Podcast: Play in new window
- Gold & Silver Set Up Could Lead To Much Higher Prices From Here
- Is Trump Overplaying His Hand With Powell?
- Will Loss Of “FED Independence” Scare Off The Foreign Investors?
The McAlvany Weekly Commentary
January 14, 2026
“We’re missing upside. That’s what they’re thinking. Cash is trash. We’re missing upside. And yet missing upside— There’s no recognition that a critical financial market signal—which I take the price of gold to be, a critical market financial signal—it’s howling for attention. Central banks and institutions are front-running 2026 headlines, which will, in the fullness of time, flip the retail investor script.” —David McAlvany
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Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany.
David, we just came out of our meeting and we were talking about what you were looking for last year to confirm that we were in a bull market in precious metals. I’d like you to review that with our listeners, if you would.
David: Yeah. As the fundamentals were developing, early 2025, we were looking for a couple signals, things that would offer confirmation of a very bullish trend. We had talked at the time about the gold/silver ratio getting away from triple digits and shrinking towards levels that we have today. That was one thing that had not changed in the early stages of 2025. The precious metals miners remained very undervalued relative to gold—
Kevin: Right.
David: —and relative to the S&P 500, very little movement in the miners. A little bit in 2024, but as we began 2025, we wanted to see an increase in interest there, and then a return to ETF demand where investors allocating to gold and silver as an asset allocation choice, not necessarily with a preference for product or for delivery, but just looking at their allocation pie and picking up a few more percentage points allocation to the metals. They generally do that in products like GLD and SLV.
Kevin: And that was— I mean, one year ago we were saying, “it still doesn’t really look or feel like a precious metals bull market,” but now it does. Even over the last few weeks, we’re starting to see quite a difference. But what an incredible year.
What are you still looking for?
David: Confirmation from the gold/silver ratio really only took place in the fourth quarter.
Kevin: Okay.
David: So, if you’re looking at the maturity of the trend, that confirmation came in the fourth quarter. The miners, they were chugging along pretty healthily all year long. And ETF demand, while it was there and certainly substantive, has yet to exceed the 2020 levels in terms of tonnage.
We’re, on a global basis, down by 10% in terms of where we were in 2020 versus now. Of course, in nominal terms, it’s higher dollars invested but less ounces consumed. We haven’t taken out those numbers from 2020. The precious metals miners, if you look at GDX, GDXJ, the ETFs that capture those exposures, they actually have seen a 20% reduction in shares outstanding—
Kevin: Isn’t that amazing?
David: —in 2025. So—
Kevin: As much as they rose, you’ve got a reduction in the ETFs that hold the mining shares.
David: Correct. In the futures market, where people tend to be more short-term speculative in their positioning, we have yet to— We could see another 50 to 100% increase in gold, silver, platinum exposures to take out the highs from a few years ago.
Kevin: I think you’ve mentioned that we really have not seen what Bill King calls the army ants. We don’t have the generalized investor in this market yet.
David: That’s right. I got to spend some time with an investment committee that I’m on this week, and everyone was heralding the double-digit returns of the S&P and the Nasdaq and the Dow. And there was not a single mention of the metals, not a single mention of any commodity, and at least some mention of emerging market and international stocks, which did outperform, as we mentioned last week, Kospi being north of 70%, Bovespa, DAX, CAC, all outperforming last year the S&P, Dow, and Nasdaq.
So, there was a nod towards that outperformance, but it’s pedal to the metal. Time to get more fully invested. We’re missing upside, and even with my concerns expressed about valuation metrics, cash building on the sidelines at Berkshire Hathaway, Marc Rowan at Apollo raising cash in advance of market turmoil, as he noted in an article in Financial Times, December 21st, so it’s been a few weeks, but no concerns, no concerns.
And Kevin, frankly, when there’s no concerns in the market, there’s no reason to migrate or shift dynamics within a portfolio structure. So 60/40 still reigns. Even though the model is dead, the memo was not read.
Kevin: Yeah, but you were talking about 60/20/20, and brought that up to the group, and you had some critical questions for them.
David: It’s just irrelevant. Nobody cares about gold. They care about yields that you can predicate off of an increase in products sold and current income from fixed income. It’s all wonderful. It’s all beautiful. It just all requires a normal, functioning market—
Kevin: Yeah.
