Fed Chair Jerome Powell surprised some investors Wednesday afternoon with his comments about the gold and silver rally. The two precious metals, the most classic of the “safe-haven” assets, have the tangibility and inherent scarcity to act as a hedge in moments of turmoil, particularly when investors worry that politics or policy could undermine the value of the dollar or U.S. government bonds.
That is why the metals’ relentless rally to record highs since late last year—gold is up 84% year over year and silver up a whopping 245%—has drawn attention from analysts. In recent months, market commentary has split the move into two distinct narratives. “The argument can be made that we’re losing credibility or something,” Powell acknowledged before insisting that’s “simply not the case.” Just look at where inflation expectations are, he pointed out: “Our credibility is right where it needs to be.”
If investors believed inflation would remain persistently above the Fed’s 2% target, the case for a structural move into gold would be stronger. Instead, Powell noted, short-term inflation expectations have “come way down,” while longer-term measures remain consistent with 2% inflation.
“We don’t take much message macroeconomically from that,” Powell said in response to a question from CNN’s Matt Egan about gold and silver during his press conference. Investors feel differently, with gold and silver at the heart of two contentious trades.
The first is the “Sell America” trade: a short-term, event-driven reaction in which investors rotate out of U.S. assets in response to political shocks, policy uncertainty, or some other kind of sudden change in trade or fiscal outlooks. Episodes such as the “Liberation Day” tariffs and renewed volatility in the dollar have fed that narrative, linking gold’s rise to a temporary loss of confidence in U.S. markets.
The second is the more structural “debasement trade.” That view holds that persistent fiscal deficits, rising debt, and long-run expansionary policy will ultimately erode the purchasing power of the dollar over time, pushing investors toward hard assets like gold regardless of near-term market moves.
Here’s why Powell isn’t bothered—maybe to his detriment.
Another record high, a dismissal from the Fed chair
On Wednesday, gold hit yet another record high, while silver reached a multiyear high earlier in the week. Powell explained that a truly sustained loss of confidence would show up not in asset prices alone, but in unanchored inflation expectations.
“So we look at those things,” Powell said. “We don’t get spun up over particular asset price changes, although we do monitor them, of course.”
Powell did not directly address the longer-term debasement argument, but his emphasis on anchored expectations suggests the Fed sees little evidence that the gold rally reflects a fundamental erosion of monetary credibility. Some economists agree, including analysts at the Bank for International Settlements, who have argued that retail investors have pushed gold away from its traditional safe-haven role and toward behavior more typical of a speculative asset.
Others remain less convinced. Mohamed El-Erian, former chief executive of Pimco, has long pointed to the metals as a signal that “people have lost trust in the U.S. to be a responsible steward of the international system.”
That interpretation aligns more closely with the classical framing of gold as a barometer of confidence. “Gold is the inverse of confidence,” Max Belmont, a portfolio manager at First Eagle Investments, told Bloomberg. “It’s a hedge against unexpected inflation, unanticipated market drawdowns, and flare-ups in geopolitical risk.”
