Gold and Silver Bull Run Continues

Theme and Background

This chapter focuses on the performance of the gold market in June 2025 and the key findings from the World Gold Council (WGC) annual central bank gold reserves survey. The report notes that gold has risen for the sixth consecutive month, with a year-to-date gain of 25.86%, closing at $3,303.14 per ounce, driven primarily by structural risks such as unsustainable U.S. fiscal policy, a weakening dollar policy, and geopolitical instability. The WGC survey indicates that global central banks, particularly those in emerging market and developing economies (EMDE), are redefining gold's role from a traditional reserve asset to a tool for financial sovereignty.

Core Thesis

The author's core investment argument is that the gold bull market is driven by both sovereign demand and global instability, and this trend has a structural foundation, rather than being short-term speculation. Counterintuitive judgments include:

• Although the U.S. stock market (S&P 500) has quickly rebounded from the April sell-off to new all-time highs, gold has remained in a high-level consolidation, without retreating due to a recovery in risk appetite.
• EMDE central banks are the largest buyers of gold, while advanced economies (AE), despite holding substantial gold reserves, lag in purchasing intent, with EMDE now dominating gold pricing.
• The weakening of the U.S. dollar (DXY falling to a three-year low of 96.88, down 10.70% year-to-date) is viewed as a deliberate U.S. policy choice, not a market surprise, further supporting gold.

Key Arguments and Data

The report supports its thesis using WGC survey data, asset performance comparisons, and technical analysis:

1. Asset Performance Comparison (as of June 30, 2025)

Indicator	Price/Value on June 30	Price/Value on May 30	Monthly Change	Monthly % Change	Year-to-Date % Change
Gold Spot	$3,303.14	$3,289.25	+$13.89	+0.42%	+25.86%
Silver Spot	$36.11	$32.98	+$3.13	+9.48%	+24.94%
NYSE Arca Gold Miners (GDM)	1,458.69	1,416.16	+42.53	+3.00%	+52.49%
DXY U.S. Dollar Index	96.88	99.33	-2.45	-2.47%	-10.70%
S&P 500 Index	6,204.95	5,911.69	+293.26	+4.96%	+5.50%
Total Gold ETF Holdings (Million Ounces)	90.58	88.22	+2.37	+2.68%	+9.33%
Total Silver ETF Holdings (Million Ounces)	771.76	741.02	+0.74	+4.15%	+7.76%

2. Key Data from WGC Central Bank Survey (73 responses, highest ever)

• 95% of central banks expect global gold reserves to rise over the next year.
• 43% of central banks plan to increase gold holdings (a record high), with 0% planning to reduce.
• 73% of central banks expect the dollar's share in reserves to decline over five years, benefiting gold, the euro, and the renminbi.
• More central banks are actively managing gold reserves (44% vs. 37% in 2024), with risk management becoming a higher priority.
• The proportion of domestic storage rose to 59% (2025), but only 7% plan to increase it further.

3. Technical and Macro Background

• Gold has been in an upward channel since 2023, with the MACD indicator showing a bullish confirmation of "higher highs, higher lows."
• U.S. stock buybacks are expected to reach $1.1 trillion in 2025 (from approximately $1 trillion in 2024), with some capital shifting from capital expenditure to buybacks, supporting equities but not diverting gold buying.
• The market has begun pricing in a 25-basis-point rate cut at the July FOMC meeting, with better-than-expected inflation data pushing yields lower (the 10-year U.S. Treasury yield fell to 4.23%, down 34 basis points year-to-date).

Companies/Assets Involved

• Gold Bullion: Core asset, bullish. Up 25.86% year-to-date, rising for six consecutive months, supported by central bank and sovereign demand.
• Silver Bullion: Bullish. Broke through the $35 resistance level, up 24.94% year-to-date, with monthly ETF holdings posting the largest increase since January 2021 (+4.15%).
• NYSE Arca Gold Miners (GDM): Bullish. Up 52.49% year-to-date, outperforming spot gold, reflecting the earnings resilience of mining companies.
• U.S. Dollar (DXY): Bearish. Down 10.70% year-to-date, falling to a three-year low, as U.S. policy tolerates a weaker dollar to support exports and debt management.
• S&P 500: Neutral to cautious. Although it has rebounded to new all-time highs, investor positioning remains subdued, with ongoing policy uncertainties (tariffs, trade).
• U.S. Treasuries: Bullish. Up 3.79% year-to-date, marking the strongest first-half start since 2020, with yields declining (10-year down 34 basis points).

