Today's Gold Story

The long and short of gold right now... Is $3,500 gold ahead?... Chicken or egg: liquidity... Two kinds of gold investments... Rewinding the last three years... Investing is like space travel...

Gold has dramatically outperformed stocks this century...

It's not even close.

According to data compiled by Bloomberg, the S&P 500 Index has risen roughly 420% in the 21st century. Meanwhile, gold has soared roughly 1,370%. That's more than triple the S&P 500.

That's the long-term story.

More recently, gold started to rally in March 2024, before falling along with everything else during President Donald Trump's tariff tantrum this past April.

But this summer, gold broke out above $3,400 per ounce and went absolutely ballistic until a recent correction. Even with the sell-off, gold has risen more than 50% since the first of the year.

So what are gold's long- and short-term rises telling us?

As investor Rick Rule pointed out to attendees at the Stansberry Research conference in Las Vegas...

Gold is doing its job. It has preserved wealth over the long term, successfully hedging the damage done to the purchasing power of fiat currencies.

Gold has risen at an average annual rate of roughly 11% per year since the turn of the century. The S&P 500 index has risen less than 7% per year over the same period.

Or perhaps gold is suggesting that there's more risk in stocks than most folks seem to believe – given investors relentlessly "buying the dips" and believing that central banks will always bail out the market if it falters.

And anyone who wondered why gold didn't seem to be doing its job during the rise of inflation in 2021 and 2022 has nothing to wonder about anymore.

Gold has caught up with every reasonable expectation anybody might have had. And gold will continue to combat inflation over the long term, although not in anything like a straight line.

Then there's the Trump factor...

Trump's Federal Reserve Board appointee Stephen Miran's November 2024 paper, "A User's Guide to Restructuring the Global Trading System," provides, among other recommendations, ways to weaken the U.S. dollar to make U.S. goods more attractive to other countries.

Nobody talks much anymore about this aspect of Trump's plans, but every time you see headlines about tariffs (like Trump's recent deal with South Korea or his meeting with Chinese President Xi Jinping), just remember that a weaker dollar is part of the playbook.

As long as Trump keeps pursuing his "America First" agenda to strengthen U.S. manufacturing, which includes bringing more foreign buyers to American markets, you should expect a weaker dollar and stronger gold.

Gold loves macro uncertainty. And reordering the global economic order certainly qualifies as uncertainty.

The only caveat is that when an asset price, in this case gold, goes ballistic and the news media finally starts talking about "the debasement trade"... you should expect a correction – perhaps an even steeper one than the more than 7% drop we've seen in gold since October 20. Ballistic price charts don't resolve by going sideways. They generally require a sharp correction.

Just glancing at a chart of gold, it seems like a move back to about $3,500 or so would put it back on the bullish trend that first started in late 2023.

I (Dan Ferris) am not presenting this as technical analysis. It's just a way to outline a reasonable expectation for the price of gold going forward, assuming what goes up sharply comes down sharply. The bottom line is that you shouldn't be surprised if there's more downside... even if gold remains in an uptrend.

But maybe I'm overthinking gold's recent rapid rise...

The Financial Times' Ruchir Sharma recently argued that gold isn't rising because of political uncertainty or inflation, but because of massive liquidity. He says:

I think there is another explanation for the gold-stock duet: massive liquidity. Governments and central banks rolled out trillions of dollars in stimulus during and after the pandemic. Much of that is still sloshing around the system and continues to drive the momentum trade across many assets, including stocks and gold.

It's a fairly conventional notion that liquidity is created by central banks, which causes asset prices to rise.

However, the best explanation of liquidity I've ever heard is that it goes up when the market rises and down when the market falls. So while folks like Sharma suggest liquidity causes prices to rise, it makes more sense that the market rising creates greater liquidity.

It's a "chicken or the egg" type of problem.

But the ability and proclivity of folks to borrow determines a lot of what happens in developed economies. Debt can fuel a boom, and debts blowing up can detonate a serious bust.

As asset prices go up, folks have more and more collateral to borrow against. So they borrow and spend... and whoever gets that money pays their bills and invests some of it. It's a virtuous circle – until something breaks. Then it can go into reverse, with asset prices falling as investors sell assets to avoid bankruptcy.

So it just makes sense to say that liquidity moves with asset prices. If you think about liquidity this way, Sharma has a point when he warns that gold prices could fall along with the market:

Investors who bought the yellow metal as a hedge are going to find it was anything but, as gold falls along with AI stocks.

People sell whatever they can when the debt-fueled excrement hits the fan – that includes gold. Gold fell about 29% from March to November 2008 as the financial crisis sent everyone scrambling to raise cash and lock in liquidity before the market fell further, which it didn't stop doing until March 2009.

Either way, prepare for ups and downs...

There are two distinct types of gold for investments: physical gold and its proxies (including publicly-traded trusts), and gold stocks (royalty and streaming, gold miners, and gold exploration).

It's hard to imagine why I would ever sell physical gold again. I did it once years ago and have regretted it ever since.

Gold stocks are different. Congrats if you bought speculative, small-cap mining and exploration stocks within the past two or three years. You're now holding gains of 300% or more (which in some cases happened in less than a year).

