If You Own Gold or Silver, This is Happening Faster Than Expected- Rick Rule

[00:00:00]I consider the gold mining industry given what I think happens to the purchasing power of the US dollar over the next 10 years to be a great opportunity. I think today's prices are fair, not great, fair, but I like the idea that I'm going to buy a great something for a fair price.

[00:00:14]Specifically, if the purchasing power of the dollar declines, as I believe by 75% over 10 years, I think that gold will maintain its nominal value, which means the gold price will do very well. If the gold price does very well, gold stocks relative to the gold price are already at attractive levels. Attractive levels relative to other industries, maybe not.

[00:00:33]>> Higher interest rates are often treated as automatically bearish for gold, but that relationship only holds until the market starts asking a more uncomfortable question. What are those rates reflecting? According to Rick Rule, gold is less about reacting to interest rates and more about measuring confidence in the purchasing power of the US dollar. In the short term, rising rates can pressure gold by strengthening the dollar and offering investors a competing yield. But that effect is conditional, not permanent. When rates rise because inflation is the real concern, the signal changes. In that environment, the focus shifts from nominal yields to real yields. If inflation runs ahead of bond returns, then even positive interest rates can translate into a loss of purchasing power. From this perspective, gold is not responding to interest rates in isolation. It is responding to whether those rates are keeping up with currency debasement. And that distinction matters because markets often misread the transition. Investors tend to extrapolate from long periods of stability where inflation is contained and monetary conditions feel predictable. The same logic extends into gold mining equities. If gold holds or rises in nominal terms while the currency weakens, then highquality producers can benefit disproportionately through leverage to the underlying metal. But the core driver remains unchanged. It is not the level of interest rates that matters most, but whether they are sufficient to preserve purchasing power in real terms. In that framing, gold is best understood not as a reaction to rates, but as a long-term expression of confidence or lack of it in fiat currency stability. If you found value in this breakdown, please hit the like button, subscribe, and share it with other investors who are paying close attention. We're here to keep bringing you sharp analysis and voices that understand what's unfolding. Thanks for watching.

[00:02:30]>> Confidence, such as it exists, is hard on gold. Uh gold is a bet really uh on the deteriorating purchasing power of the US dollar. Confidence is hard on gold. Higher interest rates in the near term are hard on gold until the market comes to realize that the reason for the higher interest rates is fear of inflation which is good for gold. When people tell me the so-called truism that higher interest rates are bad for gold I say only for a period. During the period of the decade of the 1970s tenure wrote the tenure rate rose from what 3.6 3.7 to 18 and the gold price ran 26fold. So when people tell me that the gold price can't do well during a period of um rising interest rates, I wonder if I actually lived through the decade of the 70s and I can assure you that I did. Uh in the near term, which is increasingly the way people think, uh that's become a truism, perhaps a factoid, which is to say it's believed to be true because it has been observed in the past. But if you look at the underlying reasons for both phenomenon, then you understand that that circumstance, which is to say rising gold prices and real nominal interest rates aren't mutually exclusive. I would agree with that. Um Warren Buffett, no fan of gold and not speaking about gold mines, said that he what he learned from Charlie Mer was that it was better to buy a fair something or pardon me, a great something at a fair price than a fair something at a great price.

[00:04:02]I consider the gold mining industry given what I think happens to the purchasing power of the US dollar over the next 10 years to be a great opportunity. I think today's prices are fair, not great, fair, but I like the idea that I'm going to buy a great something for a fair price.

[00:04:21]Specifically, if the purchasing power of the dollar declines, as I believe by 75% over 10 years, I think that gold will maintain its nominal value, which means the gold price will do very well. If the gold price does very well, gold stocks relative to the gold price are already at attractive levels. Attractive levels relative to other industries, maybe not.

[00:04:44]but attractive relative to the price that the n relative to the fact pardon me that the nominal price of gold >> will do uh I think very well I like the resource sector uh on an isolated basis I don't care about it with regards to a valuation metric >> that I don't have any regard for my own opinion of >> uh I look in a very absolute sense the free cash flow that the gold industry enjoys right Now the need for the gold industry to reinvest in itself to maintain never mind increase production against the probability gold revalues not against technology but rather against the US dollar. Now there I do have some confidence in my ability to predict. I feel real good about that. I'm not discounting what you say Gary. I just don't want to hold myself out to your audience to comment on this perspective rebalancing because I don't understand and I don't pretend to understand half of the equation. I believe that real interest rates are sharply negative.

[00:05:52]I believe that what I would describe as it as inflation which is the deterioration of the purchasing power of the US dollar is running at between 8 and 10%.

[00:06:05]rather than what the CP lie would have you believe. And if you juxtapose to make the math simple 10% depreciation deterioration the purchasing power of the US dollar, the 10-year Treasury isn't paying you five, it's costing you five. Uh and it's that circumstance in the decade of the 1970s that propelled the gold price. It's important to note that concern about inflation, nominal concern about inflation began in 1967 or 1968.

[00:06:36]The American investor didn't take note of that until 1972.

