Gold Savers Will Win the Long Game, and Here’s Why
Peter Reagan

Gold’s brief slide below $4,000 has pundits cheering – but traders, not fundamentals, drove the move. Silver’s scarcity tells a different story, and Bank of America now recommends gold as the smart hedge against the frenzied AI boom…

Your News to Know rounds up the most important stories about precious metals and the overall economy. This week, we’ll cover:

• Is gold under $4,000 still considered an entry point? Probably
  
  
• Silver: the most interesting under-the-radar market right now?
  
  
• BofA calls gold a hedge against “AI bubble”

Gold dips amid rate cuts, showing that traders run the market still

Bloomberg’s Yvonne Yue Li tells us that gold dropped below $4,000 in its “worst fall in a decade,” something I've recently scrutinized and mostly dismantled. How can it be the worst off in a decade when it is trading in the $3,800-$3,900 level (compared to $1,650 a couple of years ago)?

Li’s report above claims the relatively calm ending of the U.S.-China trade talks are responsible. There might be a little truth to that, which we'll soon cover, but not as it's presented.

First, remember Trump was supposed to be the "bad for gold price" President. Harris the inflationary, dollar-destroying choice. If President Trump's election had anything to do with gold, the gold price would’ve gone up, not down, after Election Day. The opposite happened.

Mainstream media never bothered to tell us why. But it was Trump who vowed to squeeze China, not Harris. Therefore, if import squeezes which Trump has been completely committed to since his first term were the driver, gold should have exploded. And… it did, but merely in a continuation of what has been going on since mid-2023.

If you were paying attention around the time the election results were posted, you know that gold immediately fell 5% when Trump’s election win was confirmed. Headlines back then told us gold's 5% fall was due to the election of a less inflationary president. But wait, Trump has always been fully committed to a weaker dollar. Pro tip: A “weaker dollar” overseas means inflation here at home.

All that is just background. Here’s the real lesson: Any time gold falls, mainstream financial media love it. Remember, among financial assets, gold is considered a second-class citizen at best. A “barbarous relic” at worst. Either way, a mere curiosity rather than what they call a “real” financial asset (like, oh, asset-based lending (ABL) revolvers, first and second lien term loans, receivables factoring and inventory reverse-factoring. You know, “normal” assets.)

When gold goes up, though, the headlines mention sentiment but overlook fundamentals. Those fundamentals include inflation, sovereign debt, limited supply, compliance with the Basel III agreement, wealth erosion and so on.

To that point, the very same article mentions how the top central banks are all gearing up to lower interest rates.

How is it possible that gold’s price is falling amid one of the most inflationary red flags imaginable?

There's a clue in the article, which might go overlooked. Regarding attendance of an LBMA conference in Japan, Li says:

"Attendance at the gathering – which began on Sunday – is at a record high, with a growing talent war for bullion traders."

Interesting that it says “traders.” Brokers and refiners, sure, they work with gold – but it’s the “traders” getting the spotlight. “Traders” have become a sought-after commodity. “Traders,” here, means speculators. In other words, those who have little or nothing to do with physical gold, yet command sufficient capital that they can move prices.

Don’t misunderstand – speculators are an inevitable part of any free market. They aid in price discovery just like actual buyers and sellers. It’s alarming, though, that the price of gold has become so volatile lately that it’s attracting professional speculators.

Like leverage, speculators tend to amplify volatility. Both down and up, too.

For gold investors, this is the place to be. LBMA talking heads said that a correction to $3,500 would be "healthy," according to whom, and still represent a ridiculously high price.

Anyone with capital sitting will probably watch very closely over the coming months, with so many calls for $5,000 and above by the end of 2026.

There's no better thing than "cheap" gold during a time of widespread currency debasement, however brief the former stretches might be.

Silver's dip from $52 might be a key point of this bull run

It actually took a little while to find how high silver went, because it's like nobody cares, but Forbes lets us know $52.25 was the peak (although I've seen several other numbers, this is as good as any).

Over the past two months, I have been saying that $50 will be the main resistance level, and that an immediate pullback from it might suggest market manipulation because that is still a very low valuation.

Now, I will make a bold stipulation that this time around, silver might have pulled the gold market down, not the other way around. (Nobody wants to go there, because gold is supposed to dominate the precious metals territory.) But it makes perfect sense. Psychological levels are one of the topics everyone discusses in the gold market, and the $2,000 level was considered “unbreakable” for the longest time.

