(Kitco News) – While gold and silver prices have hit fresh record highs in the wake of U.S. government tensions between the executive and the central bank, the risks to the yellow metal are more two-sided than they have been in years – and platinum-group metals are now the best-positioned for strong gains, according to Daniel Ghali, director of commodities strategy at TD Securities.
Ghali was asked in a recent BNN interview about the market reactions to the Trump administration’s charges against Fed chair Jerome Powell this week.
“The attacks on Fed independence were chilling for Wall Street observers, but the fact of the matter is foreign holders of U.S. Treasury assets haven't panicked,” he noted. “You can see that the US 2-year yield barely budged, the term premium has barely budged. FX markets have not really moved.”
“The only thing that really has moved are precious metals,” Ghali said. “And in some sense, gold is really the best suited asset to benefit from the U.S. dollar's loss in store value function. That's been the story over the course of the last year.”
Ghali cautioned, however, that this also means that the dynamics of the gold market itself are changing.
“This is becoming a market that is less premised on the wave of central bank demand supporting the gold price and increasingly premised on a continuation in the debasement trade that is now potentially nearing an inflection point,” he said.
Asked about the reactions from the political and economic establishment, Ghali agreed that the attacks could have had the opposite of their intended effect.
“Certainly, it seems like chair Powell might emerge from this as some sort of white knight when it comes to Fed independence, and you have a battle ongoing not only between the administration and Federal Reserve, but also in Congress around this,” he said. “What we've seen is that trust in U.S. institutions has bent, but it's not broken, and you have these ongoing battles that can swing in favor of U.S. institutions as well.”
Ghali pointed to the upcoming Supreme Court case that will determine whether or not the Trump administration can force the exit of sitting Fed Governor Lisa Cook as the most important of these battles, and one that could significantly impact the U.S. dollar.
“That would probably be far more significant than what we've seen thus far,” he said. “Perhaps the reason that trust in U.S. institutions hasn't broken is because they've not really been put to the test, and this is the first major test that they'll be facing.”
And while TD Securities now sees $5,000 per ounce as very attainable, they also see significant risk for gold prices in this market.
“Firstly, the gold vol has been significantly higher, so $5,000 an ounce doesn't seem all that far from current market prices,” Ghali said. “But more significantly, what we're trying to get to is the fact that the debasement trend does have room to strengthen further over the course of 2026.”
“It also has the room to reverse,” he added. “There's two-way risks in gold markets for the first time in several years, underscored by the fact that gold is actually no longer a fringe asset. In fact, the most popular physically-backed gold ETF is now roughly 65% as widely held by institutions as the most popular ETF in history. That's a symptom of the debasement trade that took place over the last year. And the consequence of that is that for the next leg of debasement to really kick in, what you need is the shift in asset allocations, that those institutions place more capital into gold and potentially into commodities than they have in the past.”
“It's certainly possible, but there needs to be quite a series of tactical mistakes from the U.S. administration before that happens.”
Ghali explained that the increased holdings mean that if investor sentiment turns against gold, the yellow metal’s price could correct more sharply than in the past.
“If you think about it what's occurred over the last year in terms of the debasement trade, it has largely been a function of sentiment – warranted, but sentiment nonetheless,” he said. “The pace of debasement can be dictated either by government actions or by market forces. In the case of the 1970s, you had a strong case, inflation was rampant, etc. That was a market-based debasement event. Over the last year that hasn't really occurred. Inflation has been coming down. It's been well-constrained. Inflation break-evens are pointing to subdued fear of inflation resurgence. So really what it has boiled down to is trust in U.S. institutions that has weakened.”
Ghali said TD Securities is neutral on gold at current prices. “In fact, we see further opportunities in other precious metals than gold and silver,” he said. “Platinum group metals in particular.”
