(Kitco News) - The international accumulation phase of the current gold bull market has officially ended, giving way to a volatile second phase driven by stress in the U.S. credit system, according to Daniel Oliver, founder of Myrmikan Capital.
Speaking on Kitco News, Oliver argued that the combination of overleveraged private equity and an expanding U.S. national debt is trapping the Federal Reserve. He outlined the mechanics driving physical gold and silver prices higher, pointing to what he views as fundamental weaknesses in the broader financial system.
The U.S. national debt currently sits above $38.5 trillion. Concurrently, the Congressional Budget Office projects net interest payments on the national debt will more than double to $2.1 trillion by 2036. Oliver stated that the true debt burden, when factoring in the net present value of unfunded liabilities like Medicare and Social Security, is significantly higher. He believes this level of debt is mathematically impossible to repay under current dollar valuations.
"What happens after the end of every great credit bubble is that prices collapse," Oliver said. "What happens instead is that the gold price in dollars has to go up to make the valuations of assets make sense."
This systemic stress is increasingly relevant to private credit markets. UBS analysts recently warned that private credit default rates could surge as high as 15 percent in a worst case scenario, driven by rapid artificial intelligence disruption among corporate borrowers.
Oliver explained that unlike the 2008 financial crisis, where the Federal Reserve could print money to reflate the housing market, bailing out the private equity industry presents a different challenge. He noted that highly leveraged companies facing insolvency due to a lack of consumer demand cannot be saved simply by injecting liquidity into the banking system.
"I don't expect to see a huge stock market crash the way it happened in 29 or 2008," Oliver said. "What I expect instead is for gold to crash higher."
As faith in paper financial instruments wanes due to these macroeconomic pressures, the physical metals market is experiencing structural changes. Oliver observed that industrial silver demand is tightening as manufacturers abandon standard inventory models. Fearing supply chain disruptions, he noted that companies are hoarding physical silver directly at their factories, draining available inventory from the market.
Simultaneously, Oliver highlighted that nervous banks are tightening margin requirements on smelters and refiners. He stated this forces these entities to process less physical metal, acting as a choke point that restricts the flow of gold into the retail and institutional markets.
Historically, central banks were forced by the market to hold gold reserves equal to roughly one third of their balance sheets. Applying this historical ratio to the current Federal Reserve balance sheet yields a substantially higher implied gold price, according to his analysis.
"Gold has to go to a price that rebalances the Fed's balance sheet, and $8,000 currently gets you to about a third, 12,000 gets you around a half," Oliver said.