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"The Buck Stops Here,"

Dylan Jovine, CEO & Founder
Behind the Markets

Thursday, May 7, 2026

And why gold still has upside.

Ultimately, gold investors are banking on one thing and one thing only: Governments are practically incapable of meaningfully protecting the purchasing power of fiat currencies.

That argument is called the “currency debasement trade.” And historically, that’s a pretty safe bet: Wells Fargo recently projected a gold price target of $8,000/ounce by the end of 2027. The reason? We are in the middle of the third major currency debasement cycle since Nixon took the dollar off of the gold standard.

Whether you hold gold in an IRA, own paper exposure via an ETF or mutual fund, or you’re stacking physical bullion in your attic, the key to successful gold investing is understanding where we sit in the currency debasement cycle at any given time.

Currency debasement happens when a government weakens its own money, usually to finance debt, deficits or war.

And it has a long and sordid history. Roman emperors shaved silver out of their coins. Henry VIII did the same to English currency in the 1540s. And Frito-Lay’s got caught including more and more air in every bag of potato chips.

Same thing. Call it “shrinkflation,” except they’re shrinking money, not bags of chips.

Now, the government isn’t necessarily physically shaving metal out of its coins (though historically, they’ve done that, too!) Unlike the Roman Empire and Henry Tudor, governments now have more options for quietly undermining their national currencies.

Today, debasement occurs through heavy borrowing, expansion of the money supply far beyond anything warranted by economic growth, political pressure on central banks and their directors, and (a related phenomenon) quantitative easing. That means holding interest rates down to punish savers, so it looks cheaper when the government borrows money.

On paper, anyway.

But debasement has a cost: It eventually shows up in reduced purchasing power.

Eventually, investors lose confidence that governments will protect their currency. And so they move capital out of fiat currencies like the post-1971 dollar and into assets that government presses cannot print out of thin air.

In practical terms today, that means gold, silver, bitcoin, real estate, and other tangible assets. Or stocks that are closely tied with them. Charles Schwab calls this the “debasement trade.”

The U.S. case is straightforward. Federal debt crossed $39 trillion in March 2026. The 2025 annual deficit ran about $1.8 trillion. And gross federal debt as a share of GDP has climbed from under 60 percent in 2000 to roughly 125 percent today.

It gets worse: The Congressional Budget Office projects the figure will exceed 135 percent by 2036.

Iran's new Supreme Leader made an announcement that could trigger the largest financial crisis since 2008.

"Iran will keep the Strait of Hormuz shut as leverage against the United States."
40% of the world's oil passes through the Strait of Hormuz. It's been effectively closed since the Iran war started.

Oil just crossed $100 per barrel.

But here's the part that should terrify you: Every oil crisis in modern history has ended the same way.

1973 Oil Crisis: Gold surged from $35 to $200 (571% gain)

1979 Oil Crisis: Gold exploded from $200 to $850 (425% gain)

This time is different. This time could be exponentially bigger.

The U.S. government has 8,133 tonnes of gold sitting in Fort Knox, valued on the books at $42.22 per ounce.

With gold trading above $5,000, that's a $750 billion accounting error.

President Trump has the legal authority to fix it with a single signature.

When he does, gold wouldn't just rally. It would explode to unprecedented levels.

$7,000? $10,000? $15,000?

The smart money knows this. They're positioning now, while most Americans are focused on gas prices.

That's why I've partnered with American Alternative Assets to bring you The Great Gold Reset.

CLAIM YOUR FREE GREAT GOLD RESET REPORT

Gold tends to appreciate substantially during periods of debasement, though certainly not in a straight line. Also, analysts differ in how they calculate and define these cycles. But here are two of the most prominent major debasement cycles in living memory:

Nixon Shock and stagflation (1971–1980). When President Nixon “nixed” the gold standard on Aug. 15, 1971, gold had been fixed at $35 an ounce.

Over the next nine years, the combination of oil shocks, double-digit inflation, the Iranian Revolution and the Soviet invasion of Afghanistan pushed gold to $850 an ounce by January 1980 — a gain of more than 2,300 percent.

