Sprott is a Toronto-headquartered asset manager specializing in precious metals and critical materials (NYSE/TSX: SII), tracing its roots to Sprott Securities founded by Eric Sprott in 1981 and now led by CEO Whitney George. It runs physical gold, silver and uranium trusts, ETFs, active strategies and resource lending, with about $65bn in AUM. The Insights column carries monthly commentaries and white papers on uranium, gold, silver, copper and critical materials by Paul Wong, Jacob White and John Hathaway (ex-Tocqueville gold manager) — note the house's structurally bullish commodity stance, as it sells the corresponding trusts and ETFs.
This report says gold is rising because faith in the US dollar is fading. America's huge budget deficit and foreign allies quietly selling Treasuries are shaking the dollar's role. For ordinary investors, this means don't put all your money in dollar assets—gold and silver could be safer stores of value. Silver also has upside due to supply shortages. In short, as dollar confidence erodes, hard assets like gold look more attractive.
Sprott's May research report indicates that gold has risen for the fifth consecutive month, with a year-to-date gain of 25.33%, closing at $3,289.25 per ounce. The core thesis is that long-term factors such as inflation, deglobalization, and rising fiscal deficits support a structural bull market fo
This chapter focuses on gold's market performance in May 2025 and the drivers of its long-term structural bull market. The report notes that despite short-term impacts from tariff news and bond market volatility, gold rose for the fifth consecutive month, with a year-to-date gain of 25.33%, closing at $3,289.25 per ounce. The core backdrop involves the weakening of the US dollar's reserve currency status, the expansion of the US fiscal deficit, and the restructuring of the global trade system, all of which are accelerating gold's long-term bull run.
The author's central investment argument is that gold's structural bull market remains in its early stages, with long-term drivers (deglobalization, de-dollarization, unsustainable fiscal deficits, and inflation) accelerating significantly in 2025. Counterintuitive judgments include:
1. Gold Performance: Gold edged up 0.02% in May to $3,289.25, with a year-to-date gain of 25.33%, marking one of the best annual starts since 1974. It is in a short-term consolidation range, but the long-term trend remains upward (Figure 1 shows brief consolidations after each sharp rally from 2022 to 2025).
2. US Dollar and Bond Market:
3. Fiscal Deficit Shock: The US House passed a reconciliation tax bill expected to increase the national debt by $2.4 trillion over the next decade (per AP reports), with market estimates reaching $4 trillion. The fiscal deficit is approaching 7% of GDP.
4. Abnormal Market Linkages: In early April, the US dollar, Treasuries, and stocks were sold off simultaneously, with a multi-standard-deviation synchronized decline exposing the fragility of the dollar's reserve currency status. Trump subsequently suspended the most severe tariffs for 90 days, acknowledging that excessive tariffs would accelerate capital outflows.
5. Silver: Broke above the $35 resistance level, remaining in a structural deficit since 2021, with the trend of demand exceeding supply likely to continue.
Key Comparative Data (as of May 31, 2025):
| Indicator | 5/31/2025 | 4/30/2025 | Monthly Change | Monthly % | Year-to-Date % |
|---|---|---|---|---|---|
| Gold Spot | $3,289.25 | $3,288.71 | $0.54 | 0.02% | 25.33% |
| Silver Spot | $32.98 | $32.62 | $0.37 | 1.12% | 14.12% |
| NYSE Arca Gold Miners Index | 1,416.16 | 1,377.21 | 38.95 | 2.83% | 48.04% |
| US Dollar Index | 99.33 | 99.47 | -0.14 | -0.14% | -8.44% |
| S&P 500 Index | 5,911.69 | 5,569.06 | 342.63 | 6.15% | 0.51% |
| US 10-Year Treasury Yield | 4.40% | 4.16% | 0.24 | 24 BPS | -17 BPS |
This chapter delves into the "Triffin dilemma" inherent in the dollar's role as a reserve currency—namely, that the United States must provide global liquidity through persistent trade deficits, which in turn undermines confidence in the dollar itself. The report argues that this contradiction is becoming increasingly acute and is systematically eroding global investor confidence in the dollar and U.S. Treasuries, thereby driving capital flows toward non-sovereign assets such as gold.
The author's core investment argument is: The structural weakening of the dollar and fiscal uncertainty are giving rise to a "Sell America" trade theme, which will be bullish for gold over the long term.
Counter-intuitive/contrarian judgments include:
1. Manifestation of the Triffin Dilemma: The report points out that the U.S. cannot simultaneously maintain global dollar liquidity and narrow its trade deficit unless the dollar depreciates. In the current environment, if the dollar's depreciation is insufficient to attract capital inflows into the U.S. export sector, higher yields will become the "default valve" for releasing pressure.
