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US Markets Split on Government Reopening: Gold Hits $4,100 as Fiscal Anxiety Builds

Dadra

Markets are sending conflicting signals as the longest government shutdown in American history enters its 41st day. While stocks rally on hopes of a bipartisan Senate deal to reopen operations, precious metals are surging to historic levels—spot gold trading around $4,100 per ounce and silver breaking past $50 for the first time in years.

This divergence reveals something critical: investors are hedging both ways. Stocks rise on optimism about resolution, while gold climbs on what market analysts are calling “fiscal anxiety.” The question facing investors now isn’t just which signal to trust—it’s whether both can be right simultaneously.

The Capex Super Cycle Thesis: Intelligence Needs Energy

Recent market analysis suggests we’re entering what could be the largest capital expenditure super cycle in modern history, driven by two fundamental forces: the artificial intelligence arms race and the energy infrastructure required to power it.

The pattern emerging from current market dynamics points to a multi-year buildout phase extending through 2031, when the CHIPS Act‘s 100% tax deductibility for capital expenditures expires. This policy framework creates a powerful incentive structure for corporations to accelerate infrastructure spending across AI data centers, nuclear power facilities, grid modernization, and critical mineral supply chains.

What makes this cycle particularly noteworthy is the infrastructure gap. While innovation in AI continues to advance rapidly, the energy infrastructure to support it lags dramatically—especially in the West. China currently leads in energy infrastructure with approximately 150 nuclear reactors under construction, while the US has only a handful in development. This creates a fundamental bottleneck that must be addressed for the AI revolution to continue.

The investment implications are significant. This isn’t just about semiconductor companies or software platforms—it’s about rewiring the entire economy. Nuclear reactor construction, pipeline development, grid expansion, copper mining, uranium production, and silver (now classified as a critical mineral by the US government) all become essential components of this infrastructure buildout.

Gold’s Historic Run: What Central Banks Are Signaling

Gold’s surge to $4,100 represents more than just inflation hedging. What’s particularly significant about this rally is what isn’t happening: margin requirements aren’t being raised, and central banks aren’t selling. In fact, they’re buying.

This marks a fundamental shift from previous gold rallies. Historically, when gold began accelerating, financial authorities would intervene through margin requirement increases or central bank selling to cool the market. The absence of these traditional suppression mechanisms suggests something has changed at the institutional level.

Central banks globally have been accumulating gold for several years now, a trend that accelerated after the weaponization of dollar-denominated assets during the Ukraine conflict. When the US Treasury froze Russian holdings of US Treasuries, it sent a clear signal to sovereign wealth managers worldwide: diversification away from dollar-only reserves represents prudent risk management, regardless of the dollar system’s continued dominance.

The key distinction here is critical: diversifying reserve holdings into gold doesn’t signal the end of the dollar system—it signals a rebalancing within that system. China’s recent issuance of dollar-denominated bonds, which was massively oversubscribed, demonstrates that the US dollar system remains dominant. The dollar as a currency can fluctuate, but the plumbing of the global financial system remains dollar-denominated.

Looking at gold’s trajectory, the metal likely needs consolidation between $4,000 and $4,400 over the coming months after running too far too fast. However, this consolidation phase represents an accumulation opportunity rather than a reason to exit. The long-term thesis pointing toward $5,000 near-term and potentially $8,000 by decade’s end remains intact.

Silver’s Strategic Pivot: From Precious Metal to Critical Mineral

Silver’s 5% surge past $50 per ounce carries additional significance beyond its traditional role as “poor man’s gold.” The US government’s classification of silver as a critical mineral fundamentally changes its strategic importance.

This designation has profound implications. As a critical mineral, silver now falls under national security considerations, potentially allowing government intervention in supply chains or even equity stakes in domestic production. When combined with silver’s essential role in solar panel manufacturing and grid infrastructure, this creates a supply-demand dynamic that goes beyond typical commodity cycles.

The grid buildout required for AI infrastructure and renewable energy integration represents a massive silver consumption driver that most investors haven’t fully priced in. Grid constraints have become strategic bottlenecks, and silver’s conductivity properties make it irreplaceable in many applications.