It was a bipartisan project. And the problem didn’t begin with Nixon: Some say the stage was set when Johnson decided to fight the Cold War, the War on Poverty, and then the Vietnam War all at the same time, creating an unbearable fiscal pressure on the U.S. And both Democrats and Republicans went along with it until Reagan joined forces with Carter appointee Paul Volcker to finally put a quash on the money supply in 1981.

It caused a devastating recession. The piper had to get paid. But it also got the inflationary spiral under control.

War on Terror through the financial crisis (2001–2011). Gold entered the 2000s decade near $255 an ounce. Then the combination of the dot-com bust, 9/11, simultaneous wars in Afghanistan and Iraq, the housing bubble and the 2008 financial crisis triggered wave after wave of monetary expansion.
The Federal Reserve cut rates to zero and launched quantitative easing.

A decade into the cycle, Gold peaked near $1,921 in September 2011 — a gain of roughly 650 percent.

(Wells Fargo treats the War on Terror and the subprime crisis as two distinct cycles; other analysts combine them. But you can see the effect over the course of the decade, nevertheless.

Current cycle (2022–present). Ohsung Kwon, chief equity strategist at Wells Fargo Securities, tracks debasement cycles using the M2/gold ratio — M2 money supply divided by the price of gold per ounce.

According to his model, the current debasement cycle kicked off starting in 2022, when Russia invaded Ukraine. This increased pressure on Western governments to substantially increase defense spending, even as they maintained generous social safety nets at home.

Economists understand the “guns and butter” argument, and its precedents: The debasement will continue until morale improves.

Gold opened 2022, prior to the Russian invasion of Ukraine, near $1,830 an ounce. No, in mid-April, it’s trading above $4,800. That’s off of a January peak of $5,589. But it still reflects a roughly 166 percent gain in just under 3.5 years.

That’s substantial. But it’s still not even close to the gains over the previous two debasement cycles.

Historically, Kwon estimates that debasement cycles run about 8.5 years on average. Right now, we’re not even at the halfway point.

Kwon’s bull case projects gold hitting $8,000 per ounce by 2027. His fair value estimate sits at $4,500 per ounce. From there, four of five economic scenarios in his model point to deeper debasement.

His logic rests on two observations. First, central banks worldwide are diversifying away from the dollar. Dollar-denominated assets made up roughly 70 percent of global foreign exchange reserves in 2000. By 2025, that share had fallen to just over 56 percent. Much of that flow has gone into gold. Second, fiscal pressure on the Fed to keep real interest rates low — economists call it “fiscal dominance” — reduces the opportunity cost of holding a non-yielding asset like gold.

Kwon’s bear case puts gold at $4,000 by the end of 2027. That’s a 17 percent decline from current levels.

Let’s go to the graphics:

The first chart displays how gold prices performed over the last three debasement cycles. The start point for all three is indeed to zero.

You can see how the dollar collapsed at the end of the 1970s debasement, as gold rose from $35 to $850/ounce.

In the current cycle, gold is actually running ahead of the Bush-Obama years cycle. The dotted line approximates the path to the $8,000 price point from Wells Fargo.

While $8,000 per month sounds high to us, intuitively, the graphic shows that it’s really quite a moderate target, in context.

For clarity, let’s look at the same chart, but in logarithmic scale.

Again, the chart shows that Wells Fargo’s $8,000 target by 2027 is quite close to where the 2001–2011 cycle was five years in. And gold still has some room to run beyond that.

So Wells Fargo’s target is not that outrageous after all.

Now, the debasement trade is a thesis, not a guarantee. Schwab strategists note that crowded trades can reverse sharply even as the overall debasement continues. For example, spot gold fell 12.2 percent in March 2026 after the U.S.-Iran war escalated, logging its worst month since October 2008.

So if you’re not prepared for some bumps in the road, gold isn’t the asset for you. Call your annuity salesman.

But if you’re prepared to wait out some short-term turbulence, gold’s upside still appears to outweigh the downside. Fiscal pressures on monetary policy are increasing. The U.S. faces an aging Baby Boomer population that will put massive pressure on Medicare and Medicaid budgets, for example. And interest rates feel high now, compared to quantitative easing and Covid. But they’re still modest by historic standards. So neither the Federal Reserve nor the politicians in Washington, D.C., nor the European Union governments anxious to contain Russian expansionism will have much flexibility to reverse the debasement cycle for long.

Until next time,
The Navigator