2. Fiscal Deficits and Debt Pressure:
3. Return of the "Bond Vigilantes":
4. The "Sell America" Trade:
5. Technical Picture of the Dollar Index (DXY):
This chapter does not mention specific companies; it primarily analyzes macro assets:
| Asset/Indicator | Role and Key Data | Bullish/Bearish |
|---|---|---|
| U.S. Dollar (DXY) | Reserve currency status is eroding, facing structural depreciation pressure. DXY is testing a long-term uptrend line and may break down. | Bearish |
| U.S. Treasuries (Long-term) | 30-year yield has broken above 5%, facing selling pressure from "bond vigilantes." Foreign investors are reducing holdings; yields may remain elevated even during an economic slowdown. | Bearish |
| Gold | As a non-sovereign store of value, it directly benefits from declining dollar credit, fiscal uncertainty, and geopolitical risks. | Bullish |
| Commodities | Benefit from a structurally weak dollar and investor demand for real assets (hedging inflation and geopolitical risks). | Bullish |
| U.S. Stocks (especially growth stocks) | Face a "double squeeze": high yields compress valuations (especially for tech stocks), while a weak dollar increases capital costs. | Bearish |
1. Strategically Reduce Dollar-Denominated Assets: The report argues that the dollar's 80-year status as a reserve currency is facing a fundamental challenge. Investors should reduce exposure to dollar cash and U.S. Treasuries, shifting toward non-dollar-denominated assets.
2. Increase Allocation to Gold and Real Assets: Gold is the core hedging tool against the Triffin dilemma and the "Sell America" trade. Meanwhile, commodities with strong supply-demand fundamentals will also benefit from a weak dollar and an inflationary environment.
3. Beware of Bond Market Turmoil: Fiscal uncertainty in the U.S. and other highly indebted developed countries will keep bond yields elevated for an extended period, potentially even rising during an economic slowdown. This will exert persistent pressure on equity valuations (especially high-valuation growth stocks) and may trigger "disorderly adjustment" risks similar to the UK market in 2022.
4. Monitor the Return of "Bond Vigilantes": Investors need to closely watch the reaction of government bond markets globally. Any signal of fiscal indiscipline could trigger a bond sell-off, leading to a sharp rise in financing costs and subsequently suppressing economic growth.
This chapter focuses on the structural deficit in the silver market and potential breakout opportunities. The report argues that against the backdrop of rising global long-term bond yields and heightened fiscal uncertainty, silver, as an asset with dual attributes of a reserve asset and an industrial metal, may become the first non-gold metal to break out to the upside following gold. Silver is currently testing the key resistance level of $35/oz, and a breakout could open the target range of $40-42/oz.
The author's core investment thesis is that silver is on the verge of a breakout driven by a structural deficit, and its price trajectory will transcend short-term macro fluctuations, ushering in a rally reminiscent of the return of commodity reserve status seen in the 1970s. Counter-intuitive judgments include:
1. Technical Breakout Signal: Silver prices are recovering from the sell-off in early April and are poised to test the $35 resistance level. A breakout would target $40-42/oz (Figure 4 shows the RSI indicator in a neutral-to-strong zone).
2. Persistent Structural Deficit: The Silver Institute's 2025 survey indicates a projected deficit for the fifth consecutive year in 2025, with a cumulative shortfall of approximately 800 million ounces (800 moz) from 2021 to 2025. Specific data is as follows:
| Indicator | 2025 Forecast | Comparison/Note |
|---|---|---|
| Mine Supply Growth | +1.9% to 835 moz | Supply has been largely flat over the past decade |
| Recycling Supply | Virtually unchanged | — |
| Photovoltaic Demand | Declining (lower silver usage) | Despite increased battery production |
| Overall Market Deficit | -118 moz | Fifth consecutive year of significant deficit |
| 2021-25 Cumulative Deficit | ~800 moz | Persistent inventory depletion |
3. Rapid Inventory Depletion: Silver inventories in London Bullion Market Association (LBMA) vaults have declined sharply since 2021 and are now at their lowest level since the data series began. COMEX registered inventories have risen to an all-time high of 495 moz due to arbitrage, but the concentration of supply increases the risk of localized squeezes.
4. Investment Demand Potential: Exchange-traded product (ETP) holdings stand at approximately 740 moz, down 260 moz from their 2021 peak. A recovery to historical highs would absorb nearly one-third of current LBMA inventories. Futures positioning is far below speculative extremes seen in past bull markets, leaving room for trend-following capital inflows.
5. Extreme Gold-to-Silver Ratio: The gold-to-silver ratio has widened to approximately 100, placing it in the top 2% of readings over the past 20 years. Silver's 20-year historical beta to gold is 1.46, and mean reversion would lead to significant price changes.