This video discusses the recent surge in gold prices, reaching new all-time highs. It explores the reasons behind this "gold rush," including economic and political uncertainties, and the idea of a "debasement trade" where people buy gold to prepare for a potential collapse of the US dollar. The video also explains why gold is traditionally seen as a safe haven and inflation hedge, but questions whether the current rally is sustainable or if a correction is likely.

Key Takeaways

Gold and silver prices have surged, reaching new all-time highs, with a noticeable public interest in buying gold.

The "debasement trade" narrative suggests that gold's rise reflects a world preparing for the potential collapse or replacement of the US dollar due to ballooning deficits and political turmoil.

Investors typically buy gold as a safe haven during periods of economic and political uncertainty, and as a hedge against inflation due to its rarity.

The current gold rally is fueled by economic uncertainties like potential recessions, high government debt, and political instability in the US and other countries.

Central banks, particularly from emerging markets, have become significant buyers of gold, with some speculating this activity encourages retail investors.

Despite the "debasement trade" narrative, there's not strong evidence that the dollar's decline or inflation expectations are the primary drivers of gold's recent massive surge.

While central banks hold more gold by value than US Treasuries, the US dollar remains the number one foreign reserve asset globally by quantity.

Historically, gold's value hasn't always increased over time, and periods of sharp price increases have often been followed by significant declines.

The future direction of gold prices is uncertain, as it depends on unpredictable future demand trends influenced by political and economic environments.

While some buy gold as a hedge against catastrophic events, it's important to be aware of the risks and historical volatility, as it's not a guaranteed store of value.

0:00 Hey everyone, it's Richard. You're

0:01 watching the plain bagel. As you might

0:02 have heard, there's been a bit of a gold

0:04 rush in the markets lately. No, I'm not

0:06 talking about AI stocks or Bitcoin, but

0:08 this time actual gold. Uh because the

0:10 precious metal has seen its price surge

0:12 year to date by over 60%, reaching a new

0:15 all-time high of nearly $4,400 earlier

0:19 this week. Riley, that's even extended

0:21 to silver, which itself has surged by a

0:23 similar degree to new all-time highs.

0:25 And we've seen a real mania around the

0:27 shiny metal. People have been circling

0:29 blocks lining up outside of gold dealers

0:31 in Australia and Vietnam. Interest in

0:33 buy gold searches have reached all-time

0:35 highs. I decided to crack this out of

0:36 the uh costume box. Uh even Donald Trump

0:40 has gotten in on the action accumulating

0:42 gold himself on the walls of the Oval

0:44 Office. I'll be I've been informed that

0:45 some of it is just plastic spray painted

0:47 that color, which is a bit awkward to be

0:49 caught with uh faking gold like that. Uh

0:52 by the way, this is a dollar bill. I

0:54 don't know if you saw that, but I'm

0:56 going to take this off. But amid all

0:58 this euphoria about the shiny metal, a

1:00 fairly concerning narrative has been

1:02 making the rounds and gaining traction

1:04 around why people are ultimately buying

1:06 this asset. The so-called debasement

1:09 trade. The idea that amid ballooning

1:10 deficits, political turmoil, and gold

1:12 buying activity from central banks, that

1:14 the rise in gold's price actually

1:16 reflects a world that's preparing for

1:19 the inevitable collapse or replacement

1:21 of the US dollar. that we are fast

1:23 approaching the end of the old world

1:25 order and quickly reaching the beginning

1:28 of the

1:29 older world order I guess because we're

1:31 talking about gold here. So which is it?

1:34 Are we simply seeing the latest market

1:35 fad or are we truly heading towards a

1:38 new golden age for better or for worse?

1:41 Well, that's what we'll try to decipher

1:43 in today's video, to discuss gold as an

1:45 investment class, the different

1:46 narratives around why it's reaching new

1:48 all-time highs, and some considerations

1:50 worth going through before you really

1:52 subscribe to either story here. A quick

1:55 thank you to Brilliant for sponsoring

1:56 today's video. Stick around until the

1:58 end to learn about how you can start

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2:01 for free and get a discount on an annual