The Debt Deflation Paradox: Why Growth Is the Only Way Out

Western debt levels have reached what some analysts compare to Napoleonic war levels—a historical benchmark that typically precedes either major conflict or significant economic restructuring. With US debt-to-GDP around 125% and deficits running at 6%, combined with massive unfunded liabilities, the mathematics of the situation leave limited options.

The policy framework emerging suggests a deliberate strategy: reflate assets across multiple classes simultaneously while running the economy hot through supply-side economics. This differs fundamentally from the Keynesian models that dominated policy since the early 2000s.

Historical precedent exists for this approach. After World War II, US debt-to-GDP peaked around 125-130%, then declined to approximately 35% by 1975—not through austerity, but through nominal growth and asset reflation. Stocks, bonds, real estate, and gold all appreciated together during that period, effectively inflating away the debt burden in real terms.

The current policy mix—ending quantitative tightening in December, drawing down the Treasury General Account (potentially injecting nearly a trillion dollars into the system), and cutting the Federal Funds rate below 2.75%—creates conditions for broad asset reflation.

Treasury Secretary Scott Bessent‘s background as a legendary hedge fund manager who helped break the Bank of England provides confidence that this strategy is being executed by practitioners rather than theoreticians. His suggestion about potentially revaluing gold from its current statutory price of $42 per ounce represents the kind of creative thinking that unconventional debt levels require.

The China Factor: Deflation Meets the AI Arms Race

China’s economy presents a stark contrast—experiencing debt deflation with producer prices negative for over a year. This creates both challenge and opportunity in the global rebalancing.

While China lacks the technological lead in AI that the US maintains, they hold a decisive advantage in energy infrastructure. Their massive nuclear buildout and control over critical mineral supply chains position them advantageously for the energy-intensive AI race ahead.

This dynamic necessitates what amounts to an economic truce. With excessive debt on both sides, cooperation becomes essential for mutual growth out of debt crises. The reported détente between the Trump administration and Chinese leadership reflects this economic reality more than diplomatic preference.

China’s weakness in escaping the middle-income trap, combined with excessive overcapacity, gives the US negotiating leverage. But the West’s energy infrastructure deficit means neither side can simply dominate—they must coexist while competing.

Market Timing and the 2031 Inflection Point

The technical market setup suggests a specific timeline. Following April’s unexpected 20% correction—which Wall Street notably sold at the bottom—history indicates that without a recession, back-to-back 20% drawdowns are statistically unlikely.

Historical patterns point to the S&P 500 potentially reaching 7,400-7,500 by spring 2026, followed by a normal 8-10% correction, then a strong rally into the midterm elections. What makes 2026 unique is that the typical midterm election cycle pullback likely won’t occur, having already happened a year early in April 2025.

The demographic overlay strengthens this thesis. Millennials and younger generations entering their peak family formation and investing years typically drive secular bull markets. They invest and consume differently than previous generations, creating sustained demand patterns.

However, the real concern isn’t the next few years—it’s the mid-2030s. The analysis suggests that once artificial general intelligence (AGI) is achieved, likely sometime between 2030-2032, the dynamics change fundamentally. The current cooperation phase, driven by mutual debt concerns and national security imperatives to reach AGI first, gives way to renewed competition.

The sobering projection: the S&P 500 potentially peaks around 15,000 in 2031 and doesn’t reach that level again until 2041. That decade of flat returns would favor deep value names, cash, and real assets—particularly gold and Bitcoin as stores of value.

Valuation Concerns and the Michael Burry Warning

Recent warnings from “Big Short” investor Michael Burry about companies overstating profits through extended asset depreciation schedules—potentially $176 billion in under-reported depreciation through 2028—deserve consideration but require context.

The challenge with valuation concerns during technological super cycles is that traditional metrics often prove inadequate. We’re operating in what economists call a “market for lemons” scenario—a condition of information asymmetry where the intrinsic value of AI infrastructure cannot be determined with certainty for decades.

When uncertainty is high, the most compelling narrative captures market imagination rather than spreadsheet precision. This doesn’t mean bubbles can’t form—in fact, bubbles are a normal evolutionary feature of major technological waves. The 1892-1893 financial crisis occurred because investors thought railroads were a scam, yet railroads obviously transformed the economy.

The key is distinguishing between bubble warnings for specific overextended names versus broad sector dismissals. Some companies like Palantir trade at valuations that can’t be justified by traditional CFA metrics—that doesn’t mean the entire AI infrastructure buildout is a bubble. Nuclear power companies, grid infrastructure providers, and critical mineral miners aren’t at bubble valuations yet.

