What Gold’s Aggressive Move Is Really Telling Us

And there it goes.

Gold just blasted through US$4,100 an ounce.

It’s a major signal. And if you know how to read it, it’s screaming three things at us right now.

The US-China trade truce won’t last

First, gold’s surge is telling us that the so-called US-China trade truce is temporary.

At best.

Sure, China just lifted its export ban on gallium, germanium, and antimony to the US. The White House is celebrating this as a win, with the suspension lasting until November 2026.

But let’s be real.

As George Bush once famously said: “Fool me once, shame on you, fool me twice, you can’t get fooled again.”

China has pulled the critical minerals lever before. Back in 2010-2011, they banned rare earth exports to Japan during a territorial dispute. Prices went parabolic. Dysprosium oxide shot up 26-fold in just 31 months.

Then in 2025, they did it again. Export restrictions on rare earths, gallium, germanium, and antimony hit Western supply chains hard.

The US Geological Survey estimated the ban on just gallium and germanium could cost the US economy US$3.4 billion, with half of that hitting the semiconductor sector.

That’s not too much, but it would definitely crimp margins, hurt investment capital flows AND stunt AI capex.

Here’s the rub.

AI is compressing timeframes for everything. Supply chain disruptions that used to play out over years now happen in months.

So the next time China decides to squeeze us on critical minerals? It could come way sooner than anyone thinks. Maybe 2027. Maybe 2028.

Heck, probably next year.

The market knows this. That’s why gold keeps climbing despite the so-called “truce.”

Real risks to Western economies

Second, gold is flashing red about genuine structural risks facing Western economies.

According to China’s Ministry of Commerce data, China controls approximately 90% of rare earth processing, 99% of refined gallium output, and 60% of global refined germanium production.

These are chokepoints for Western technology, defence systems, and clean energy infrastructure.

Gallium and germanium are essential for semiconductors. Gallium powers advanced radar technology.

Germanium is critical for infrared tech, fibre optic cables, and solar cells. Antimony is used in military applications from flame retardants to ammunition primers.

Western economies are dangerously exposed. And investors holding gold know it.

So when you see gold rallying this hard, it’s not just about inflation expectations alone.

It’s about geopolitical risk, supply chain vulnerability, and the uncomfortable reality that China holds enormous leverage over critical inputs to modern economies.

Gold says “we ain’t buying it”

Third, and most importantly, gold’s aggressive move is the market saying “we’re not buying it.” Paper assets, that is.

“Growth” paper assets in particular.

Think about what’s happening right now. The US Federal Reserve has cut rates twice in 2025, bringing the funds rate down to 3.75-4.00%. The RBA has cut three times to 3.60%.

Central banks are trapped. They know inflation isn’t truly beaten, but they’re cutting anyway to support paper assets and prevent a deeper slowdown.

Gold is telling us that investors see through this. They’re rotating out of paper and into hard assets. And this creates a feedback loop.

As gold rises, it puts more pressure on central banks to keep cutting.

Because if they don’t, stock and bond markets could crack. But if they do cut into persistent inflation, they risk devaluing their currencies even further, which sends more capital into gold.

It’s a monetary doom loop.

(Pssst… that’s good for crypto too by the way)

Here’s a more traditional doom loop hedge though…

The commodity hedge edge

Lower nominal rates plus high inflation (meaning very low REAL rates) is the perfect recipe for hard assets to run. And commodities in particular, because they’ve been used for centuries as hedges against inflation.

There’s academic backing for this:

A landmark study by Gary Gorton and K. Geert Rouwenhorst from the National Bureau of Economic Research examined commodity futures returns from 1959 to 2004. Their findings are crucial for understanding what’s ahead.

Here’s what they found, in simple terms:

Commodities offered the same return and Sharpe ratio as equities over the period studied. In other words, commodities historically performed just as well as stocks on a risk-adjusted basis.

Commodity returns were negatively correlated with equity and bond returns. When stocks and bonds fell, commodities often rose. This makes them powerful portfolio diversifiers.

Commodities were positively correlated with inflation, unexpected inflation, and changes in expected inflation. This is the big one. When inflation heats up or surprises to the upside, commodities tend to perform strongly.

The researchers concluded that commodity futures behave differently over the business cycle compared to traditional financial assets. And that difference is exactly what makes them valuable right now.

TLDR…the setup for
commodities is stunningly good

Commodities thrive in this environment. Gold is leading the charge, as it often does in the early stages of a commodity cycle. But the opportunity extends far beyond gold.

Other commodities like copper, uranium, and lithium all have very strong fundamental backings. Infrastructure demand, nuclear renaissance, and energy storage are real, long-term demand drivers.

AND – we’re in an environment where central banks have plenty of monetary ammunition left. Rate cuts are coming (reluctantly).

Central banks are really boxed in here.

The setup right now is inflation AND rate cuts.

Which if the last circa 100 years of economic and financial data is anything to go by… means commodities should go ballistic.

In the coming weeks, we’ve got lots to show you on the commodities front. Stay tuned for that, our resident geo and commodities expert, James Cooper has some big plays up his sleeve.