David: —to carry forward. And at this point, to extend the trend requires even more liquidity, which we may well get, but that doesn’t guarantee that it’s sustainable.
Kevin: So, you don’t see in the normal portfolio, the larger portfolios, gold really included at this point. But let’s talk about the volatility in the markets because there seems to be a move toward resources in a pretty dramatic way.
David: Yeah. I think volatility continues to be a defining feature of the precious metals, of the industrial metals, of course, with a strong upward bias. Daily price swings now 4 to 7% are becoming a routine dance. Last week, nickel traded up over 10% in a day. Copper, aluminum also volatile, but with the upward bias. In energy, natural gas last week was lower by 12.4%. Volatility is what I’m getting at, sizable moves in different directions.
With Dr. Copper at recent all-time highs and continuing to run hot, is it a surprise? Is it a surprise that the Atlanta GDPNow forecast, on its most recent posting, January 9th, sits at 5.1% annual growth rates expected for this year? That’s the rate that it’s running. Of course, the GDPNow, it shifts rapidly, but as an indicator of where things and how things are running hot, it’s impressive.
Kevin: I’m thinking liquidity here, Dave. You often watch what liquidity is doing. Manipulation of interest rates can sometimes increase liquidity in the market, but there’s no lack of liquidity right now.
David: No, we’ve got QE5 or 6, I’ve lost count, adding 40 billion in liquidity on a monthly basis.
Kevin: Why count? Why count?
David: Yeah.
Kevin: Yeah.
David: I mean, we could have called it QE1, because it never really went away.
Kevin: Right.
David: Mortgage-backed securities, the proceeds from those that are coming due, are, with that 40 billion, being recycled back into short-term Treasuries to buy down the interest rate. They want to stimulate growth, and they’re doing that. You can see it in the GDPNow figure, you can see it in Dr. Copper trading as hot as it is. 30-year fixed rate mortgage sits at 6.16%.
Kevin: Making things very unaffordable for people trying to start.
David: It’s more affordable than it was when it was peeling off towards 7%. And with Fannie and Freddie likely to get 200 billion in stimulus dollars to increase lending, maybe you see those rates come down. CPI headline number this week, 2.7%, which barely slipped. And then you’ve got 2.6 if you’re talking about core. We’re still closer to 3% than we are 2.
Kevin: Right. And the Fed’s goal is a stated 2%, yet they’re still talking about trying to lower rates. But housing affordability, with rates rising from almost zero four or five years ago to where we are right now, people can’t afford houses even at 6.6%.
David: Housing affordability is being tackled via Fannie and Freddie and the suggested policy shifts to limit institutional ownership of single-family homes. It felt like a trial balloon, the 50-year mortgage proposal. I think it was more a soft suggestion than a proposal. But we’ll see. If things like that ultimately get more people in housing, it doesn’t mean that housing is more affordable—
Kevin: Right.
David: —it just means that you’re structuring your payments in such a way that, from a cashflow standpoint, you’re okay. I’d be very cautious on a 50-year mortgage if that ever comes into play. Do the time value of money and figure out how much money you’re actually paying for the house.
I was shocked when I was 16 years old. We were in the process of moving to Durango, and it was my first lesson in mortgage math. We looked at what the family was paying for our house in Parker, just south of Denver, Colorado—
Kevin: Right.
David: —10 acres. It was a beautiful place, off of Democrat Road. You’d belong there, really. But we sold the house, we’re the last in the company to sell. And I looked at the mortgage documents, the disclosures, and I couldn’t believe the estimated disclosed total price after paying interest at a modest number over 30 years. It was more than twice the asking price. And I thought, do people know what they’re doing?
You do the time value of money on a 50-year—
Kevin: Oh, what is that? Triple, quadruple?
David: Three to four times.
Kevin: Yeah.
David: So, $500,000 home might be $2 million, all in. Is that how you want to spend your savings? The affordability issue—And I think this is the reality. Trump knows that he can use Fannie and Freddie as something of a subsidy piggy bank. He can share the wealth and will do so.
Kevin: Do you think he’s doing that also thinking about November?
David: Of course.
Kevin: Coming up?
David: Of course.
Kevin: Elections?