Investment Implications

• Increase exposure to gold and related assets: Central bank purchases (especially from EMDE) and the structural weakening of the dollar provide long-term support. Growth in gold ETF holdings (+9.33%) indicates accelerating fund inflows, suggesting an overweight position in gold and gold mining stocks.
• Watch for silver catch-up opportunities: Silver's technical outlook is bullish after breaking above $35, with monthly ETF holdings posting the largest increase since January 2021. Dual drivers from industrial demand (e.g., solar energy) and monetary attributes suggest considering allocation.
• Reduce dollar exposure: The dollar's weakness is a policy choice, not a short-term fluctuation. Investors should reduce dollar-denominated assets in favor of gold, the euro, or renminbi-denominated assets.
• Beware of the false rebound driven by U.S. stock buybacks: The S&P 500's rebound is primarily fueled by corporate buybacks ($1.1 trillion) and volatility control funds, not fundamental improvements. Policy uncertainties (tariffs, interest rates) remain risks, suggesting hedging.

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Theme and Background

This chapter focuses on the significant divergence in gold reserve motivations between Emerging Market and Developing Economies (EMDE) and Advanced Economies (AE), and provides an in-depth analysis of the financial repression policies the U.S. is adopting to address fiscal pressures, along with their impact on the dollar's trajectory. The report argues that the global reserve system is undergoing a structural shift, with the dollar's core position facing erosion.

Core Views

• Structural divergence in gold demand: EMDE central banks view gold as a "sovereign asset" to hedge against geopolitical risks, financial sanctions, and dollar dependence. Their purchases are strategic and long-term, and are price-insensitive. In contrast, AE central banks adopt a more passive stance toward gold, largely treating it as a legacy asset.
• The U.S. enters a "fiscal dominance" era: To manage massive debt and interest costs, U.S. policy priorities have shifted from fighting inflation to financing deficits, even at the expense of the dollar's exchange rate. Financial repression will become the norm, sustaining debt through artificially low real interest rates and channeling domestic savings into Treasury bonds.
• Structural dollar weakness is highly probable: Under fiscal dominance and financial repression, the dollar will face sustained depreciation pressure. Accelerated de-dollarization by EMDE central banks further undermines the dollar's reserve currency status.

Key Arguments and Data

1. Comparison of gold holding motivations between EMDE and AE central banks (2024-2025 changes)

Reason for Holding Gold	EMDE Motivation Change (pp)	AE Motivation Change (pp)
Geopolitical risk	+14%	-21%
As a policy tool	+21%	Not explicitly mentioned
Concern over sanctions	+22%	Not explicitly mentioned
Enhancing domestic trust	+16%	Not explicitly mentioned
No default risk	Not explicitly mentioned	-16%
Liquidity	Not explicitly mentioned	-16%
Historical status	Not explicitly mentioned	+92% (2025, stable)

2. "Gold-Dollar Sentiment Gap" forecast

• By 2027, the gap between the share of EMDE central banks expecting to increase gold holdings and those expecting to reduce dollar holdings is projected to reach +35 percentage points.
• The same gap for Advanced Economies (AE) is expected to be +31 percentage points.
• The data indicates a strategic asset rotation by global central banks from the dollar to gold, driven by structural distrust rather than inflation or diversification.

3. U.S. fiscal and debt data

• Approximately 30% of marketable Treasury securities mature or are repriced each year.
• A 1% rise in the 10-year Treasury yield immediately adds hundreds of billions of dollars in annual interest costs.
• Banks and insurance companies collectively hold over $5 trillion in Treasuries and agency MBS.
• U.S. annual interest payments are about $1 trillion, while Social Security and Medicare costs total over $2.5 trillion, nearly equaling federal tax revenue (approximately $3.5 trillion).
• Defense spending is around $850 billion and rising.

4. Financial repression policy tools

• Relaxing eSLR: Excluding or reducing the weight of Treasuries in bank leverage ratio calculations could free up $5-6 trillion in Treasury absorption capacity for banks.
• Encouraging stablecoins: Promoting stablecoins backed solely by Treasuries effectively monetizes short-term Treasury issuance at zero yield.
• Mandatory allocation: If voluntary purchases are insufficient, pension funds and retirement plans could be forced to increase holdings of long-term Treasuries.

Companies/Assets Involved

• Gold: Core bullish asset. The report argues that EMDE central banks' strategic purchases provide a "central bank gold put" for gold prices, ensuring demand remains sticky even during market pullbacks.
• U.S. Dollar: Clearly bearish. The report believes the dollar will weaken structurally under fiscal dominance and financial repression. The DXY index has already fallen to a three-year low (as previously mentioned).
• U.S. Treasuries: Bullish on price (i.e., bullish on the bond market). The report argues that policy will prioritize protecting the bond market by lowering yields to reduce interest costs.
• China: As a representative EMDE central bank, its large-scale gold purchases are seen by the report as the most important example of gold's "re-monetization" and "re-politicization."