[00:06:41]uh at that period of time the US economy had come off uh what was described as the Camelot era the period from the end of uh World War II 1946 to 1967 1968 with everything going very well very very very well the consequence of that is that investors decisions were predicated on their experience in the past which had been great the parallels between then and now are staggering uh the assumptions that we make about the future uh are formed by our experience in the period 1982 to 2022 the most benign economic climate known to humankind. Liquidity is expensive, but in a crisis, it's the only thing that matters. According to Rick Rule, holding liquidity is not free. It comes with a quiet cost, a gradual erosion of purchasing power over time. But that cost is better understood as an option premium. You are effectively paying for flexibility, the ability to move when others cannot. In periods of stress, that flexibility is what turns volatility into opportunity. Assets are forced to be sold. Prices disconnect from fundamentals and capital that is ready can act when most of the market is constrained. In that framework, gold sits in a slightly different category.

[00:08:05]It is not just a hedge against currency debasement, but part of a broader strategy of preserving optionality across monetary cycles. Rick rule also points out a structural detail that matters for positioning. Precious metals and related equities make up a very small fraction of total financial assets in developed markets. In other words, the sector is still structurally underowned relative to the scale of long-term monetary and inflation risk.

[00:08:32]That imbalance doesn't guarantee timing, but it does change the potential impact if capital allocation shifts even modestly. From there, he separates investors into three practical groups.

[00:08:44]The first prioritizes stability and treats liquidity and physical gold as core protection. The second accepts volatility and looks toward highquality gold equities for leverage. The third is willing to take on higher risk in more speculative mining names where outcomes can be far more uneven but also more extreme. Gold preserves purchasing power and equities decide how much risk you're willing to layer on top of that foundation. Let's get back to the interview. For most people, gold uh I I think I think you need to do a few things that most people don't want to do. The first is that despite the fact you lose money doing it, you have to maintain liquidity, and that's really expensive. My savings, and they're substantial, uh are costing me probably 4% of in purchasing power annually. I consider that negative yield to be an option premium on having the liquidity available to take advantage of a liquidity squeeze. Uh while I'm not suggesting that a liquidity squeeze is necessarily uh imminent, I think it's inevitable. And I remember back to 1987 uh also 2008. 1987 I didn't have liquidity. So I couldn't take advantage of the circumstance. 2008 I had plenty and the consequence of that is that 2009 was the best investment year of my career. So you have to have liquidity despite the fact it's expensive and you have to have gold. Uh you need to decide for yourself whether gold constitutes liquidity for you. I learned myself I can sell gold if something is more attractive. But I know some gold bugs who can't bring themselves to sell gold in any circumstance. So for them they have to regard it as an asset class that isn't liquid. A thousand years or more of recorded history have told us that gold protects us from the deteriorating purchasing power of fiat instruments particularly when ne when interest rates are negative. a JP Morgan Chase statistic, I believe it was, that precious metals and precious metals related equity constitutes 1 half of 1% of the total savings and investment assets in the United States. They suggest that that's down from a four decade mean of 2%.

[00:10:48]I'm not saying we have to have mean reversion, but I'm not saying that that uh ultimately we won't overshoot the mean either. What I'm trying to say is that it's a very very very owned underowned asset class relative to what I see as the risks inherent in not owning it. In direct answer to your question, not for me because I've been saving in gold for 25 years. But for most people, the most efficacious addition to their savings that they could make would be gold. And by the way, they should increase all of their liquidity.

[00:11:28]Uh because I'm afraid, not certain, but afraid it's going to come in handy. For people who are investors as opposedely to savers, they should consider the highest quality gold equities. They have names Franco Nevada, wheat and precious and ag. Uh for people who are willing to do the work, endure volatility and embrace real risk, they need to speculate in the rest of the gold mining sector. For people who aren't willing to do the work, they should avoid that sector like the plague. Uh there are wide variances in quality and wide variances in risk. And people who aren't tolerant of volatility and aren't willing to do the work to obviate to the extent they can single company risk would be well advised to skip that portion of this interview. I mean literally catastrophic. Uh it already is and I think that higher interest rates will do three hard things to the economy that sadly need to happen.

[00:12:32]The first is that higher interest rates raise the cost of capital for companies.

[00:12:36]A higher cost of capital reduces earnings per share which probably over time has a delletterious impact on the prices of equities raising the equity cost of capital too. Secondly, uh higher so-called risk-free interest rates uh provide competition for the equities markets from bond markets. They lower the relative value of dividends and in and hence decrease the value uh of dividend paying stocks. And third, they increase the cost of capital and the availability of capital for everybody else, exacerbating what is already becoming an increasingly difficult time in private credit markets and below investment grade debt. Uh there's nothing to be done about this, Gary. uh if you intervene in the near term, you make the problem worse in the intermediate term. Better to do what we did in 1980, which is take the pill, have two very very very hard years to purge purge the system uh and then rebuild the system from a more honest base. Sadly, uh that's not the American way. Gold and silver are best understood as monetary assets tied less to short-term rate movements and more to long-term shifts in confidence, liquidity, and real purchasing power.

[00:14:04]Periods of rising interest rates do not automatically suppress precious metals when those rates are driven by persistent inflation and negative real yields. With precious metals and related equities still representing a relatively small share of global financial assets, even gradual shifts in allocation can have meaningful effects over time. In this broader framework, gold and silver function not just as hedges, but as strategic tools for preserving purchasing power and optionality across uncertain monetary cycles. How do real interest rates and liquidity conditions together influence the long-term price cycles of gold and silver? So stay tuned for clear datadriven insights into the financial system. Don't forget to like and subscribe so you never miss our weekly updates. Thank you for your continued support and we hope you enjoy the