But don't forget that finding success in any natural-resource stock depends on being a good contrarian. You succeed by buying and selling them well. So today could be a good time to take some profits.

There's no telling how deep a correction will go, and you want to preserve profits after a sharp spike. Even if the correction in gold and gold stocks is over, nobody ever lost money by taking some profits in a big winner. You lose money by overstaying your welcome in speculative stocks.

Now, as for the rest of the stock market...

I've been warning about the hyper-expensive and frothy markets over the past few years. I wasn't wrong to worry... We saw various bubbles burst in early 2021, and the big indexes peaked later that year into the first trading days of 2022.

But I was wrong to make worrying my main point. I figured nobody else was warning you about bear markets and sideways markets, so I'd be the lone voice doing so.

Still, things have changed, and I need to change with them. As I've pointed out a few times now, the world changed on November 30, 2022 – the day OpenAI released the first publicly available version of ChatGPT.

It fired the starting gun on the AI boom and effectively ended the 2022 bear market. If I could, I'd go back to that moment, recognize it for what it was, and turn hyper-bullish. It took me way too long to realize what was happening and to see the parallels between the dot-com boom and the AI boom.

I believe we're in one of the biggest wealth-creation events in human history right now, as we figure out all the ways we can use AI to improve our lives. Don't let worries about an eventual bust make you miss out.

It can be hard to change your mind about markets...

But it's necessary if you're actively managing any portion of your portfolio.

Active portfolio management is like the Apollo moon missions. Some folks like to say the Apollo spacecraft were frequently off course on their way to the moon. But they got there by constantly correcting their courses.

Most human endeavors require several steps, many of which seem like detours, to get where you're going.

For investors, trailing stop losses might feel like a detour. But if you don't prevent catastrophic losses, you'll never compound your capital over the long term.

It's also okay to course-correct your expectations for the overall stock market.

History shows that life-changing technology can cause long bull markets that go higher and last longer than what seems reasonable.

So it's just as rational to believe that a huge AI-fueled market boom is underway as it is to expect a bear market to one day wash away the junk in the market.

It's all normal... and all part of the relentless growth that humankind has produced over the past couple of centuries. So use the moment to your advantage.

New 52-week highs (as of 10/30/25): Altius Minerals (ALS.TO), ASML (ASML), BWX Technologies (BWXT), Cencora (COR), Cisco Systems (CSCO), Enel (ENLAY), EnerSys (ENS), Alphabet (GOOGL), Kellanova (K), Mueller Industries (MLI), Roivant Sciences (ROIV), Valaris (VAL), and Vale (VALE).

In today's mailbag, more conversation about AI, robotics, data centers, and electricity prices... Do you have a comment or question? Keep your notes coming... As always, e-mail us at feedback@stansberryresearch.com.

"I read with interest subscriber Tim L.'s comments [in Monday's mailbag] about pushing state utility regulators 'to mandate allocation of capital improvements and some other costs disproportionately to the major power users and minimize the effect on residential and small business customers.'

"My local state senator in South Carolina, Tom Davis, has advanced a plan to engage the private sector to fund the completion of a failed nuclear reactor project that will power new planned data centers in SC while lessening the burden on residential and commercial ratepayers. Here's what he said recently...

This is what I've been waiting over eight years for: to not only convert $9 billion of what many in July 2017 called a completely unrecoverable waste of money into a productive asset, but to do so in a way that assigns the cost of new power generation to the private hyperscalers driving the need for that new generation...

Once this sale is finalized, billions of dollars in sunk costs will come off the ratepayers' base, which in turn will decrease their monthly bills. And once the two reactors are completed, with private capital and at private risk, an additional 2,200 megawatts of carbon-free energy will come online. This new generation model can be replicated in future years to meet future needs. A source of shame will become a source of pride.

"The site's owner, utility company Santee Cooper, has received an estimated 14 proposals related to the abandoned site so far!" – Subscriber David G.

"I disagree with one comment from E.G. at the end of your email [on Wednesday]. Specifically, 'None of those technologies were intended to have a superior intellect (AI), or be able to replicate human movement and function (robots), or to marry those capabilities with the express intent to replace a very large percentage of the human workforce with machines that can think and act...'

"Ah, contraire. MANY technologies were intended to replicate (and augment) human movement and function. Look no farther than a backhoe, which scoops a much larger amount of dirt with the same or greater frequency as the human with his/her shovel. Or, consider the thousands of robots in manufacturing (especially vehicle manufacturing), which replicate assembly, welding and other functions with better precision and less downtime. The fact of the matter is that technology has never reduced the need for human resources in the long run. Rather, it has forced the reallocation of them into areas previously unprofitable, improving our quality of life.

"Unfortunately, the reallocation process does not necessarily reallocate the resources of each affected individual. In other words, the person losing their job is not necessarily the same person filling the newly created job. The one serious concern I have is that technological advances are now occurring faster than society can adapt. It takes time, often years, for new products to be developed and to grow into job-absorbing companies with a significant impact on overall employment. Consider the online sales process and how long it took to create online stores with the associated order and delivery process. That took 2 to 5 years for most companies.

"This COULD cause a recession, which would also slow technological advancement." – Subscriber Mike M.

Good investing,

Dan Ferris
Medford, Oregon
October 31, 2025