David: Yeah. It’s not clear what he’s going to do with the institutional ownership of single-family homes. Best estimates are that they own 1/2 of 1% of the total in the US. 106 million homes, I think is the estimate.
Kevin: It’s still a pretty good block that’s off the market for the—
David: 530,000 homes.
Kevin: Yeah.
David: Is it going to be a disgorgement of those homes where they hit the market and depress prices in the regions that they’re in? Or is it just a cap? You own what you own, you can’t own anymore. That’s not clear yet.
We got Fed chair Jerome Powell facing criminal charges—
Kevin: Right.
David: —for what Trump sees as an egregious cost overrun on a refurbishment of the Marriner Eccles building.
Kevin: And Trump says it’s not political, but boy, timing-wise, it sure feels like he’d like to have lower interest rates from somebody.
David: Of course it’s political. We saw the game played last year as he’s in the press, raising the temperature, saying, “You got to lower rates, you got to lower rates, you got to lower rates.” And oh, by the way, what’s this project? I estimate that you’re going to spend 4.1 billion and the price tag was supposed to be 2.5. Well, we’re dealing with the president’s estimates of what he thinks the cost will be and what he thinks the cost overruns will be. Nothing’s been settled.
So, always for us, less of a political judgment and more of a, what are the ramifications in the market?
Kevin: Right.
David: And at least the stock market could care less. The stock market responds blithely to the news, trading higher. Where you did see some sensitivity was with bonds and the dollar, and of course precious metals, reflecting a more contrarian concern—
Kevin: Well—
David: —because your equity investor just says, “Look, there’s enough liquidity.”
Kevin: Well, let’s look at that because the equity investor thinks short, the bond investor is usually thinking long. So long term, they’re seeing the inflation built into this, don’t you think?
David: I think when you watch the precious metals in the bond market and the dollar market all responding in sympathy, it suggests that Fed independence is the key issue at stake. Trump may have overplayed his hand on this one. The markets are watching to see if one of the two Kevins, that is Warsh or Hassett, comes into the chairman role early to influence fed funds to the levels that Trump prefers, again, closer to 1%. The extraordinary notion that rates should be or need to be near zero with Dr. Copper at all-time highs, with the CPI remaining untamed, with GDP statistics crossing over and above 5% suggests that the Oval Office bias for growth is midterm-focused. This is about the election.
Kevin: But Trump is used to managing things, sometimes by force, we saw that with Venezuela, so yield curve control. Does he think that they can possibly just manage that yield curve and control the bonds?
David: Yeah. If you get past November and you get to paint the tape to the degree that you can, you’re addressing policy initiatives—that gives you the latitude to address policy initiatives in the back half of your term. Of course, there’s nobody in the equity markets that’s going to be upset by rates coming lower. It just doesn’t matter. It doesn’t matter that you’re getting market signals that things are already hot: GDP, Dr. Copper. These things are saying, not a good time to be lowering rates. Ordinarily, you could take the current valuations in the equity market as a signal of negative future returns in your general market equity indices. Ray Dalio suggested as much. Not negative returns per se, but low single digit returns, and that’s before factoring in inflation, so in real terms probably negative returns. But these markets, Kevin, they remain amply liquefied, artificially stimulated, and solidly in the political rubric for GOP success in November. Liquidity remains a critical element. That’s really the question as far as the equity market’s performance in 2026 is concerned. Will markets remain liquid until the fall?
Kevin: Well, and will everybody still be on the AI narrative, right?
David: Yeah.
Kevin: Artificial intelligence—
David: Absolutely.
Kevin: —it seems to be the catchphrase.
David: Will the AI narrative continue to keep a rose-colored lens in place for investors to perceive unlimited upside in tech? And we’ll see. Q4 2025 and Q1 of this year, reporting from the big AI names, I think that’s a risk factor for the narrative. You’ve got bond market moves, a steepening yield curve, fiscal concerns priced into long-dated debt instruments. That could also upend the November political aspirations. So there’s a number of things which may have already run their course, or may, in fact, with ample liquidity, continue in terms of momentum.
Kevin: Well, you brought out that Trump may have overplayed his hand. Is it the bond market that’s going to show that with the Powell thing?
