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The global stock markets have transitioned from the edge of the abyss earlier this year to new select bull markets caused not by fundamentals, but an increase in money creation by the central banks.

So how are global bull markets in stocks possible with record governmental and private debts around the world? The answer is booming artificial money creation necessitated by the deficits in all important countries and now developing nations.

Even Argentina, which seemed to have some excellent economic policies the past several years under Milei, is now in a currency crisis.

We believe it signals a panic world-wide effort to “reflate” in order to prevent a monetary meltdown. Debt can only be reduced by repayment, global debt defaults, or by reflating the economies with huge new money creation.

That latter way of course is the popular way out. It has the least adverse consequences for the people in power. By the time the resulting inflation goes parabolic, they will be retired and playing golf.

We believe that a major decision of the central banks around the world, including the Fed, was made in early April of this year to take that latter route. That is when the market plunges made a sharp turn to the upside.

Also remember that gold became a Tier 1 asset for U.S. banking regulations on July 1. That is when the latest rise in gold prices started.

Being a “Tier 1 asset” means that banks require no reserves to hold against because it theoretically has “zero risk.” So says the BIS in Basel, the central bank of central banks, which makes many of the rules.

That makes GOLD a great asset for the banking system, much better than T-bonds.

The gold of the US Treasury has surpassed $1 trillion in value for the first time in history (that is a thousand times $1 billion).

Below is the chart of central bank holdings of GOLD versus holdings of US Treasuries debt (chart from WisdomTree). Notice how just this past September, central banks are holding a higher share of Gold (teal line) than U.S. Treasuries (black line). That’s the first time this has happened in nearly 30 years.

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It is likely that the US Treasury will revalue gold officially closer to its actual market value. We are confident that will occur under Trump. Imagine the official price being $3,500 or so instead of the current “official” book value price of $42.22 per fine troy ounce set by the government in 1973.

Investors would love it. And that brings votes.

In fact, it is possible that Washington would make an automatic adjustment in gold’s official price every 5 or 10 years. Wouldn’t that be interesting?

Below is a chart of the latest data showing the gold holdings of the biggest holders. As the chart below shows (data via World Gold Council), the gold holdings by the U.S. are more than twice the holdings of Germany, the 2^nd biggest holder.

CONCLUSION: Gold and silver have been in “runaway bull markets” this year because of rising money supply and expectations of new record deficits in the US and major EU countries.

Take a look at this chart of U.S. M2 money supply. The latest data shows that it hit  another record high in early October (chart below via the St. Louis Fed).

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Smart central bank leaders know what to expect in the coming months and have bought huge amounts of gold instead of US T-bonds.

Gold and silver prices rise during times of extreme crisis and excessive growth in governmental debt globally, when the central banks create unprecedented amounts of money to save the financial system.

That is what we may see in 2026, which should be a big propellant for precious metals. A collapse in the dollar will be another big boost for these metals.

Although our cycle studies show that the ultimate secular top in gold and silver prices may not come till the year 2030, keep in mind that corrections of 38% to 50% do occur in a secular precious metals bull market. That would be painful. The warning has already been sent by the correction in gold and silver since mid-October.

If you enjoyed reading the above analysis, you can continue reading what our latest research says about gold, silver, and the global financial markets by getting your free October Wellington Letter excerpt now, limited to the first 100 signs ups!

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