2:03 subscription. Before hopping into it,

2:05 let's start with a highle overview of

2:06 why investors generally buy gold in the

2:09 first place. If this is something that

2:10 you're familiar with, you can skip the

2:12 section using the timestamps in the

2:13 description down below. But for the

2:15 uninitiated, the idea of buying gold as

2:17 an investment probably seems pretty

2:19 bizarre. After all, gold doesn't produce

2:20 any sort of cash flow or yield. And

2:22 while it does have those industrial uses

2:24 that gives it that sort of commodity

2:26 value, 44% of demand is simply for

2:29 financial purposes with roughly a fifth

2:31 of all gold ever mined simply being held

2:35 by central banks. So why is it that

2:37 people park their money in this very

2:39 specific precious metal? Well, there are

2:41 a few reasons for it. For one, the

2:43 market tends to view gold as a safe

2:45 haven investment. That is something that

2:46 will retain or even grow its value

2:49 during periods of turmoil. Historically,

2:51 for example, the precious metal has

2:52 passed key price levels during periods

2:54 of market stress, passing $1,000 an

2:56 ounce with the onset of the great

2:58 financial crisis, $2,000 during the CO9

3:00 pandemic, and $3,000 earlier this year

3:03 with Trump's initial tariff roll out.

3:05 It's also, of course, fairly rare with

3:07 gold's total supply only growing by

3:09 about 2% annually. And part of that is

3:11 actually recycled gold. So, it's not

3:13 even all just new gold coming out of the

3:14 ground. So, because of that, gold is

3:16 also viewed as an inflation hedge or

3:18 something that again will retain its

3:19 value when fiat currencies are losing

3:22 theirs. But by far the biggest reason

3:24 why gold gets this treatment is simply

3:26 its history. the mere inertia of having

3:29 previously been treated as a financial

3:31 asset or form of money. Something that

3:33 goes back thousands of years with it

3:35 being widely coveted for jewelry and

3:37 religious institutions historically for

3:39 its non-corrosive properties and luster

3:42 with it up until the 1900s being used

3:43 for coinage or to otherwise back the

3:46 value of money with it even today still

3:48 being held by central banks to help

3:50 support the value of their currencies.

3:52 Now, of course, with developed countries

3:53 having abandoned the gold standard in

3:55 the 1970s, there's long been some

3:57 controversy over the role of gold in the

3:59 modern economy, with some viewing it as

4:01 a relic of a time long past, much like

4:04 sea shells or rice. While others are

4:06 adamant that even today, it's the only

4:08 form of money worth anything. But this

4:10 debate over gold is really nothing new.

4:12 So-called gold bugs or gold enthusiasts

4:15 have been rooting for its resurgence for

4:17 quite some time. But what's fueling the

4:19 precious metal rally today? What's

4:20 brought it back in fashion? Well,

4:23 probably not this. Uh, but Donald Trump

4:26 has interestingly played a role in the

4:28 price resurgence. As mentioned,

4:30 investors tend to flock to the precious

4:31 metal during periods of uncertainty. And

4:35 well, look around. For one, there's the

4:37 economic uncertainty. As we all know,

4:39 Trump's tariffs have been causing quite

4:41 a bit of upheaval for global supply

4:43 chains uh for most of this year. And

4:45 recently, we've seen tensions reignite

4:47 between China and the United States,

4:49 with Trump threatening a 100% tariff

4:51 against Chinese goods starting November

4:54 1st. And while the boomound AI has

4:56 certainly bolstered activity in the

4:57 economy, a number of analysts have been

4:59 ringing the alarm bells warning of a

5:01 potential recession just around the

5:03 corner. with Goldman Sachs putting the

5:04 probability of a recession over the next

5:06 12 months at 20% as of September. JP

5:09 Morgan putting the odds at 40% as of

5:11 July and one UBS analyst putting the

5:13 probability at a staggering 93% as of

5:16 September with some even buying gold as

5:18 a hedge against this supposed AI bubble.

5:20 The idea that with valuations being so

5:22 high for AI stocks and so much

5:24 unsustainable activity in the space that

5:26 there's the risk of a severe correction

5:28 with some investors choosing to hide

5:29 their money in anticipation. But one of

5:31 the main economic concerns being flagged

5:33 as driving some gold demand here is

5:35 government debt loads which have reached

5:37 very high levels with deficits

5:38 continuing to expand and with interest

5:40 rates still being fairly high. The

5:42 interest burden of that debt alone risks

5:44 causing some problems. Something that

5:46 would only be exacerbated by a

5:48 recession. So that's the first thing.