Investment Implications

• Increase gold exposure: Especially gold mining stocks (e.g., the NYSE Arca Gold Miners Index, up 52.49% year-to-date as previously mentioned), as EMDE central banks' strategic buying provides solid support for gold prices, and this trend is long-term.
• Short or reduce dollar exposure: Based on the logic of fiscal dominance and financial repression, long-term dollar weakness is highly probable. Investors should consider allocating assets to non-dollar assets or gold.
• Watch for the "financial repression premium" in U.S. Treasuries: While interest rates may be artificially suppressed, bond market stability remains a policy priority. Investors should be wary of the erosion of purchasing power from negative real rates, but in the short term, policy support may keep Treasury prices firm.
• Beware of fragmentation in the global reserve system: The divergence in gold motivations between EMDE and AE signals a slow unraveling of the dollar-centric global reserve system. Investors should monitor the long-term impact of this structural change on asset pricing and geopolitical risks.

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Theme and Background

This chapter focuses on the causal relationship between a weakening US dollar and fiscal dominance, and provides an in-depth analysis of structural changes in the silver market. The report argues that the United States, in an effort to reduce the cost of debt financing, is actively accepting a weaker dollar through financial repression, which will serve as a new catalyst for precious metal prices. Meanwhile, silver is transitioning from years of inventory depletion into a price discovery phase that is more sensitive to incremental buying.

Core Thesis

The author’s core judgment is that the US has shifted from a "strong dollar" policy to a policy mix of "protecting the bond market and accepting a weaker dollar." This shift is achieved through financial repression (suppressing real interest rates and forcing domestic institutions to absorb Treasury bonds), with dollar depreciation serving as the price paid for financing the ever-expanding national debt. For silver, the author believes that after significant inventory depletion, silver prices have become markedly more elastic to buying pressure, with potential for a "squeeze."

The counterintuitive insight is that the weakening dollar is not a market shock but a deliberate policy choice by the US; the driving force behind silver’s rally has shifted from "requiring massive capital inflows" to "small buying volumes triggering significant price swings."

Key Arguments and Data

1. Policy Logic Behind Dollar Weakness:

• Suppressed US Treasury yields result in "real returns" on US assets that are lower than those on overseas assets, undermining the basis for a strong dollar.
• The expansion of T-bill-backed stablecoins creates a large volume of "dollar-like" instruments, diluting the scarcity premium of the dollar without increasing direct demand for it.
• With reduced foreign investor participation, the dollar loses its natural buying support during risk-off periods, making the exchange rate a release valve for market pressure.

2. "Signposts" Confirming the Policy Shift:

• Permanent eSLR (supplementary leverage ratio) exemption: Locks banks in as the "buyer of last resort" for Treasuries.
• Expansion of T-bill-backed stablecoins to trillions of dollars: Effectively constitutes "stealth quantitative easing" outside the Fed’s balance sheet (pending the Genius Act).
• Legislative mandates requiring pensions or insurance companies to increase holdings of long-term Treasuries: Explicitly adopts financial repression as a policy tool to lower public financing costs.

3. Silver Inventory and Price Elasticity Changes:

• Silver closed at $36.11/oz in June 2025, up 9.48% month-on-month, marking the highest monthly close in 13 years, with a year-to-date gain of 24.94%.
• Silver broke through the $35 resistance level, with a technical pattern (cup and handle) targeting $40.
• Approximately 800 million ounces of silver inventory have been consumed cumulatively in the 2020s (Silver Institute data).
• Price elasticity comparison (via regression analysis of ETF + CFTC positions against price):

Time Period	Buying Volume Required to Push Silver Price Up by 1% (Million Ounces)	Regression Curve Shape
2021-2023	10.6	Convex upward (more buying needed to push price higher)
2024 to Present	7.2	Concave and flat (small buying volumes can push price higher)

Companies/Assets Involved

• Silver Bullion: Bullish. The report believes silver is in a structurally tight supply phase, with inventory depletion making prices more sensitive to buying. After breaking $35, the target is $40.
• Gold and Other Precious Metals/Hard Assets: Bullish. The report explicitly states that financial repression, a weaker dollar, negative real interest rates, and a steepening yield curve will serve as catalysts for the next leg higher in these assets.
• U.S. Treasuries: The report implicitly suggests a bearish view on the real returns of dollar-denominated assets, but notes that the bond market itself is protected by policy (through financial repression measures).
• Stablecoins (e.g., T-bill-backed stablecoins): Viewed as a tool for "stealth quantitative easing," whose expansion will dilute dollar scarcity, indirectly benefiting alternative currencies like gold.

Investment Implications

• Go Long Silver: Current inventory depletion has altered silver’s price elasticity, allowing small incremental capital to trigger large rallies. After breaking $35, the technical target is $40, with squeeze risk present; active allocation is recommended.
• Go Long Gold: The combination of a weaker dollar, financial repression, and negative real interest rates is a classic catalyst for a gold bull market. As the market begins to price in these policy outcomes, gold will enter a new rally.
• Short the Dollar or Go Long Non-US Currencies/Hard Assets: The US is actively choosing a weaker dollar as the price for debt financing. The dollar index has fallen to a three-year low, and this trend may persist. Investors should reduce exposure to dollar cash and dollar-denominated bonds, shifting toward hard assets such as precious metals and commodities.