David: Two things. Once the case is in court, I think we’ll see, what is the evidence and what are the claims? We do have this innocent until proven guilty. Where’s the proof of malfeasance or of criminal activity? I think to myself, gracious, I’ve done a number of renovations on our house, and I’m glad I’m not being accused of criminal activity because I went over budget. Everybody assumes that there’s a 10% to 20% fudge factor in there. You have to factor it in because stuff happens. There’s delays. There’s time that goes by, and because of that, prices can go up. Or you made mid-course corrections and you decided you wanted something different, and you had to take it out and put it back in, and there’s cost overruns.
Kevin: You know what I’m picturing right now, Dave, is you and Trump walking in hard hats, white hard hats in your renovation, and you being judged by Trump, and he says, “This is going to be criminal if you overrun.”
David: Now, the reality is, this was a project with oversight from Congress, so if you were doing something recklessly without permission, that’s one thing. But with congressional oversight— I think that’s one of the ways in which he may have overplayed his hand. The other is this issue of, to what degree is he pressuring the global view of our central bank into the grave, where, if we lose credibility, if that notion of independence in central banks is called into question—
Kevin: It’s an illusion, but if we lose the illusion.
David: The illusion is very important. It’s very important. So if you lose it, what are the knock-on effects for the dollar? What are the knock-on effects for the bond market?
Kevin: You had mentioned the Kevins. Are both of those guys, whichever one is put into place instead of Powell, possibly they’re going to be loose on monetary policy for Trump? You think they’ll run it hot?
David: They only made the shortlist because they’ve basically said, “We’ll do your bidding.” They’ve already—
Kevin: Which is politicizing—
David: —made every indication, which is one of the reasons why it’s not a question of if, it’s a question of when you begin to see more pressure on the long end of the curve. This is confusing to me because Trump’s push to go after Powell, particularly as it relates to the bond market— If you assume the Kevins either get started in May—again, either Hassett or Warsh—if they get started before May or they get started in May, if legal proceedings spook Powell out of the chairman role, the debasement of the dollar is likely. So capital flows out of bonds are likely to exaggerate a steepening yield curve, and that financial tightening would most likely put a damper on equity performance.
Kevin: Unless yield curve control works.
David: Think about the relationship between the asset classes. Policy choice on the fed funds rate, negative impact to the dollar, that creates some pressure, some pressure within the fixed income markets. That pressure reveals itself at higher rates. Higher rates ultimately have an impact in equity performance. So this is where it would seem that Trump’s assumption of yield curve control—
Kevin: High inflation.
David: —Treasury purchases, and influencing the fed funds rate by edict, subsidizing mortgages with an added $200 billion, it ignores how the bond market actually works, and it further ignores how influential those financing costs are to stock market performance.
Kevin: So a lot depends on the illusion of Fed independence, is what you’re saying.
David: Absolutely. They are independent. They’re just conveniently political. So if you called them and said, “Hey, Jerome, move rates,” he’s going to say, “Not my job to take your call and do your bidding.” On the other hand, and we’ve seen this not just with Powell, but with previous Fed chairman—
Kevin: Virtually all of them except Volcker, maybe.
David: —there’s political bias expressed. This is a human nature issue. At this point, if I were on the Fed committee and I was watching Trump pressure Jerome Powell, I probably would not vote to lower interest rates because the human nature side of me is like, “No, the hell with you. Are you kidding me?”
Kevin: “You don’t tell me what to do.”
David: “You don’t tell me what to do.” Maybe this is like a return to my 14-year-old self, but, “You can’t tell me what to do. It’s not your job to tell me what to do.” So he’s actually creating a setup where human nature is going to be defiant.
Kevin: This is why you’re not on the short list for Fed chairman, Dave. I know you were looking forward to that.
David: It’s so funny just to see what the expectations of the president are. He loves sycophants. Absolutely eats them up. He had the oil executives in to talk about who’s going to spend what on Venezuela. The gentleman from ExxonMobil is like, “At this point, it’s uninvestible.” Trump’s response is, “Well, then fine, I’ll get 25 other people to put their money there, and I’m not going to even give you this offer. You don’t get to play in my sandbox,” and his sandbox is Venezuela.
