A New Suit

For hundreds of years an ounce of gold would buy a real nice suit. I was reminded of this over the weekend in Zurich. At my favorite watch store, Factor Zeit, the young owner Sean and I were discussing watch investments and gold prices. He pulled out a 2012 one-ounce American Gold Eagle. It was given to him, when it was brand new, by an old Swiss watchmaker. The man, who was Sean’s mentor, told him it would buy a nice suit and if he always held on to it, he could always buy a nice suit. Gold was $1600.

In January, gold peaked at $5595. Many were predicting even higher gold prices, the collapse of the US Dollar, the end of the Petrodollar and foreign buyers abandoning the US Treasury market. Central banks were on a buying spree; asset allocations were being radically altered in favor of gold and Tether was grabbing all that glittered.

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In January, I also bought a new Armani suit for $3000. It is a nice suit. But Sean’s Gold Eagle was very close to buying two nice suits. As I boarded the plane yesterday morning in Zurich, wearing my new suit, gold had fallen overnight in Europe to $4000.

So, is gold correcting to the “nice suit” equilibrium? Or are we headed to a “two suit” gold price?

The world is in turmoil as we all learn that the All In Sustaining Cost of Making America Great Again is very high. Even this MAGA Republican Texan is thinking- maybe too high. Holy Wars are horrific and beyond disconcerting. They are not just horrific in the bloodshed, destruction and suffering, but in their consistency over the past 3000 years. I would certainly define the conflict in Iran and with their proxies in Gaza. Yemen and Lebanon as a Holy War. This Holy War is no different in its suffering and bloodshed. But it does differ in its use of modern weaponry, at tremendous scale, that is causing unprecedented destruction and involves resources in a region that the entire world has become dependent upon.

Oil prices have gone parabolic. Major energy infrastructure in the Gulf is being destroyed. Shipping of many commodities that world economies depend upon for their very survival have been severely disrupted and will likely carry a long-term risk premium when this Holy War subsides. It is especially hard on all the Asian countries. US Allies, Japan & South Korea who are economically dependent on literally everything that flows through the Straights of Hormuz. Many countries will suffer from the lack of fertilizer for food crops and other basic needs that are generated from hydrocarbons. More African children will likely malnourish and many people in Europe and Asia could suffer a cold winter without heat. Economies will slow and some may grind to a halt for lack of energy.

The All In Sustaining Cost of a mining operation is much easier to calculate than that of a Holy War in in the 21^st century AD. It is a cost that will power Central Bank printing presses the same way natural gas powers AI data centers.

Precious Metals Strategy was never meant to be political. Here we are though in a Holy War affecting the precious metals markets (and all commodity markets) with me trying to justify the American Flag pin on the lapel of my new Armani suit.

Gold & silver became very over-bought due to historic price increases from February 2025 through January 2026. A correction was already guaranteed. The correction began before Epic Fury but then accelerated rapidly due to rapidly increasing energy prices. The media is primarily focused on higher inflation and higher real interest rates as the cause of gold’s decline. Certainly, a legitimate factor. However, I see three factors affecting precious metals that aren’t getting much attention:

1. Two of the top ten 2025 Central Bank buyers, Poland and the Czech Republic import 80-90% of their oil and LNG. Their energy bills just doubled or tripled. While the Czech Republic operates at a small trade surplus, Poland runs large trade deficit. When 2026 Central Bank gold purchases are released, it’s reasonable to assume these countries may no longer be on that top ten list. Chinese purchases of gold may also drop as they are the world’s largest importer of oil, primarily from Russia and Iran at significant discounts. When the US lifted sanctions on Russian and Iranian oil already in transit (and bound for China at a steep discount) it was redirected to other Asian countries at a premium. If sanctions are otherwise relaxed due to shortages, a settlement of the Ukraine War or regime change in Iran, China may end up paying full price for its oil imports again. China also imports 26% of its LNG from the damaged Qatar plants. Their LNG bill just went up as the world fights for available LNG supplies.

The US Dollar has shown renewed strength both as a safe-haven currency and because, as a net exporter of oil and LNG, the US is a big benefactor of higher energy prices. Some Central Banks could be selling gold to defend their own currencies. The question is; are Central Bank’s slowing their gold purchases? Is there some forced selling of gold? Time will tell, but I am guessing yes- to both.

2. Hedge funds were short oil at historic levels in January. They got caught offside and have likely suffered huge margin calls. It appears from recent price action that at least some of those margin calls are being met with gold sales. Oil prices and gold prices are trading inversely. Hedge funds that have leveraged positions in private equity/credit funds have seen their liquidity disappear as positions are starting to be marked down. Blackrock recently marked down the NAV of their TC Capital Fund by 19%. One Blackrock position was marked down from par to zero in one quarter. Recent weakness in gold (and US Treasuries) is likely a case of leveraged hedge funds selling what they can to meet margin calls and increase liquidity.

3. Bullion banks were also caught offside with their gold and silver shorts with last year’s dramatic price increases, especially in Q4 and January 2026. March futures expire next week. There appears to have been huge amounts of paper shorting to allow the higher priced futures contracts and option positions to expire worthless. Conspiracy theories involving Jane Street Capital are circulating and may very well be legitimate. Refer to the very poetic XRP_MANchester who covered this in more detail here and here.

Epic Fury is costing the US, conservatively, $1Billion a day. These costs are adding to already large deficits. Reparations will likely add significantly to that number as the US tends to rebuild what it bombs. At this point, the inflationary impact on the rest of the world is incalculable. The solution, in this fiat world, is very predictable. That sound I am hearing, as I soldier home over the Atlantic, is not the vibration of jet engines but the sound of printing presses being cranked up from 7 to 10 from 35,000 feet.

There is no “US Dollar collapse”, no “US default” and no “New Gold Standard” bogeymen needed to ensure that the printing presses will be running 24/7 assuring long term fiat currency depreciation. Gold prices are adjusting to the realities of unprecedented worldwide debt levels. Sean will always be able to buy a nice suit. We may be repricing to a “two suit” gold price. This “suit correction” may not have run its course but I see it as an opportunity to add physical metal for long term appreciation.

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The PMS Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. First, you should understand I am a God Fearing, gun carrying, MAGA, Republican, American Patriot living in the most conservative county in Texas. So, I often get things wrong in markets and politics. I prefer high-horsepower internal combustion engines to electric firetraps. But, in the spirit of compromise, I have upgraded to an AMG Hybrid because the electric motor helps tame the twin turbos (and adds 200 horsepower). I may own or transact in any of the commodities mentioned in this piece at any time without warning. Any mention of individual equities is meant for validation of my secular themes and should not be considered a recommendation to buy or sell.

This is not a recommendation to buy or sell anything, just my opinions. I often lose money on positions I trade and invest in. None of this is a solicitation to buy or sell any commodity or security. I am and will be a long-term holder of physical gold and silver. However, I may add to or reduce my position in precious metals at any time, without further warning. I won’t update my positions. All positions and opinions can change as quickly as I understand just how ridiculous my position has become. You should always do your own due diligence. Do not make decisions based on my opinions. I exist in a community where I am surrounded by like-minded Texans. If you see numbers and calculations of any sort, assume they are wrong and double check them. I use ChatGPT and I know that it can hallucinate or just be wrong at times. I am convinced that Open AI is some sort of conspiracy to make me feel smarter than I really am.

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