand for physical metal was being strained. Gold and silver were traveling around the globe to maintain confidence in a paper market that is bound to fail at some point.
Despite the feeling of 2011, I concluded that I was experiencing PTSD and this was the regime change I bet on 15 years ago.
Metals kept rising, validating the dollar collapse theory. It seemed like the perfect storm of events. My only point of concern was how fast it was moving. I recognize that things unfold quickly near the end:
“How did you go bankrupt?”
“Very slowly at first, and then very quickly.”
With prices moving by 5% and 10% a day, I determined that we were either in the final collapse of the dollar or headed for another speculative flush-out. The data I track did not show excessive speculation, so I assumed the endgame was here—ready to play out over the next 12–24 months. I knew there would be pullbacks; in fact, you want them. They are healthy. They keep exuberance down and prevent markets from getting too speculative. But the market would not stop. My FOMO kept me fully invested.
And then came Friday, January 30th. Some combination of news stories finally froze the metals in their tracks and triggered a massive deleveraging within the paper markets.
In the aftermath of the washout, it felt healthy and needed. Metals had only retreated to prices from one to three weeks prior. The bull felt intact. Then I started reading about Warsh, and I understood the trigger. This was not a breakdown in fundamentals, but a sudden repricing of time and narrative.
Warsh is someone who wants lower rates but also wants to shrink the Fed balance sheet. This felt like an anti-Trump move. Trump wants long-term rates coming down to unfreeze the housing market and reduce the burden of U.S. debt. That is done through QE, not merely lowering short-term interest rates. So why would Trump pick Warsh?
Warsh’s thesis is that AI will juice U.S. productivity to +5%; investment just needs to continue. If AI takes hold and blasts the economy higher, interest rates will fall even as the Fed shrinks the balance sheet. The strength of the U.S. economy will drive people into the dollar and into U.S. debt.
Thus: lowering short-term rates will fuel the AI build-out, which in turn will bring down long-term rates as growth accelerates. This is the exact narrative Trump wants to hear: the strongest economy in the world, the rest of the planet sees the U.S. as the leader and jumps over themselves to buy the USD and Treasuries. We grow our way out of debt on the back of AI.
Will this happen? Probably not. The path is very narrow, and this is a big gamble. The “Fed Put” is being taken off the table on the pretense that the U.S. will explode higher. Short-term rates will provide the rocket fuel that unlocks everything. The biggest problem is that the path is extremely narrow:
If any one of these five things doesn’t happen, then the story falls apart in a brutal way, potentially worse than what was unfolding in 2025. When the Fed Put is gone and the Fed steps away as a marginal buyer of duration, the rest of the world needs to buy in.
So what happens, honestly… who really knows. But let’s take an educated guess. First, a future U.S. return to glory would definitely be bearish long-term for metals. I am assuming that will not happen. The path is simply too narrow; timing and outcomes would all have to line up perfectly.
So what could happen instead? The Fed lowers rates and allows the balance sheet to shrink. U.S. debt continues to grow and the market is flooded with long-term issuance. The yield curve steepens dramatically, which puts pressure on everything: U.S. debt service, corporate credit, the housing market, and more. The economy tightens and slows. The Fed will have to step back in, losing credibility, the dollar falls, and metals surge—endgame.
So why am I bearish on metals for the first time in 15 years? Because as I learned through 2011–2020, facts and reality do not drive markets, perception does. Until this reality plays out and becomes obvious, the market is likely to focus on higher long-term rates, which is bearish for metals.
Are we looking at another 2011–2015 followed by upward chop? I don’t think so. I think this has created a temporary reprieve for the USD as investors wait and see. What seemed obvious a week ago—a dovish Fed with lower rates and more money printing—now has to be re-priced to a “hawkish” Fed. That means metals could stay pressured until the Fed is forced to fold.
This takes what looked imminent and pushes it back until the narrative collapses. It could be weeks, but it is far more likely that it takes longer. Trump and Warsh are taking a significant gamble. But until that gamble fails, metals will pay the price, especially because they were being priced for perfection just a few days ago.
Am I selling metals? Absolutely not. The endgame still looks clear. When that endgame emerges again is anyone’s guess. Until then, I think the move is to take risk off the table: convert speculative positioning to conservative positions, swap out any leverage, and convert some silver and miners exposure into simple gold if you want to participate in the long-term thesis but want to avoid some short-term pain. Be prepared to wait this one out.
Obviously, anything can happen… it’s even possible the narrow path is walked by Trump and Warsh.
Yes, I know about the endless appetite for physical metal in the East. The Comex vaults continue to be drained. But…
The Warsh nomination was a major curve ball for the market. Not only will it take time to digest the nomination, it will also take time for his policy to take shape and the market to respond. The immediate path of least resistance is to buy the Trump/Warsh narrative. That is what markets will do. The BLS will continue to print false inflation numbers and likely stronger growth, so it will take time. Don’t expect an immediate resumption of the metals. We will likely see lower highs and lower lows. Any weak hands need to get flushed out. Anyone who is not a true believer will be tested.
Recently, it felt like every investment analyst was pricing in higher and higher gold and silver prices. It looked like a no-lose bet. That brings in all types of buyers, and those buyers are going to be tested. What felt like a safe, albeit volatile upward trade, will experience volatility in both directions.
Don’t succumb. Focus on the data. Unless it becomes obvious that the Trump gamble is going to pay off, the long-term narrative of metals will stay intact. But it will take time for markets to see this. Be patient.