So it’s just fascinating. If you don’t, “Oh, sir, how can I serve you today?” Kiss the ring, kiss the ring, kiss the ring. It’s surprisingly infantile. I love the fact that he can get business deals done and he does it in sometimes a very brusque manner. In some respects, he’s one of our most successful presidents, having pushed policy initiatives well past what most people in DC would consider a normal timeline. It’s not diplomatic, it’s not well polished—
Kevin: It’s happened quick.
David: —and yet it’s done. On the other hand, it is this, “You’re going to do what I tell you to do, and you’re going to like it.”
Kevin: Ask a Venezuelan bodyguard. Go ahead and ask if that works.
David: Right. So if the bond market becomes convinced that Fed independence is at jeopardy and institutional credibility wanes, a primary reason to buy US assets or hold what you already own, that becomes dubious. I think this is where he’s got to be careful. I am confused because he wants to control rates, and he thinks that that is meaningful on the short end of the curve, not realizing that by controlling those rates, he may set a daisy chain of things in motion within the financial markets that are absolutely the opposite of what he wants. Again, I don’t know that he understands the interrelationships.
Kevin: Well, do you think he needs to be aware more of keeping the foreign investor in? With this devaluation of the dollar, it’s not pretty for the foreign investor.
David: It’s particularly sensitive there. We have, as of last week— The third quarter Z.1 report came out last week. It shows the inflows of $345 billion foreign capital into our debt securities. This is the rest-of-world assets coming into US debt securities, $345 billion for the quarter to a record $15.7 trillion total. Treasuries increased by 142. Corporate debt, purchases from overseas investors, jumped by $150 billion. Again, this is for the quarter. Equities and mutual funds gathered the largest overseas audience, playing for growth, looking at the AI trend, knowing that we dominate that space outside of China, $1.597 trillion in inflows for the quarter.
Kevin: In equities?
David: Equities and mutual funds combined, but still equity exposure in one form or the other, taking the one year growth in equity inflows to $3.53 trillion, $3.5 trillion. New record, foreign exposure, US equities, $21.23 trillion. Appreciate our friend Doug Noland, who always goes through these numbers and distills them. How do you keep investors happy? Positive returns.
Kevin: Right, which they’ve been getting.
David: How do you keep overseas investors happy?
Kevin: They’re less positive returns, but they’re still getting them, with more currency value.
David: Well, positive returns post-currency conversion.
Kevin: Exactly.
David: Right? So preferably more positive than other geographies. So not only do you need to come home after you do the currency exchange back to your own currency, now you’ve got to look around and say, “Okay, what I’ve got on a net basis, how am I doing?” If the dollar’s up, well, it’s a double benefit. If you’ve got positive equity returns plus the dollar has appreciated, you’re bringing home the money.
Kevin: Right.
David: But if you have a decline in the dollar, then that mutes your equity returns, and your net number, how does it compare with how you could have done elsewhere? Now, all of a sudden it starts to advertise poorly for the next year’s allocations.
Kevin: Do you think the rule of law is a draw for international investors coming to the United States?
David: Of course. Yeah, for sure. Because I don’t think all geographies are created equal. If you said, “Well, you could invest here and get 20% here and get 40% here and get 120%.” Well, if you could get 120%, but the government could also take 100% of your assets because there is no appreciation for the rule of law— Of course, the rule of law remains an anchor for overseas investors in the United States. Like we said, not all risk profiles are the same, but those overseas investors have to remain convinced that we are practitioners of the rule of law. And that’s again where: don’t overplay your hand because institutional viability and reputation have a lot to do with how people perceive the rule of law. And if the law, like Frédéric Bastiat describes in his book The Law, becomes a cudgel, becomes a baton, a weapon, then the reputation for the practitioner of the law is in question.
Kevin: So the institution of the Fed, we talked about it being somewhat of an illusion, but you could spook the international investor if it loses credibility.
David: Yeah. Again, I’m going to take the hard line that they do have—
Kevin: Independence?
David: —independence.
Kevin: Yeah.
David: But again, political independence is different than having political bias expressed.
Kevin: Right.
David: And it’s really, do you take the call and do you do what you’re told? We saw that under the Nixon administration where you took the call and you did what you were told. Arthur Burns was one of the worst Fed chiefs ever because he had no backbone.
Kevin: He was a tool of the President.