5:49 There's a lot of anxieties around the

5:51 state of the economy. A second factor

5:53 driving this gold demand has been the

5:55 political uncertainty, headlined again

5:57 by none other than Donald Trump, whose

5:59 unconventional whiplash policies and

6:01 actions have raised concerns over

6:03 America's checks and balances and the

6:05 overall integrity of the US dollar. With

6:07 there being particular concern over

6:09 Trump's targeting of the Federal

6:10 Reserve, with Donald Trump having

6:12 publicly criticized and attempted to

6:13 pressure Jerome Powell to cut interest

6:15 rates and having attempted to fire

6:17 Federal Reserve board member Lisa Cook

6:19 over seemingly unfounded mortgage fraud

6:21 allegations, with the intent there

6:22 seeming to be to replace her with

6:24 someone more willing to follow Donald

6:25 Trump's direction. In addition to the

6:27 concerns around the Federal Reserve,

6:29 there's also the government shutdown,

6:30 which has recently become the second

6:32 longest in history with Democrats and

6:34 Republicans refusing to compromise on a

6:36 spending bill to keep the government

6:37 open. Something that seemingly helped

6:39 get gold across the $4,000 mark earlier

6:42 this month. And importantly, it's not

6:44 just the US experiencing political

6:46 turmoil here. Uh in France, the Euro

6:48 zone's second largest economy, we've

6:50 seen the country go through four

6:51 different prime ministers in less than

6:53 two years amid political divides in

6:55 parliament. With even the current prime

6:57 minister having recently resigned only

6:59 to be later reappointed and with the

7:02 appointment of a stimulusfriendly prime

7:03 minister in Japan, there are concerns

7:05 that the debt heavy country will see

7:07 further deficits in the future with both

7:09 these countries seeing their bond yields

7:11 increase representing weak demand for

7:13 government bonds. So with all this

7:15 uncertainty, you can see why many

7:16 investors have been migrating to gold

7:18 here as a safe haven asset. But there's

7:21 one other important buyer in the market

7:23 that's in part been fueling this rally,

7:26 and that is central banks. You see,

7:28 following the abandonment of the gold

7:29 standard, we saw a general trend of

7:31 central banks offloading their gold

7:33 reserves. With the US dollar ultimately

7:35 replacing gold as a key reserve asset.

7:37 Over the last few years, central banks

7:39 have become the biggest buyers of the

7:41 precious metal, buying at their fastest

7:43 pace since at least the 1950s. With the

7:46 past 3 years, each seeing over 1,000

7:48 tons of bullion being purchased by the

7:51 institutions, with the total gold held

7:52 by central banks estimated to sit around

7:55 36,000 metric tonses. In fact, you might

7:57 have seen the headline that for the

7:58 first time since 1996, central banks now

8:02 hold more gold in their reserves than US

8:04 treasuries. And some have speculated

8:06 that's the central bank mine activity

8:08 that's ultimately spurring investors to

8:10 jump into the space with many retail

8:11 investors getting exposure via gold ETFs

8:14 rather than actually owning the precious

8:16 metal. These investment vehicles offer

8:17 share representations of physical gold

8:20 and have had a record year of buying

8:21 activity in just the first 9 months of

8:23 2025 with more than $60 billion flowing

8:27 into gold ETFs so far. Albeit total

8:29 assets in gold ETFs do remain below

8:31 their 2020 peak when the pandemic was

8:33 fueling a lot more holding. So we really

8:35 are seeing buying from all fronts here

8:37 from institutions, retail and central

8:39 banks. But it brings us back to the

8:41 debate about what this all ultimately

8:43 represents with some again highlighting

8:45 that this reflects the ultimate

8:47 debasement trade. Currency debasement

8:49 refers to the historical practice of

8:50 rulers slowly eroding trust in their

8:53 currency by mixing gold and silver coins

8:56 with less valuable metals. Something

8:57 that's argued to have contributed to the

8:59 collapse of the Roman Empire in 476 AD.

9:02 even though that did technically happen

9:04 200 years after the coin stopped having

9:06 meaningful gold or silver content. And

9:08 as the name implies, some have argued

9:10 that with the current ballooning US debt

9:12 load, uh the weaponization of the dollar

9:14 against Russia in 2022, and political

9:17 instability in general, the US dollar is

9:20 slowly being debased with many

9:22 referencing the 10% decline in the value

9:24 of the US dollar this year alone, the

9:25 fact that the dollar's makeup of foreign

9:27 reserves has been decreasing, and of

9:29 course, the surge in gold's value. We've

9:32 had a lot of big names adding fire to

9:34 this narrative, even if not directly

9:35 supporting it. Ken Griffin of Citadel,

9:37 Ray Dallio of Bridgewater, and Jaime

9:39 Diamond of JP Morgan have all

9:41 highlighted the risks of the US debt

9:43 situation, noting gold's role to varying

9:45 degrees in hedging against these risks.

