The UNTHINKABLE is About to Happen to the FED (& Why Gold and Silver are Next)

The Fed is now a passenger

Three senior Goldman traders, on camera: the Fed is now "more passenger than driver" — the institution whose job is setting the price of money is no longer steering. The same week, Goldman's metals desk quietly told clients gold's bull market isn't over — the drop an "elongated pause," with new record highs ahead.

The trillion-dollar borrowing wave

The new driver of interest rates is a borrowing spree that out-borrows the US government itself: Big Tech's AI buildout. The hyperscalers (Microsoft, Amazon, Meta) need power plants and chips — "the most capital-hungry investment in history." They're rich but not rich enough, so they borrow: AI debt runs about $500 billion this year (roughly 15% of quality US corporate borrowing), with about $1.3 trillion expected next year — a handful of tech firms issuing more debt than the US government.

The "savings glut" era is over: the pool of bond-buyer money is finite, and AI companies, deficit governments, defense, and reshoring all reach into the same pot. Investors sell existing government and mortgage bonds to fund the new debt, bond prices fall, yields rise — and those yields anchor mortgages, car loans, cards, and the government's own interest bill. The "unthinkable": the Fed sets only the overnight rate, while the long-term rates that mortgages and retirements depend on are set by bond markets — "the lunatics" — pulled by a trillion-dollar borrowing wave the Fed didn't create and can't switch off. It "can tap the brakes a little, but it doesn't have its foot on the gas."

Worse, the AI boom is implicitly inflationary: the economy must deliver the AI future now, while the productivity payoff sits "somewhere out there in the future." Paying with capital today in hope of tomorrow's gains lifts rates before the gains arrive. Treasury buybacks against $1.3 trillion of incoming AI debt? One trader called them "a firecracker in a hurricane."

Why smart money moves to gold

When the Fed loses control, smart money's answer is trust. When currencies and their managers are trusted, cash and bonds feel fine; when nobody's steering, wealth hides where "no central banker can touch" — gold, across 5,000 years of empires, and "mad cousin" silver (more volatile, moves later, hits harder). Long rates set by unstoppable borrowing plus inflationary borrowing means cash is "a guaranteed leak," and government bonds are no longer a safe haven — the debt flood threatens them. "Big patient money" moves to wealth with no CEO, no board, no issuer: "you can't print gold." Trust in government paper is already cracking: every escape route for over-indebted governments — inflate it away, or hold rates down while inflation runs hot — is gold-positive.

The central-bank gold bid

Goldman's Tony Kim gives the numbers: gold peaked in January, roughly 20% below — an "elongated pause," with "new highs in the future," driven by Fed-leadership uncertainty (the Warsh nomination) and the US–Iran conflict scrambling reserve flows into gold.

The centerpiece is central-bank demand, and the math is brutal. About 3,500 tons of gold are mined yearly — the entire supply. Before Ukraine, central banks bought 400–500 tons a year ("boring"); now they buy 1,000+ tons a year — doubled, swallowing roughly a third of new mine supply, never sold, vaulted permanently. The trigger was 2022, when the West confiscated Russia's dollar reserves; every central banker learned: "hold our wealth at home in our basement where we can touch it." With residual supply so thin, "a trickle" of private buying moves prices sharply — even a modest wave of regular buyers fights over a smaller pile, and prices jump far more than the money flow suggests.

The old rules are broken

Per Goldman, the rule that "higher rates kill gold" is broken: today's higher rates are driven by fiscal fear, and scared investors buy gold. Official bond-market meddling is perversely gold-bullish. Silver is the wilder instrument — a much smaller market, half of demand industrial, only about 20% investment demand — where spikes are enormous ($50 to $80 to $100) and 20–30% "air pockets" appear. Bigger upside, stronger stomach required; "silver has the most lunatic traders in the world." Goldman's quoted advice: "still bullish on gold... [around] the 4,000 level, buy it" — a forecast, not a promise (and physical gold has real downsides: premiums, storage, insurance).

The takeaway

The starkest warning: "doing nothing is going to be dangerous." Cash is guaranteed to lose over time; salaries shrink in real terms. Those with money can protect themselves — "that can also be you" — but the paycheck-to-paycheck will struggle unless they act. (He pitches a free two-hour live training, "The Index Fund Trap.") When bad data arrives, frightened money flies to bonds — be positioned before it does.