David: Yeah. Didn’t mean that he didn’t have political bias in different ways, but he was also malleable, manipulable, and controllable, and that’s the independence piece. So I expect Democrats to vote Democrat, and to be influenced in their thinking. I expect Republicans to vote Republican, and to be influenced in their thinking. Their biases will be expressed in their policy preferences, but that independence piece is really a different issue.
So compromise institutional credibility. If you do compromise institutional credibility, you are challenging certain assumptions about investing in the US. If you compromise dollar stability and you raise a key question for these holders of US denominated assets, then the question becomes, is the juice worth a squeeze? Within the fixed income markets, if you look at this last year, as an overseas investor, you didn’t know this at the front end of the year, but by the end of the year you had signed on for negative returns.
Kevin: Yeah, because the dollar lost close to 10%.
David: Virtually no fixed income instrument cleared the hurdle created by the 9.6% drop in the dollar. So what’d you get paid? 3%, 4%, 5% if you were in high yield, 7%, 8%. And so you took extra risk for extra yield and what’d you get for it? A negative real number. So you had to speculate in tech for the performance numbers to be compelling. And they were compelling last year.
Off the April lows, AI provided a compelling growth opportunity for overseas capital. And this is my point. Combine a weaker dollar with subpar equity returns, and you’re more likely to have a tsunami of capital exiting US dollar denominated assets. So the rest of world assets currently deployed in US markets, if you’re looking at fixed income, all debt instruments, and equity, 64.12 trillion.
Kevin: So you need a very large door if you’re going to exit. How wide are the exits?
David: That’s a lot. How wide are the exits? Is there sufficient domestic capital to invest and replace an overseas investor who has a currency exchange hurdle to overcome to get a net positive return for the year? What I’m getting at is that dollar debasement through QE and compromised institutional legitimacy at the Fed runs the risk of triggering capital outflows. I don’t think equities or bonds are prepared for what we’re going to call the repatriation trade.
Back of the napkin estimates of total stock market capitalization added to US bonds is around 105 trillion. So let’s be generous, round up to 110; 64.12 divided by 110, 58% of US publicly traded assets, both fixed income and debt, are held by foreign capital. So 58%, if you give them a motivation, again, we come back to why.
Kevin: Six in 10 investors—if you just want to make it a number—six in 10 are foreigners. So if they leave—
David: Dollar debasement through QE becomes consequential. Compromising institutional legitimacy and the confidence that people place in the rule of law becomes consequential. 2025 brought US dollar currency risk into focus for eight billion people. 350 million people living in the United States wouldn’t know that their currency traded lower by 9.6%, but every overseas investor knows it. Your life revolves around sterling or euros or yen or RMB. The currency math is second nature. So you ask how wide are the exits.
In stocks and bonds, I don’t mean to neglect domestic outflows. I just want to frame how much capital is potentially more skittish and why there’s an extra motivation. You get a little market downside, that’s one thing. But to illustrate, a 5% loss in equities or in a bond portfolio is nothing to be concerned with for a domestic audience. But if you combine a 10% currency loss with a 5% market loss, 15% is something more people pay attention to.
Kevin: Well, and oftentimes we say, “Okay, well, let’s say they do go. You’ve got to figure out who’s going to buy those stocks.” We’ve talked before about how markets sometimes can have this vacuum that occurs, where you have people exiting but there’s really no bid on the stocks for hundreds, maybe thousands of points on the Dow. So who would be the buyers?
David: Yeah, the bid is provided by the willing buyer. There has to be enough willing buyers to match the willing sellers or the bid begins to drop. In any bull market, you want to identify likely buyers. We saw this with the growing argument for cryptocurrencies. Well, but as soon as the institutions step in, then we’re going to have another run. Well, as soon as we have central bank adoption— And it’s a prognostication about how large the burgeoning crowd of demand is going to be, and then beginning to predicate what the price is going to be to accommodate that demand. In any bull market, you want to identify likely buyers. In any bear market, to appraise risk, you should also identify the likely sellers.
Kevin: Yeah. And you said 2026 could be a major repatriation trade. So we have to have likely buyers or we’re going to have a pretty substantial downturn.
David: So that’s what I’m getting at. If bull dynamics stay in place, then foreign capital will continue to flow in. Introduce bear market dynamics and the majority of capital invested in US assets—we’ve already just stated—is not domestic capital. 58% is foreign capital. 2026 could well see a major repatriation trade, intensifying outperformance of international equities versus US. The AI trade needs to hold. If it doesn’t, one of your primary draws to the US markets in 2025 could reverse.