9:48 So with these narratives, all this

9:49 interest, and of course the price chart,

9:52 it's very easy to get caught up in this

9:53 narrative. And there is of course a

9:55 chance that gold continues to rise in

9:56 price from here. But before you

9:57 subscribe to the most extreme narratives

10:00 here around dollar debasement and the

10:02 like, there are a few things worth

10:04 considering. For one, while individual

10:06 investors may of course be buying gold

10:07 for any assortment of reason, there's

10:09 not a whole lot of evidence that the

10:11 debasement trade is what's driving most

10:14 market activity here. In terms of the

10:15 dollar being down this year, we haven't

10:17 actually seen much movement in the

10:19 dollar index since April, while gold has

10:22 seen roughly half of its massive surge

10:24 during that period. And the dollar

10:25 itself is still roughly flat from 3

10:28 years ago. So that decline doesn't

10:29 really explain gold's massive price

10:31 appreciation. In fact, if you price gold

10:33 in terms of oil barrels, you can see

10:35 that even when you strip out the dollar,

10:36 the metal's value has surged

10:38 dramatically. We also haven't really

10:39 seen any changes in inflation

10:41 expectations, suggesting that uh gold's

10:43 surge in price doesn't really reflect a

10:46 basease scenario of runaway prices. In

10:49 terms of US Treasury bonds, their yields

10:51 don't really reflect this abandonment to

10:53 the dollar. In fact, treasury bonds have

10:55 actually increased in price since May.

10:57 Also brings us to another important

10:58 point around the foreign reserves of

11:01 central banks. Well, yes, it is true

11:03 that gold has replaced US Treasury bonds

11:05 in terms of value that has more so to do

11:08 with the surge in gold's price rather

11:10 than the quantity of gold held

11:12 increasing meaningfully. Remember,

11:13 gold's price has more than doubled over

11:15 the past couple of years. So, it's not

11:17 really surprising that its share of

11:18 these reserve market values has

11:21 increased relative to treasury bonds

11:23 which have been relatively flat. And

11:25 that's just treasury bonds, a type of US

11:27 asset. But US dollars continue to be the

11:29 number one foreign reserve asset with

11:31 there being roughly 7 trillion in US

11:34 dollars held versus the roughly $5

11:36 trillion in gold. Now, we are seeing the

11:38 dollar's share of total foreign reserves

11:40 decrease over time, and that's certainly

11:42 been exacerbated by recent events, but

11:44 it's far from having been replaced at

11:45 this point. And there's also a really

11:46 important point around which central

11:48 banks are actually buying gold here.

11:50 Because while headlines might give this

11:51 impression that nations around the world

11:53 are rushing to buy gold here, that's

11:56 really not the case. The biggest buyers

11:58 of gold year to date have been Poland,

12:00 Kazakhstan, and Turkey, with China,

12:02 India, and Russia also being notable

12:04 buyers over the past few years. But

12:06 these countries don't really reflect

12:07 global interest in gold. According to a

12:09 World Gold Council survey, while the

12:11 percentage of countries looking to

12:13 increase their gold reserves has been on

12:15 the rise, most central banks aren't

12:17 planning to increase their gold

12:18 allocation. And those that are tend to

12:20 be from emerging markets and developing

12:23 economies. So you are seeing a handful

12:24 of countries aggressively accumulating

12:26 gold, some of which do have a very

12:28 active interest in moving away from the

12:30 US dollar. And the percentage of

12:31 countries interested has again been

12:33 increasing. We haven't seen as much

12:35 buyin from the larger world powers. And

12:38 that kind of makes sense. The reason

12:39 central banks have foreign currencies on

12:41 hand is to allow them the liquidity to

12:43 transact quickly when enacting policy.

12:45 And while gold is a fairly liquid asset,

12:48 it can still drag down the price to have

12:49 to sell before doing these transactions

12:52 compared to just having US dollars or

12:54 even treasuries which can be borrowed

12:55 against very easily. And while it's

12:57 great to hold an asset that's

12:58 appreciating in value, it might not be a

13:00 smart allocation to jump in after we've

13:02 seen this volatile price appreciation.