Five years ago, gold first broke $2,000 – then traded sideways for a while, and now it’s gone parabolic. Will we ever see $2,000 gold again? Honestly, I doubt it…

Getting back to silver, Incrementum AG's 200-page In Gold We Trust report has essentially turned into the “In Silver We Trust” report. Throughout, they actually refer to silver as “performance gold,” the kind of marketing talk I’m not exactly comfortable with. Gold and silver are very different assets!

Moving on – Incrementum’s analysts tell us silver touched “a new all-time high above $50 per ounce and briefly peaking near $56.”

What drove the price explosion? “More than a speculative surge, this rally was the culmination of years of mounting structural imbalances finally boiling over.”

This is the kind of backing I want to see in financial analysis!

“Structural imbalances” here is the politically correct way of saying there is an alarmingly low amount of silver available, relative to demand for physical silver. As in, 200 million ounces a year.

They further explain how the 1-month silver lease rate in London skyrocketed by 39%, signaling extreme scarcity. My colleague Phillip Patrick reported on this at the time in his article The Great Silver Squeeze of 2025.

While providing a powerful analysis into how physical silver demand is taking control, there is just a hint of over eagerness coming from Incrementum.

Do you think that, in a free market, silver couldn't move up to correct based on supply and demand? While gold was correcting downwards based on sentiment? Of course it could.

With gold holding steady at $4,000 the average gold-to-silver ratio since 1971 tells us silver’s price should be about $73/oz. In other words, there’s still a long way to go.

But the silver market rarely behaves as expected – and the fall from $56 to $48 was described as symptomatic of gold's pullback. I don’t know.

Compare silver’s recent price action to gold’s over the last five years. The moment traders realized the price of gold could hold above $2,000 for months without falling, all bets were off. And prices have been surging ever since.

If silver stays above $50 for any length of time, I expect, like with gold, all bets are off. With immense pressure on the physical side, I wouldn’t be surprised to see silver suddenly leap to $100 or even as high as $200.

Contracts and derivatives can do a lot to prices – but one thing they can’t do is replace critical mineral silver on the industrial side. I’m still very bullish on silver.

BofA: Gold, as a hedge against the “AI bubble,” will outperform

It was nice to hear BofA's analysts, as seen on Business Insider, not only call out the AI bubble but give gold its due in doing so.

I have been repeatedly pointing out that any time you hear of economic strength in the U.S., you're hearing about the tech sector. And recently, any time you're hearing about tech sector strength, you're hearing about AI.

To sum up a long story short, over the last two or three years, every possible piece of software (and even a ton of hardware) has been rebranded as “AI.”

From your phone camera’s “AI lens” to Google search results, AI is everywhere.

And it’s not cheap… As Renaissance Macro Research warned back in July, capital expenditures on AI datacenters contributed more to GDP than consumer spending in the first half of the year.1 Paul Kedrosky estimates that AI investment will be responsible for 2% of U.S. GDP growth this year. Reuters suspects AI is responsible for the “gravity-defying U.S. GDP,” and you can see why!

Last month, the Financial Times described the current situation quite well: America is now one big bet on AI.2

That sort of all-in, single-sector “strength” is a major red flag for me. And for anyone who’s spent any time studying financial markets. (And for anyone who’s read Chancellor’s Devil Take the Hindmost, for that matter.)

So, if you’re concerned, you aren’t alone. As Samuel O’Brient tells us:

"The AI trade is still in full swing, but if you're worried about the party ending, BofA has a few ideas to hedge."

In a note to clients, Bank of America analyst Michael Hartnett says what I've been thinking for a while, but in a more appropriate tone: The U.S. tech sector might be overinvesting in AI hype. Apparently, private equity’s big money isn't sold on AI anymore, even as CEOs plan hundreds of billions in AI datacenter projects for the rest of the decade.

Look: This is always a risk for businesses. Every dollar borrowed and spent is a dollar that has to be paid back – hopefully out of revenues. The future cash flow is speculative, though – only the debt is certain.

BofA presents a price target of $5,000 for gold in 2026, calling gold “structurally under-owned.” They have a point here – last week, finance blogger Charlie Bilello pointed out that gold currently represents just 6% of global investable assets (vs. an all-time high of 22%).3

Interesting – it's the same "structural" angle used in Incrementum's extremely bullish silver analysis from above.

Maybe there's some hope for investors after all.

Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver.

www.birchgold.com