Kevin: Okay. But the money that’s been coming in, you were talking about trillions coming in. It’s mainly toward AI tech?
David: Yeah. I mean, the majority came into equities, and I think it skewed—at least in terms of the index allocations—toward five to seven names. So if you’re looking at global capital flows into the US, it was not done on a proportional basis. There was a higher percentage that went to the success story. So momentum feeds momentum. You just have to be mindful of what could put it into reverse. That’s why I’m saying these policy decisions are consequential for the dollar and may very well be highly consequential for both the bond market and stock market because of the concentration of foreign capital in US markets.
Kevin: So with the dollar losing almost 10%, you would think that all these trillions coming into the equity market, that’s the demand for dollar-denominated assets, Dave. Why wouldn’t the dollar actually strengthen during that period of time?
David: Yeah, this is a fascinating setup. It’s one of the reasons why I’ve got some currency concerns in 2026. The inflows through the end of the third quarter: just shy of $2 trillion for the quarter; smaller number relative to the full year. Did the dollar recover in the third quarter with a $2 trillion influx of foreign capital?
Kevin: And it did not.
David: No. And multiples of that two trillion for the full year, was it enough to boost the dollar? With a massive amount of foreign capital coming in, there’s still dynamics afoot that pressured the dollar lower by 9.6%. Isn’t it reasonable to assume that if domestic policy choices drive the dollar lower this year, that repatriated capital would exaggerate that decline?
Kevin: Isn’t this interesting, Dave? This is hitting me, because dollar recycling has been the way we have supported the dollar after we went off the gold standard, especially through petro dollar recycling. And right now, what we’re saying is we’ve got dollar recycling going on in the means of coming into equities. It’s not working. The dollar is still declining, so you wonder what’s going to catch this.
David: Not enough capital came in in 2025 to fix the currency problem.
Kevin: So do you think gold and silver are signaling that there’s not a net beneath the dollar right now?
David: Yeah. I mean, we don’t know how the dollar will trade this year, but I think gold and silver, other hard assets in 2025— So last year may be a harbinger for what 2026 holds.
Kevin: And those are central banks, mainly, buying.
David: Central banks, Asian investors, dominated demand for the metals up until the fourth quarter when US institutions and individual investors finally started coming into the market. It’s truly amazing that we have reached these price levels, 4,600 for gold, $89 for silver, with so little US investor activity.
Kevin: Yeah. It’s almost like you have crickets in the general investor market right now?
David: Yeah. Few investors understand this dynamic, where futures markets are nowhere near peak activity. Global ETF holdings remain 10% below peak holdings dating back to 2020. GLD remains 21% below peak holdings in ounces. Precious metals miners, the ETFs, have close to 20% shrinkage in shares outstanding. Not a sign of record demand or of market exhaustion. Precious metals miners are looking at margins of $2,600 an ounce in the fourth quarter.
Kevin: Yeah, huge profits.
David: And as Fred Hickey points out, 2,660 was the price of gold in Q4 2024. One year later—
Kevin: Right. So the margins right now are, yeah.
David: —the margins are now equal to—
Kevin: The price that it was.
David: —the previous price. If you can let that sink in. Now, that number is profit. So demand for GDX, GDXJ, reflected in shrinking shares outstanding, down by 20%. This is not an overowned market. It is an expensive market. It is not an overowned market.
Kevin: I love the way you say that because so often right now we’re being asked, do we take our gold and silver and cash that in and just enjoy the ride? But this setup is amazing, Dave. The people who have been buying don’t really have anything to do with the markets.
David: I think there are reasonable things to do with your gold ounces. If you’ve always dreamed of owning a Steinway, then take a couple ounces and buy your Steinway because this is probably the best exchange rate, Steinways to gold ounces, that you’re going to see in your life. Well, maybe it’ll improve, but it’s pretty darn good.
Kevin: Yeah. I did that with some silver and Anderson windows, Dave. They’re pretty darned expensive, but—
David: The Anderson to silver ratio.
Kevin: Yeah. That’s right.
