In the previous two reports, we explored why U.S. Treasury yields continue to rise and why the national debt of the United States has exceeded $39 trillion for the first time since World War II. If after reading those two reports you started to think "so where should I put my money?"—gold is one of the answers that many global investors have already shown through their actions. Here are some of the reasons, as well as key points you need to understand before deciding whether to include gold in your investment portfolio.
Key data: Gold reached a historical high of $5,589 per ounce on January 28, 2026 · Current price approximately $4,460 to $4,523 per ounce · Year-on-year increase of about 35% · Increased by more than 230% since 2020 · GLD assets under management exceed $141 billion · Central banks purchased a total of 863 tons of gold in 2025 · The People's Bank of China has increased its gold holdings for 18 consecutive months
Section 1 — Background: Why This Report Follows the Previous Two
In the yield rise report, we showed how the yield of U.S. 30-year Treasury bonds rose to 5.2%—the highest level since 2007—and analyzed how the rise in yields damages stock valuations through four channels. In the U.S. debt crisis report, we demonstrated how the national debt of the United States exceeded $39 trillion, interest payments surpassed $1 trillion for the first time, and how the Congressional Budget Office qualified the current fiscal trajectory as "unsustainable."
The previous two reports told you where the problems lie. This report discusses what global investors are buying to address these issues.
The logical connection between the three reports is very clear. When a government continues to run a large deficit, issues bonds on a massive scale, and is downgraded by the three major credit rating agencies, two things often happen: First, bond investors demand higher compensation, and yields rise; Second, investors start looking for assets that the government cannot increase, cannot dilute through inflation, and cannot confiscate through taxation. Gold has played this role for thousands of years. And in 2025 and 2026, the significance of this role surpassed any period in modern financial history.
The price of gold at the beginning of 2025 was about $2,624 per ounce. By January 28, 2026, it reached a historical high of $5,589.38. In just twelve months, gold not only hit a new high but also completely redefined the meaning of "high-priced gold" in modern markets. From May 2025 to early June 2026, the price of gold rose from about $3,335 to approximately $4,460 to $4,523, an increase of about 35%. Since 2020, gold has increased by more than 230%.
This is no coincidence, but a direct response from the market to the forces described in the previous two reports.
Educational note: The "spot price" of gold referred to by investors is the current market price for the immediate delivery of physical gold, quoted in U.S. dollars per troy ounce. One troy ounce equals 31.1 grams. When purchasing gold ETFs, their prices are closely linked to the gold spot price, with only a small annual management fee deducted. When the media reports gold reaching a historical high, it is indeed referring to the spot price.
Section 2 — The True Drivers of Gold Prices
Gold is fundamentally different from almost all other assets. It does not pay dividends, does not generate profits, and does not create cash flow. Holding Nvidia stock provides profit returns; holding bonds provides interest income; while gold just sits there. So, why does it go up?
The answer lies in the fact that gold is not, in the traditional sense, an investment product but rather a form of financial insurance— a means of preserving purchasing power when other assets come under pressure. When people lose confidence in paper money, government credit, and the financial system, the price of gold rises. Understanding this is key to understanding the current price of gold.
Inverse relationship with real interest rates. There exists one of the clearest long-term relationships in financial markets between gold and real interest rates: when real interest rates (nominal interest rates minus inflation rates) are low or negative, gold tends to rise; when real interest rates are high and positive, gold tends to fall. When risk-free bonds offer a 5% return and inflation is at 2%, investors can earn a 3% real return annually, making gold comparatively less attractive. However, when inflation reaches 5% and bonds only provide a 4% return, the real return on bonds becomes negative 1%. In this environment, the disadvantage of gold’s zero yield no longer holds—holding cash and bonds means a decrease in purchasing power each year, while gold at least can retain value. Currently, persistent stubborn inflation, massive government debt, and the unclear direction of the new Federal Reserve Chair's interest rate policy provide structural support for gold.
Inverse relationship with the U.S. dollar. Gold is priced in U.S. dollars, so a weaker dollar directly boosts the dollar price of gold. When investors' confidence in the dollar as a reliable store of value is shaken—as triggered by the U.S. debt trajectory and Moody’s downgrade—gold becomes more attractive. The BRICS nations currently hold 17.4% of the world’s gold reserves, up from 11.2% in 2019, which is the result of a deliberate effort to reduce exposure to the dollar.
