Iron Laws and Golden Light Shows
In a recent New York Times article titled, “Stephen Miller Asserts U.S. Has Right to Take Greenland,” White House Deputy Chief of Staff Stephen Miller was rather direct in expressing his version of the international law of the jungle. Not only did he suggest the U.S. has the right to take Greenland, but he also told the Times, “We live in a world, in the real world, Jake, that is governed by strength, that is governed by force, that is governed by power… These are the iron laws of the world since the beginning of time.”
Miller pointed to the recent U.S. action in Venezuala to prove his point, suggesting that a U.S. military blockade of the South American country means, “We set the terms and conditions… For them to do commerce, they need our permission. For them to be able to run an economy, they need our permission. So the United States is in charge. The United States is running the country.”
Then last Friday, on Fox News, describing where Greenland fits into the new America “take what we want” policy, Miller told Sean Hannity that “Greenland is essential for America’s national security… With respect to Denmark, Denmark is a tiny country with a tiny economy and a tiny military. They cannot defend Greenland. They cannot control the territory of Greenland. Under every understanding of law that has existed about territorial control for 500 years, to control a territory you have to be able to defend a territory, improve territory, inhabit a territory. Denmark has failed on every single one of these tests.”
Now, HAI isn’t chronicling recent commentary from the White House Deputy Chief of Staff to delve into politics, but rather to point out just how significant this espoused view is toward turbocharging the fundamental drivers for the already raging global de-dollarization imperative.
In short, if U.S. national security needs—backed by U.S. power and force—dictate taking control of other entire countries, then national security needs might also suggest that America’s $38 trillion debt debacle, combined with trillions in annual deficits as far as the eye can see, might necessitate seizing other countries’ dollar assets as well.
On net, there are $27 trillion in foreign-held U.S. dollar assets, primarily in U.S. equity and bond markets. At present, the Trump Administration is making it clear that the policy of the United States is to take what it deems necessary for the national security of the U.S. As a result, those abroad may understandably be worried that the U.S. might find any number of reasons to justify grabbing some portion of the $27.6 trillion in U.S. dollar assets held on net by foreigners, given that those assets would certainly be useful toward recapitalizing an effectively insolvent U.S. government.
Again, politics aside, in HAI‘s view, all else equal, the recent Trump administration foreign policy direction seems quite likely to further stoke the flame that already is the absolute global imperative for foreign U.S. dollar assets to diversify into the time-tested, universally trusted, no-counterparty-risk neutral reserve asset that can be safely stored inside a country’s own borders—gold.
As HAI has maintained for years, all of the above is consistent with an ongoing monetary regime change in which the prevailing petrodollar (global dollar recycling system) is realigning towards a new gold recycling system where gold serves as the new (albeit old) primary global reserve asset instead of U.S. Treasuries.
None of this is to say that the current U.S. policy trajectory is necessarily a mistake. Recall that Stephen Miran, current Trump-appointed Fed member and former head of the Trump 2.0 Council of Economic Advisors, wrote a white paper in 2024 on restructuring the global trading system. It was essentially the blueprint for a plan to encourage a global flight out of dollars in order to weaken the dollar as a prerequisite to facilitating the national security imperative of reshoring the U.S. industrial base. He admitted at the time that gold may be a beneficiary.
This week at the World Economic Forum in Davos, U.S. Commerce Secretary Lutnick seemed to announce to the world that the system is changing—and that the U.S. is spearheading that change.
Lutnick told Davos, “The Trump administration and I are here to make a very clear point—globalization has failed the West and the United States of America. It’s a failed policy… It has left America behind.”
Lutnick continued, “America is done exporting jobs and offshoring its future. We will no longer give in to globalization.”
Well, a U.S.-centric unipolar dollar-based globalization with the downside of “exporting jobs and offshoring” is an apt description of the post-1971 dollar based global system. In a nutshell, Lutnick (presumably with Trump’s blessing) just said—unequivocally—we’re out!
Regardless of whether current U.S. policies pushing the world out of dollars are a mistake or are (as HAI suspects) cold hard calculation to benefit U.S. national security, it hardly matters to gold. It is the profound secular winner of a global de-dollarization push.
So, in HAI‘s view, the big picture fundamental set-up for the monetary metals remains rock solid. Now, in the shorter term, both gold and silver are technically extended and negotiating major round-number price targets/resistance at $5,000 and $100 respectively. In the short term, we could see enhanced volatility. However, given the accelerating global monetary regime change pulling precious metals back into the center of the global monetary system, HAI continues to expect significant further upside in gold, silver, and the companies that produce them over the coming months and years.
As HAI has highlighted over recent weeks, the multiple signals of large-scale secular capital rotation into precious metals are now numerous, and they’re also indicating that the move is still in its early days. In fact, according to a 12-factor capital rotation gage by Northstar Charts, we’ve only seen the current 100% full-scale capital rotation signal into gold three other times historically—in 1930, 1972, and 2002. Crucially, the common denominator of those three prior capital rotation signals was that they were all at the very start—not the finish—of major precious metals bull markets.
HAI agrees that we are still in the relatively early days of this precious metals bull given the fundamental reality of a changing monetary system (re-validating gold as the primary global reserve asset) and the fact that few are even aware of that new reality—yet. Capital rotation is key, and it has just started to kick into gear. Short-term volatility aside, this bull move for PMs won’t be over until everybody owns them. At present, almost nobody does. We’ve already seen some fireworks in the PMs, but, in HAI‘s view, we’re going to see an even more vivid and breathtaking light show in the months and years ahead.
Weekly performance: The S&P 500 was down 0.35%. Gold was up 8.58%, silver surged 14.46%, platinum launched 19.38%, and palladium was up 12.38%. The HUI gold miners index was up 10.26%. The IFRA iShares US Infrastructure ETF was off 0.43%. Energy commodities were volatile and higher on the week. WTI crude oil was up 3.27%, while natural gas exploded up by 72.33%. The CRB Commodity Index gained 3.37%. Copper gained 1.86%. The Dow Jones US Specialty Real Estate Investment Trust Index was off by 2.78%. The Vanguard Utilities ETF was down 1.92%. The dollar index was off 1.95% to close the week at 97.46. The yield on the 10-yr U.S. Treasury was flat on the week at 4.23%.
Have a wonderful weekend!
Morgan Lewis
Investment Strategist & Co-Portfolio Manager
MWM LLC