David: This is a setup you rarely see as an investor. The fundamentals are favorable. Price moves already in play, confirming a significant trend. The confirmation signals that we were looking for in 2025, we have. Some of them came just at the tail end of 2025. It’s a young bull market from that standpoint, in terms of getting confirmation. A bull market adage, climbing the wall of worry, it’s now in play.
Kevin: Am I too late? Should I be selling? All these questions that we have to ask, we have to wrestle with.
David: Should I wait for a pullback? Is the trend already over? I can’t answer any of those questions definitively, but the fact that our business only picked up to rather impressive levels—our metals brokerage business—mid-November to the present— Prices were moving, but nobody was participating. Most of the price moves came from, again, Asian investors, certainly. Central bank investors, certainly. But we’re looking for the audience of buyers and sellers.
Are the last buyers in or is the majority of potential buyers still on the sidelines? And I’d say we’ve got a lot of people who have little to no allocation of the metals in any form or fashion. That provides me with an interesting anecdote based on 2025 traffic. And again, it’s not something that everyone would be privy to, but having been in the metals business for 53 years, we know what volumes feel like. We know when we’re at capacity in terms of processing trades, the number of trades a day.
Kevin: We know what fear buying feels like, and that has not happened.
David: And interestingly enough, traffic has picked up because interest has picked up, but I think it’s of a performative nature, where investors are saying, “Give me some of that.”
Kevin: “I want to make some money.”
David: “I want to make some money.”
Kevin: It’s not, “I want to save what I’ve got.”
David: No, and that is really the uncontrolled dynamic where prices move to places that you have a hard time imagining, at a pace that is breathless. So we’ve made it this far in price without the generalist investor seeking a safe haven. Bonds are fine. Stocks are fine. Everything is fine. So long as traditional asset allocations are working, this is the state of play.
The vast majority of investors are not making allocation shifts. They’re still dealing with FOMO attached to AI, stuck in tech, stuck in crypto. They’re basically still locked in the casino. And I don’t know if you’ve ever been in a casino or have been in one in recent years. I know the answer to that. But you get in and you can’t get out. Everybody’s trapped in the casino, the market casino.
Kevin: Well, and they’re trapped in a way of thinking, “Okay, let’s go back to the markets.” Because I asked you last night, I said, “Dave, is it worth your time to be on some of these committees that don’t actually see the way you see?” And you told me, “Yeah, Kevin, even if it’s just for the educational experience of what people are thinking.”
David: Yeah, for sure. Yeah, I finished a call yesterday, pension manager, no mention of gold and silver, no mention of miners, no mention of hard assets, a mention of shifting more assets to stocks and bonds to maximize returns, and a recognition that you can never time the market, so you might as well be in for the long run and just let it ride. We’re missing upside. That’s what they’re—
Kevin: They’re thinking.
David: They’re thinking. “Cash is trash, we’re missing upside.” And yet, missing upside, there’s no recognition that a critical financial market signal, which I take the price of gold to be, a critical market financial signal, it’s howling for attention. Central banks and institutions are front-running 2026 headlines, which will, in the fullness of time, flip the retail investor script, and the repatriation trade, which is global hot money—
Kevin: Which can run in a second, yeah.
David: Global hot money seeking the best possible return, that is now a risk to US equity and bond holders. Debt market concerns, currency market vulnerability, an invasive US foreign policy, all of these are being addressed by global asset allocators in the gold market, to some degree in the silver market.
And by the time the script is flipped on US investors, the wall of worry will be even steeper and harder to climb. We’re talking about $100 silver, $5,000 gold. And this is months away. Unique to this backdrop is the traditional safe haven, Treasuries and fixed income, which are already impaired.
Kevin: So—
David: So, as we see any course correction, concern, fear, panic, do you, on a knee-jerk basis, go to Treasuries?
Kevin: I’m just going to ask you a final question, Dave. Do you sell your ounces now?
David: Again, it’s an amazing setup. No. Not by a long shot. Not by a long shot. Sit on your hands and compound returns. The reduction in ounces comes when gold fever is like a plague. When everyone has it, can’t shake it. And I’m telling you, the fever hasn’t spread at this point beyond central banks and gold bugs—yet.
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You’ve been listening to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany. You can find us at mcalvany.com, and call us at 800-525-9556.
This has been the McAlvany Weekly Commentary the views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.