Safe-haven demand amid geopolitical tensions. For thousands of years, gold has been a safe-haven asset during times of war, crisis, and political turmoil. The current environment—conflicts between the U.S. and Iran leading to the closure of the Strait of Hormuz, oil prices breaking above $100 per barrel, the ongoing war in Ukraine, U.S.-China trade frictions continuing through tariffs, and the accelerated fragmentation of the global geopolitical landscape—provides continuous support for gold demand. When the world is filled with uncertainty, funds flow towards assets with no counterparty risk. Gold has no counterparty; it is not a promise from anyone.
Central bank gold purchases as a structural demand driver. This is the most significant new change in the gold market and is information that most retail investors have not yet fully digested. Between 2022 and 2024, central banks around the world purchased more than 1,000 tons of gold annually—more than double the historical annual average of 400 to 500 tons. In 2025, central bank gold purchases amounted to 863 tons, still representing a very high level of official sector demand. JPMorgan predicts that total demand from central banks and investors will average around 585 tons per quarter in 2026.
The driving force behind this structural shift is a single event: in 2022, Western countries froze approximately $300 billion of Russia's foreign exchange reserves as a sanction measure. This action sent a clear signal to every central bank in the world: paper assets stored abroad can be frozen overnight, while gold stored in domestic vaults cannot. This lesson has not been forgotten. In 2025, more than 40 central banks achieved net increases in their gold holdings. Recent data shows that the People's Bank of China extended its consecutive gold purchasing record to 18 months in April 2026, adding 8 tons—the largest monthly increase since December 2024—bringing China's official gold reserves to 2,322 tons, accounting for 9% of total reserves.
Educational note: "Real interest rates" refer to the interest rates you actually receive after inflation is deducted. If the yield on a 10-year U.S. Treasury bond is 4.6% and inflation is 3.5%, the real interest rate is about 1.1%. If inflation rises to 5%, the same yield of 4.6% corresponds to a real interest rate of negative 0.4%. Gold historically performs best when real interest rates are negative or extremely low because in such an environment, holding cash or bonds means a yearly decrease in purchasing power, while gold at least can maintain value.
Section 3 — The Five Forces Currently Driving Gold
In 2026, five specific forces are converging synchronously to support gold at historically high levels.
Force 1: The direct connection of the U.S. fiscal crisis to gold. Every point recorded in our debt crisis report directly reflects the bullish logic surrounding gold. A government with a debt of $39 trillion, increasing by about $7.5 billion daily, an annual deficit of about $2 trillion, and interest payments reaching $1 trillion annually faces significant long-term depreciation risks for its currency. When the fiscal trajectory is qualified by the Congressional Budget Office itself as unsustainable, and when all three credit rating agencies have downgraded the U.S. rating, rational investors will allocate part of their wealth to assets beyond government control. Gold is that asset.
Force 2: De-dollarization and the erosion of trust in dollar assets. The freezing of Russia's central bank reserves in 2022 marked a paradigm shift in global reserve management. If dollar assets can be frozen due to geopolitical reasons, they are no longer purely financial assets but have become political tools. Central banks in global southern countries, Middle Eastern sovereign wealth funds, and BRICS nations are all increasing their gold holdings in response to this new reality. China has increased its gold reserves by more than 350 tons over the past few years as part of a clear diversification strategy. This structural shift has created a new group of gold buyers who are consistent and insensitive to price changes, a phenomenon that simply did not exist a decade ago.
Force 3: U.S.-Iran conflict and energy-driven inflation. On February 28, 2026, the U.S. and Israel launched military strikes against Iran. The subsequent closure of the Strait of Hormuz pushed oil prices above $100 per barrel. The March 2026 CPI data then showed a year-on-year inflation of 3.8%, the highest level since May 2024. Military actions, disruptions in energy supply, inflation—this series of events is a typical scenario in which gold performs best in history. Energy-driven inflation erodes the real value of fixed-income assets and cash while increasing the appeal of limited supply asset classes.
Force 4: Investment demand at an all-time high. In 2025, global demand for gold through ETFs, bars, and coins soared by 84%, reaching 2,175 tons, a historical high. The World Gold Council reported that net inflows into ETFs continued into 2026, and investment demand now far exceeds jewelry and industrial demand. When institutional and retail investors both increase their allocation to gold, the expanded demand base supports high prices in a variety of market environments.
Force 5: Uncertainty brought by the new Federal Reserve Chair. Kevin Walsh took over as Federal Reserve Chair in May 2026, inheriting the most complex inflationary landscape in years. The market currently prices a 48% probability of a rate hike before December 2026, whereas just a week ago the probability was only 14%. This environment keeps inflation concerns high and thus maintains robust gold demand.
