Gold’s recent surge past $3,700 an ounce, with silver hovering near $43, is more than just a market anomaly or another chapter in the long history of precious-metal volatility. It is a signal—a blunt, unvarnished assessment of the economic landscape—that global investors perceive a growing gap between the official narratives of stability and the underlying realities of policy and politics.
The Federal Reserve is preparing to lower interest rates even as core inflation remains near 3 percent, still notably above the Fed’s 2 percent target. Cutting rates under these circumstances risks reigniting inflationary pressures and expectations. Moreover, ongoing political attacks on the central bank’s independence hint at a future monetary policy regime with an asymmetric bias: policymakers may tolerate higher inflation while resisting the difficult measures needed to bring it back down. Markets see this, and gold reflects it. A weaker guardrail against inflation is a recipe for higher demand for hard assets.
At the same time, tariffs—once portrayed as a temporary bargaining tool—are hardening into a permanent feature of U.S. trade policy. The cumulative effect is straightforward: rising costs across supply chains, filtering down to higher consumer prices. Gold, long seen as a hedge against inflation, reacts in advance of those pressures. Silver, often more volatile, amplifies the same concerns.
Fiscal policy trends are adding additional fuel. Under President Biden, U.S. debt and deficits ballooned, but under President Trump the trend shows no sign of reversal. Mounting obligations, financed through ever-greater issuance of Treasury securities, call into question the sustainability of America’s current fiscal path. Investors know that large deficits usually end in one of two ways: cuts and reform, or higher inflation. With neither outcome politically palatable, the latter seems more likely, and gold prices have lifted accordingly.
Layered on top of these traditional concerns are a set of extraordinary measures now grouped under the label of the “Mar-a-Lago Accord.” The plan includes deliberate dollar-weakening, aggressive use of tariffs, and even proposals to extend Treasury bond maturities to a century. While the intent is to reengineer the global financial order in America’s favor, the near-term effect is profound uncertainty. If the dollar is purposefully undermined, and if the debt market is distorted with century-long maturities, the normal anchors of price stability and financial predictability are weakened, perhaps irreparably.
Of course, none of this ensures a runaway inflationary spiral or lasting financial crisis. Economies have weathered imbalances before, and new equilibria can emerge. But markets, and especially gold, are not concerned with official reassurances. They are priced in line with prevailing probabilities and dueling incentives. Right now, the probability of a stable, disinflationary environment in the near term is diminishingly small. The incentives for policymakers—to stimulate, to inflate away debt, to intervene in markets—are all skewed toward the generation of instability.
That is why gold at $3,700 and silver at $43 matter. They are not just shiny commodities enjoying a speculative boom. They are barometers of trust, revealing truths that governments are too corrupt or too cowardly to acknowledge.
Peter C. Earle, Ph.D, is the Director of Economics and Economic Freedom and a Senior Research Fellow at the American Institute for Economic Research (AIER).
Image: Free image, Pixabay license.