Gold Soars When Sh*t Hits the Fan

After a disturbing weekend where the world flirted with WW3, gold and silver flew higher on Monday.

Silver stood out, popping nearly 5%, with the largest silver miner ETF (SIL) rising more than 6%. Spot gold rose mildly, but gold miners jumped by about 5%.

This is the strange part of being a gold/silver bug. Bad news can be great for your portfolio.

It’s important to maintain the right state of mind. We do not root for bad events to happen, we prepare for them.

In this case, gold and silver are soaring due to a combination of factors:

• Threat of WW3
• Worsening trade war
• Global debt bubble

We aren’t happy about these events. We are prepared for them. This is an important distinction. One needs to be careful to not get into a mindset of rooting for negative developments.

Let’s briefly go over each of these factors driving precious metals higher.

Madness in Russia

By now you’ve all heard about the surprise attack launched by Ukraine against Russian military bases. If you need a briefing on what happened, my colleague and friend Byron King laid out the facts and implications this morning in Ukraine Targets Trump with a Propaganda Pearl Harbor.

My takeaway from these events is that President Trump appears to be getting bad advice on foreign policy.

It was just last week he issued this statement on Truth Social:

Source: Truth Social

The Trump administration has denied knowing about Ukraine’s attacks in advance, and I’ll take them at their word. But it appears that someone is setting him up to make it look like they were in on it. Not a great look.

This attack on Russia’s nuclear-capable bomber fleet is a dangerous provocation by Ukraine. Additionally, it was carried out using civilian vehicles, which is recognized as a war crime because it endangers all civilian vehicles going forward.

We remain hopeful that President Trump can figure out a way to de-escalate the war in Ukraine, but his job just got a lot tougher.

Between the war in Ukraine and the threat of China forcefully taking over Taiwan, conflict risk should continue to put a bid under precious metals for the foreseeable future.

On The Trade Front…

The other threat lurking over the globe is a resurgence in the trade war. As we suspected, the temporary trade truce between America and China appears to be breaking down.

And the war over rare earth elements is just getting started. China continues to withhold key rare elements required for high tech manufacturing including electric vehicles, phones, and semiconductors.

As reported by the New York Post:

China’s exploitation of its monopoly over rare earth elements has become a major sticking point in high-stakes trade talks with President Trump – and experts warn the US needs to prepare for the worst.

Beijing has infuriated Trump officials by failing to loosen its crackdown on exports of seven “heavy” rare earth metals which are essential for gadgets like smartphones and electric cars as well as military hardware like F-35 fighter jets and drones.

… Nonetheless, any talk from China of a trade truce is “little more than window dressing,” according to longtime mining executive Mark A. Smith, whose firm NioCorp has a rare earths facility under development in Nebraska.

“China is strategically choosing minerals for export restrictions that have a disproportionate impact on our military readiness and national defense,” Smith said. “They hold virtually all of the cards.”

China has a virtual monopoly on many of these critical elements, and they appear to be ready to weaponize this asset fully. They have the ability to essentially shut down a huge part of American high-tech manufacturing.

Eventually there will be a trade deal, but as we have mentioned before, it may take up to a year. Neither side wants to lose face by folding, and the results of the current negotiations will shape the future of trade for decades to come.

The stakes couldn’t be higher, and the only sure near-term outcome is chaos. Things may need to get nasty before the U.S. and China finally reach a long-term deal.

Don’t Forget The Debt Bubble

The ever-present debt bubble almost seems like an afterthought these days. It’s easy to forget with more pressing and urgent events dominating our news feeds.

But the fact is that America is losing the war on debt and deficit. President Trump and Elon Musk made a valiant effort, but Congress has not played ball.

Things may need to get significantly worse before our government recognizes the urgency of our situation. By then it will be too late. The snowball is rolling down the hill, gathering mass and velocity. At this point the best we can hope for is to minimize the impact.

All of this is why we own gold and silver. Precious metal investments are a sort of insurance policy and hedge. They cushion bad news. And in today’s world, that’s a priceless attribute.

We continue to believe that the bull market in gold and silver is just getting started.