Section 4 — Price History: Understanding the Context of Current Levels
Gold stayed below $1,000 per ounce for most of the 2000s. The global financial crisis of 2008-2009 was the first time it broke above $1,000, as investors flocked to safe-haven assets. The near-zero interest rate period and quantitative easing then pushed it up to a historical high of $1,917 in 2011, before significantly declining after real interest rates rose from 2012 to 2015.
The next significant breakthrough occurred during the COVID-19 pandemic in 2020, when gold first broke above $2,074 per ounce, driven by zero interest rates, unprecedented money printing, and economic uncertainty. The structural shift in central bank behavior triggered by the freezing of Russian reserves in 2022 began to establish a new demand floor for gold.
In 2025, gold started at about $2,624, broke through $3,500 in the spring, and first surpassed $4,000 in October. The last week of January 2026 saw it surpass $5,000, before reaching its historical high of $5,589.38 amid escalating U.S.-Iran tensions on January 28. Since then, gold has undergone a correction of about 16% to 20%, and as of early June 2026, the price has been trading in the range of about $4,460 to $4,523.
Institutions remain overall bullish. JPMorgan predicts that gold will move towards $5,000 per ounce in the fourth quarter of 2026, with long-term potential to challenge $6,000. Goldman Sachs has set a target price of $5,400 by the end of 2026. UBS Private Wealth reaffirms its target price at $6,000. A Reuters survey of 30 analysts produced a median forecast of $4,746—highly close to current gold prices—representing the consensus for a baseline scenario, while more optimistic institutional targets reflect assumptions about prolonged energy price suppression and persistent inflation.
Educational note: Even in a long-term bull market, gold will experience corrections—that is, temporary price declines. The current retracement of about 16% to 20% from the January peak is a normal phenomenon in commodity markets and does not necessarily imply the end of a trend. During the 2001 to 2011 gold bull market, there were multiple occurrences of 15% to 20% corrections, yet the price still continued to rise afterward. The true factors determining long-term direction are whether the underlying demand drivers—central bank gold purchases, fiscal concerns, real interest rates, and geopolitical risks—remain valid.
Section 5 — How U.S. Stock Investors Can Gain Exposure to Gold
For investors investing through the U.S. market, there are three main ways to gain exposure to gold, each with differing cost, convenience, safety, and risk characteristics.
Physical Gold—Vaults and Physical Dealers
The most direct way to hold gold is by purchasing physical gold bars or coins from reputable dealers or gold custody service institutions. This gives you real ownership with no counterparty risk—gold belongs to you, and no institution can freeze or devalue it through policy decisions.
In the U.S., physical gold can be purchased from well-known dealers like APMEX, JM Bullion, and SD Bullion, typically at a price over the spot price plus a small premium. For investors who do not wish to store gold at home, professional vault services such as those provided by Brink's, Loomis, and the Royal Canadian Mint's storage program offer secure storage options—your gold is stored separately and insured, without being mixed with others' holdings, and verification throughout the process is possible.
The downside of physical gold lies in liquidity and cost. Storage and insurance require ongoing expenditure, and when selling, you need to find a buyer or return to the dealer, who usually buys at a price slightly below the spot price. For investors who view gold as a long-term store of value and do not require frequent trading, these trade-offs are acceptable. For investors needing to quickly and cost-effectively exit positions, ETFs are more practical.
Gold ETFs—The Most Convenient Entry Option for Most Investors
Gold ETFs trade on exchanges like stocks, with prices closely linked to gold's spot price. Transactions can be executed in seconds through any standard brokerage account, incurring no storage or insurance costs aside from the annual management fee. Here are the main options for U.S. investors:
SPDR Gold Trust (GLD). The largest gold ETF in the world, with over $141.7 billion in assets under management as of June 2026. Its only assets are physical gold stored in the vaults of JPMorgan and HSBC. The large scale provides excellent liquidity, deep options chains, and very narrow bid-ask spreads, making it the preferred choice for frequent traders and large institutional positions. Management fee: 0.40%.
iShares Gold Trust (IAU). Structurally nearly identical to GLD, but with a lower management fee of only 0.25%, and assets under management exceeding $80 billion. For long-term investors, the lower annual fee significantly compounds over time. IAU's gold is stored in JPMorgan's vaults in the U.S. and London, complying with LBMA standards. For most retail investors who do not require the extraordinarily high liquidity of GLD to handle large transactions, IAU is a more cost-effective choice.
iShares Gold Mini Trust (IAUM). The lowest fee option for physically backed gold ETFs, with a management fee of only 0.09%, designed specifically for small investments and systematic purchases, suitable for investors who wish to gradually build positions through long-term accumulation.