13:05 Not to mention, it's a costly asset to

13:06 store and doesn't generate any sort of

13:08 income while you're holding it. And

13:09 what's interestingly looked over quite a

13:11 bit is while there's often this debate

13:12 of the US dollar versus gold or other

13:14 alternative assets, the US central bank

13:16 is actually the one set to gain the most

13:18 from gold's price appreciation given

13:20 that they currently own the largest

13:22 amount globally. So, some initial

13:23 thoughts around the debasement trade and

13:24 why you should be skeptical of this sort

13:26 of overarching narrative. Uh the second

13:28 big consideration here is that while

13:30 gold is often treated by investors as

13:32 this safe and secure store of value,

13:35 it's worth highlighting that

13:36 historically that property hasn't always

13:39 held. It's easy to get caught up in the

13:40 belief that because of gold's rarity,

13:42 its value will mathematically increase

13:44 over time as the dollar experiences

13:46 inflation. But in the past, there have

13:48 been extended periods where gold's value

13:50 has fallen against the US dollar with

13:52 there being a 20-year period starting in

13:54 the 1980s where gold fell in price. And

13:57 something being scarce doesn't

13:58 inherently draw demand. Uh platium, for

14:00 example, is a metal that's actually 30

14:02 times more rare than gold that currently

14:05 trades at a third of gold's price.

14:07 Because again, a lot of gold's demand is

14:09 based on its historical inertia, not

14:11 strictly speaking, its scarcity. And

14:12 with the sharp increase in gold's price

14:14 that we've seen, there's naturally the

14:16 risk of a correction. Bank of America

14:18 analysts have highlighted that this sort

14:19 of price movement has only occurred

14:21 three times before historically, each of

14:23 which were followed by 20 to 33%

14:26 declines. And at least one of those

14:28 declines was actually fueled by central

14:30 banks themselves. A sell-off that only

14:32 ended when they signed the Washington

14:34 agreement, agreeing to limit how much

14:35 gold they would sell. And while it's

14:37 certainly too early to call it a

14:38 reversal, we have already seen the

14:40 middle drop over 5% from its peak

14:43 reached earlier this week, demonstrating

14:44 that this safe haven asset can get quite

14:46 volatile when people are rushing into

14:48 it. But it brings us to the ultimate

14:50 question, Richard, where does gold's

14:51 price go from here? Uh to which I would

14:54 respond, I have no idea. Again, as

14:56 mentioned, hopefully it goes to

14:57 emphasize that the price of the asset is

14:59 really based on future demand trends,

15:01 which are hard to determine. If we see a

15:03 cooling of the political and economic

15:05 environment, or interestingly, if we see

15:07 rising yields, which itself could

15:08 demonstrate a weakness for US

15:10 treasuries, those are all factors that

15:12 have been highlighted as things that

15:13 could lead to a cooling of gold prices.

15:15 And with gold price surging amid a

15:17 seeming perfect storm of factors, the

15:19 reversal of any one of these things,

15:21 whether it be a trade deal with China or

15:23 a reopening of the government, could

15:25 contribute to a pullback. But the truth

15:27 is that we just don't know where things

15:28 will go from here. Whether the political

15:30 situation will continue to heat up or if

15:32 we see agreements around tariffs and

15:34 trade deals. Because there's so many

15:35 factors at play, it's impossible to

15:36 predict the demand trends for something

15:39 like gold over time. And historically,

15:41 you can see that demand has fluctuated

15:42 quite a bit. Now, it's not to say

15:44 everyone buying gold right now has this

15:45 sort of doom and gloom expectation. Some

15:47 are just buying it as this hedge against

15:49 tail risks, something that they're

15:51 willing to spend the money and

15:52 potentially lose it for the sake of just

15:54 offsetting any sort of, you know,

15:56 catastrophic event in the US. But my

15:58 point is not to argue that gold's price

15:59 won't increase or that it's certainly

16:01 going to decrease from here, but rather

16:03 just to highlight the risks given that

16:04 many people view this as the ultimate

16:06 store of value, something that over time

16:08 has maintained its worth when that

16:10 hasn't been a guarantee. Thank you for

16:12 watching. And before I sign off, you

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17:31 joining me today. I hope you found this

17:32 video helpful. If you did, please do

17:33 make sure to like, subscribe, all that

17:34 good stuff. It does help the channel

17:35 tremendously. And let me know your

17:36 thoughts on gold. Whether you think it's

17:37 a relic of the past or you think it

17:39 might beat out the dollar as the top

17:41 reserve assets. Personally, I'm hedging

17:43 my bets with the uh the golden dollar

17:45 dollar bill chain. This was like five

17:48 bucks from Amazon, but I'm getting my

17:49 money's worth. Thanks again for joining

17:51 me and as always, be safe out

The 2025 Gold Rush - Debasement Trade or FOMO?

Name: The 2025 Gold Rush - Debasement Trade or FOMO?
Channel: The Plain Bagel

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The 2025 Gold Rush - Debasement Trade or FOMO?