Portfolio Construction for the Reflation Era

The strategic allocation framework emerging from this analysis suggests:

Core Holdings:

Tactical Opportunities:

Risk Management:

The Mining Company Execution Challenge

Gold miners face a critical transition. The easy money from gold’s run from $2,000 to $4,000 has been made. Now these companies must execute operationally—a significantly more difficult proposition.

Mining is notoriously difficult to model on spreadsheets that adhere to quarterly Wall Street expectations. Mines flood, grades vary, jurisdictions change regulations. The operational leverage that makes miners attractive on the way up creates downside volatility when execution falters.

For investors in junior miners and large-cap producers, the question becomes: Has the major upside been captured, and should capital now shift to physical accumulation rather than equity leverage? This is particularly relevant for positions that have already delivered substantial gains.

The counter-argument is that we’re still early in this cycle, with gold potentially heading to $5,000-$8,000 by decade’s end. But the risk-reward calculation changes when assets are no longer deeply undervalued—especially in operationally complex businesses.

What Comes Next: The Bretton Woods 2.0 Framework

The current environment feels less like crisis management and more like deliberate restructuring. The post-World War II Bretton Woods system, warned about by Keynes in 1945 as unsustainable, is being rewritten in real-time.

Keynes predicted that making the dollar the global reserve currency without proper adjustment mechanisms would hollow out American manufacturing, reduce living standards, and trigger populism. Seven decades later, his warning proved prescient.

The solution emerging involves several components:

Asset Revaluation: Potentially marking up gold from its statutory $42 per ounce to market prices, creating over a trillion dollars in value on the US balance sheet that could be deployed strategically.

Government Balance Sheet Management: Taking minority equity stakes in critical infrastructure and mineral assets, similar to the Intel position recently announced. This represents resource nationalism adapted for democratic capitalism.

Broad Asset Reflation: Running all asset classes higher simultaneously—stocks, bonds, real estate, gold, silver, and crypto—to reflate away debt burdens while maintaining the dollar system’s structural dominance.

Supply-Side Growth: Implementing policies that allow the economy to run hot without triggering problematic inflation, fundamentally different from the monetary stimulus approach of previous decades.

The New York Federal Reserve President Williams‘ recent comments about potentially needing asset purchases to stabilize the system signal that policymakers understand the toolkit available and are willing to use it.

The Trust Factor and Why This Time Feels Different

Markets have finally seen behind the curtain. The general investing public now recognizes what sophisticated investors have understood for years: the fiat currency system has structural fragilities that require ongoing management.

This loss of naive trust doesn’t mean system collapse—it means portfolio adaptation. Once investors recognize that debt is being monetized, even if rates fall, gold and hard assets respond accordingly. You can’t get the genie back in the bottle.

What’s different about this cycle is that it’s being run by practitioners who understand both theory and practice, backed by political leadership willing to think unconventionally. Whether this represents innovative policy or fiscal desperation, the answer is likely both simultaneously.

The key for investors is recognizing that this period through 2030-2031 represents a unique window driven by national security imperatives to achieve AGI first. Countries need each other to play nice in the proverbial sandbox while growing out of debt crises. The cooperation phase won’t last forever, but while it does, it creates conditions for broad asset appreciation.

Forward View: What to Watch

Several developments will signal whether this thesis is playing out as projected:

Near-term (Next 6-12 months):

Mid-term (2026-2027):

Long-term (2030-2035):

The markets are split today because both signals are valid. Stocks can rally on optimism about cooperation and growth, while gold rises on recognition that the path forward involves monetary expansion and currency debasement—even within a dollar-denominated system.

For investors, this isn’t about choosing between optimism and anxiety. It’s about positioning for an environment where both are justified, where nominal asset prices rise across categories, and where understanding the difference between the dollar system and the dollar itself becomes essential to navigating the decade ahead.

The post-World War II restructuring took thirty years to complete. We’re in the early stages of a comparable rebalancing—one that won’t feel like crisis every day, but will fundamentally reshape how wealth is stored and economies are powered. The winners will be those who recognize this transition early and position accordingly across multiple asset classes rather than betting everything on a single outcome.

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