Aberdeen Standard Physical Gold ETF (SGOL). Gold is stored in Swiss vaults, providing an option for geographic diversification away from U.S. and U.K. storage places used by GLD and IAU. Management fee: 0.17%, making it ideal for investors particularly wishing to store gold outside the U.S. financial system.
Educational note: The "management fee" of an ETF is the annual fee charged as a percentage of the investment amount. For a gold ETF with a management fee of 0.25%, every $10,000 invested incurs a payment of $25 annually. This fee is automatically deducted from the fund and reflected in the ETF price. In calculating a $50,000 investment, the difference between management fees of 0.40% and 0.09% accumulates to about $1,550 over ten years. For long-term holders, the impact of management fees is more significant than it may appear.
Gold Mining ETFs
For investors looking for leveraged exposure to the price of gold, gold mining stocks and ETFs provide a distinctly different risk-reward profile compared to physical gold. When the price of gold rises, mining companies' profits often increase faster than gold prices themselves because their operating costs are relatively fixed—a gold mining company with a full cost of $1,500 per ounce sees its profit margin more than double when gold rises from $2,500 to $5,000, even if the gold price itself "only" doubles.
VanEck Gold Miners ETF (GDX) is the largest and most liquid gold mining ETF, holding over 50 major gold mining companies, with assets under management of about $33 billion. Major holdings include Newmont, Barrick Gold, Agnico Eagle Mines, and Franco-Nevada. GDX is the standard choice for investors seeking diversified exposure to the gold mining sector.
VanEck Junior Gold Miners ETF (GDXJ) covers medium and small mining companies with potentially greater growth space but also higher corresponding risks. During a strong gold bull market, junior mining companies often significantly outperform GDX, but they also often experience deeper declines during corrections.
To illustrate this leverage effect with data: the returns of gold mining stocks were about 45% in 2025, significantly outpacing the roughly 25% gain of physical gold ETFs like GLD and IAU. However, mining stocks also bear risks not associated with physical gold—operational accidents, cost overruns, political risks in mining jurisdictions, and uncertainties in management execution. Even in an environment of rising gold prices, if a mining company's production costs rise faster than gold prices, it can still become unprofitable.
Section 6 — Understanding Risks: What Challenges Could Gold Face
Gold's extraordinary rise is built on real macro foundations. However, today's investors buying gold need to understand potential risks with the same clarity as they understand favorable conditions.
Substantial recovery of real interest rates. High real interest rates are the most reliable enemy of gold. If a combination of rate hikes and a decline in inflation creates a real positive interest rate environment—e.g., a 10-year Treasury yield reaches 6% while inflation is only 2%—the opportunity cost of holding gold will rise significantly. Investors could then expect a 4% annual real return from risk-free bonds, thus making the disadvantage of gold's zero yield tangible. In 2022, when the Federal Reserve rapidly raised interest rates, gold saw a notable correction compared to its peak in 2020. Any real improvement in U.S. inflation combined with tightening monetary policy is the most direct threat to the bullish logic surrounding gold.
Stronger dollar. Since gold is priced in U.S. dollars, a stronger dollar poses direct resistance to gold. GBI Direct notes three recent resistance factors facing gold in May 2026: a rebound in the dollar, some progress in U.S.-Iran ceasefire negotiations, and technical selling following January's highs. If the U.S. addresses its fiscal issues in a more credible manner than expected, attracting funds back into dollars for safety, gold will face price pressure at the exchange rate level.
Easing geopolitical risks. Trading Economics points out that gold fell below $4,500 in early June partly because U.S.-Iran peace negotiations stalled, and Trump suggested that a memorandum to reopen the Strait of Hormuz could be reached as soon as next week. Any real de-escalation of conflict in the Middle East will simultaneously eliminate the energy premium, inflation premium, and geopolitical risk premium currently embedded in gold's price.
Sell-offs under acute financial market pressure. In instances of acute financial crisis—different from the gradual fiscal worries currently supporting gold—investors sometimes sell gold to respond to margin calls or to raise cash. In March 2020, amid the initial impacts of COVID-19, gold sharply declined within weeks, only to later rebound strongly and reach new highs. In true financial panic, gold may experience a temporary increase in correlation with other risk assets, although its fundamental function as a safe-haven asset remains intact.
Valuation and mean reversion. The current gold price of around $4,490 is still about 70% higher than levels eighteen months ago. Even with strong fundamentals supporting it, an asset with such a large increase historically tends to experience a prolonged period of consolidation or correction before the next round of increases. Today's buyers are not entering at the beginning of a rally, but rather partway through a significant bull market, affecting the probability distribution of recent outcomes.
Educational note: The "opportunity cost" in investing refers to the cost incurred from choosing one investment over another. Holding gold, which yields no returns, instead of a 10-year Treasury bond yielding 4.6% means carrying an annual opportunity cost of 4.6%. Gold can only "outperform" bonds in terms of sustained holding if its price increase consistently exceeds this yield—meaning you believe that Treasury yields are insufficient to compensate for the risks of holding dollar assets. This is a core trade-off that every gold investor implicitly undertakes.
Section 7 — How to View Gold in Your Portfolio
Gold is best understood as portfolio insurance rather than a growth investment. Its value lies in preserving purchasing power and reducing portfolio volatility when other assets are under pressure. Most financial advisors who incorporate gold into their allocations suggest a ratio of 5% to 10%, suitable for most investors.
The logic supporting holding a certain amount of gold exposure at this current juncture stems precisely from the concerns recorded in the previous two reports. If after reading those two reports you conclude— the U.S. fiscal trajectory poses real long-term risks to the purchasing power of the dollar, the rise in yields is a structural shift rather than a temporary fluctuation, and geopolitical fragmentation is creating sustained uncertainty in global financial markets—then moderate allocation to gold is a natural extension of this judgment.
The reasoning against excessive concentration in gold holdings is equally clear. Gold generates no returns while held. In a positively bullish economic scenario where inflation is controlled, fiscal problems are well managed, and real interest rates normalize at modest positive levels, gold could significantly underperform bonds and stocks over multi-year horizons. The same macro forces making gold attractive in 2026 may reverse should fiscal policy improve or geopolitical conditions stabilize.
Investor allocation mindset framework:
Investors seeking the simplest and most cost-effective long-term exposure to gold may find IAU or IAUM to be the most attractive entry options—IAU balances low cost, high liquidity, and the advantages of large scale funds, while IAUM serves long-term holders purely aiming to minimize fee erosion with the lowest management fee.
Investors desiring real ownership without reliance on any financial institutions and with no counterparty risk will choose to purchase physical gold through reputable dealers and vault services, accepting trade-offs on storage and liquidity as the cost of achieving true independence from the financial system.
Investors wanting leveraged exposure to gold's upward trend and who can bear company-level risks will research GDX (diversified mining exposure) or GDXJ (higher volatility exposure to smaller mining companies), understanding that mining stocks often decline more significantly than physical gold during corrections, yet can also rise more than physical gold during bull markets.
Section 8 — Key Developments to Watch
Trends in U.S. real interest rates. The most important single variable influencing gold prices is whether real interest rates significantly rise. It is essential to track both 10-year Treasury yields and monthly CPI data in parallel. If yields rise while inflation falls, creating a real positive interest rate environment, gold will face resistance; if inflation remains stubborn while yields are limited by fiscal concerns, gold will still have support.
U.S.-Iran negotiations and the situation in the Strait of Hormuz. Trump has indicated that a memorandum to reopen the Strait of Hormuz could be reached as early as the week of June 9. If both parties genuinely reach an agreement to reopen the strait, this would depress energy prices, alleviate inflationary pressures, and eliminate the geopolitical premium in gold. This is the most noteworthy potential downward catalyst for gold prices in the near term.
Central bank gold purchase data. The World Gold Council publishes demand data quarterly. The People's Bank of China increased its gold holdings by 8 tons in April 2026, marking the largest single-month purchase since December 2024. If this purchasing pace continues, it will maintain a structural demand floor that has supported gold since 2022.
Walsh presides over the first FOMC meeting from June 16 to 17. Any signals from Walsh regarding inflation tolerance or a tightening monetary policy inclination will impact gold trends. A more hawkish stance implies potential rate hikes, detrimental to gold; a more dovish stance favors gold.
Key price levels of $4,500 and $5,000. If prices consistently hold above $5,000, it will signify a major uptrend restart and may attract more momentum buying. Conversely, if it consistently dips below $4,200 to $4,300, it implies a deeper correction than expected, potentially leading to a reevaluation of recent arguments.
The forces that have pushed gold from $2,624 to $5,589—fiscal deterioration, concerns about dollar depreciation, central banks de-dollarizing, geopolitical risks, and negative real interest rates—have not disappeared. After experiencing the U.S. debt milestone recorded in the previous report, these forces have not weakened; rather, they are deepening. Whether gold's next step is towards $5,000 and higher, or experiencing a longer consolidation at current levels, the structural logic of holding a certain exposure to gold in a diversified portfolio is a rare instance in modern financial history supported by such ample macro fundamentals.
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