jakiro
Author: Ray Dalio
Introduction: A week that changes everything
Some weeks seem ordinary, but they become a turning point in the undercurrent.The last week is probably such a moment that rewrites our assumptions and forces us to rethink those seemingly certain beliefs.Gold and silver, long regarded as the default choice for safe-haven assets, may be entering a completely different chapter.The question is whether we can detect it in time or only realize it afterwards.
After studying the market for a lifetime, you will find that the most important moments are often not conspicuous at the time.They are not accompanied by flashing lights or loud declarations that claim that the trend is over.Instead, they appear subtle and quiet, and their importance is revealed only when looking back afterwards.This is exactly why they are difficult to control and easily overlooked.What we may have witnessed last week is perhaps a turning point in the gold and silver cycle.
Over the years, the story of gold and silver has been clear and consistent: the government has borrowed heavily, the central bank has printed money on a large scale, and the purchasing power of currency has declined.In this context, holding precious metals is almost a one-way bet.They are antidotes to reckless policies, insurance for systemic failures, and value anchors when paper commitments become suspicious.This logic holds true, and those who hold gold and silver are rewarded.However, no narrative, no matter how reasonable, will last forever.Every force in the market is cyclical.When debt is too high, it triggers deleveraging; when inflation soars, it eventually triggers tightening; when risks are mispriced, it is eventually corrected.The same is true for safe-haven assets, which shine in certain cycle stages and are overshadowed when the conditions that drive their rise begin to reverse.
This reversal signal is emerging.They aren’t eye-catching enough to make headlines, but they’re obvious to those who are following the underlying mechanisms.Bond yields are climbing, which changes the opportunity cost of holding precious metals.If you can get a good return from government bonds, holding gold that does not generate returns becomes less attractive.This relative attractive change may seem technical, but overall changes the flow of billions of dollars.
Meanwhile, central banks are now starting to tighten after years of injecting liquidity.Liquidity is oxygen in all markets.When liquidity is abundant, almost all assets will rise, including gold and silver; when liquidity is pulled away, competition for capital intensifies.In such an environment, even the most powerful narrative can lose its influence.That’s why I think last week was important.It marks a potential turning point in the cycle, and once reliable investments can become vulnerable.
Gold and silver have not collapsed, nor have their role as long-term store of value disappeared, but the force that drives them up is weakening, and the factors that drag them down are growing.Looking back at history, this pattern has appeared repeatedly.In the late 1970s, precious metals soared due to out-of-control inflation.However, by the early 1980s, rising interest rates and tightening monetary policy brought gold a two-year bear market.Investors who assumed that yesterday’s effective strategies would last forever have paid a heavy price.They mistake a phase of the cycle for eternal truth.
The danger today is similar.It’s not that gold and silver are worthless, far from that.They remain powerful diversified investment vehicles, protectors of long-term wealth, thriving under certain conditions.But last week may mark the end of a favorable phase and the beginning of an unfavorable phase.If so, it may no longer be reasonable to continue to hold them with past beliefs.That’s why it’s so important to focus on turning points.They are the difference between wealth growth and erosion.You can identify the end of the trend and protect yourself from downside risks.But if you ignore signals because they conflict with your beliefs, you will be caught off guard.
The hardest part is emotion.People become attached to their investments, especially those that perform well.Gold and silver have been a safety blanket for many investors over the past decade.Now the characters who question them are almost like betrayal.But the market doesn’t care about your emotions or loyalty.They operate in causality, no matter what you think should happen.Therefore, the prudent approach at this stage is not blind selling, but calm reflection.Ask yourself: Have the drivers of the previous stage reached their peak?Are new drivers gathering strength enough to reverse the cycle?If the answer is yes, the conclusion is obvious: you have to adapt, even if it makes you feel uncomfortable.
Last week may be remembered as the turning point in gold and silver’s shift from accumulation to distribution.If so, it will be one of the quiet moments that define the future of global portfolios.We can’t be sure right away, but waiting for confirmation often means you’ve missed the turning point.This is the essence of successful investment: the willingness to see what reality is, not what you want it to be; and the courage to act when the signal indicates a cycle changes.Most people can’t do it.They are obsessed with familiar things, defend old stories, and stay for too long.The few who can get away from and recognize trends are the ones who protect wealth and prepare for the next stage.
So while it may be difficult to accept, we have to face this possibility: the past week may have changed everything for gold and silver.
The historical role of gold and silver as safe-haven assets
One of the biggest forces driving the market is the relationship between yield and liquidity.This is not an abstract concept, but a leverage that determines the flow of funds, which assets get returns, and which assets lose their attractiveness.At present, these two levers are changing in ways that directly threaten the investment logic of gold and silver.
First look at the rate of return.For much of the past decade, investors have been in an environment with near-zero interest rates.In this case, holding gold or silver that does not generate returns has little cost because the returns of alternative assets are insignificant.This environment provides a free runway for precious metals.They can rise with narratives and fears without being undermined by safer, profit-producing competition for assets.But now things have changed.Bond yields are rising and are rising in a way that changes investment logic.A 5% Treasury yield may not be exciting for those pursuing fast returns, but it is an attractive option for institutional investors who manage trillions of dollars.It is safe, liquid, and has a reward waiting.When such an option exists, the relative attractiveness of holding metals that do not generate returns is significantly reduced.
This shift does not mean that gold and silver have no effect, but that the margins of preference have changed.Investors will ask: Why do I have assets that don’t have cash flow when I can get a considerable return from government bonds?Amplify this problem to pension funds, sovereign wealth funds and asset management companies and you will see how the direction of funds starts to tilt.Even small-scale reallocation from metal to bonds can create an irresistible drag.
Then there is liquidity.If the rate of return is the price of money, liquidity is quantity.Over the past decade, central banks have injected a lot of liquidity into the system through quantitative easing, asset purchases and ultra-low interest rates.This environment has raised almost all assets, especially gold and silver.Excess cash flows in the system, and investors have the spare time to allocate to hedge and diversify investment assets, so precious metals benefit a lot.However, now the situation is the opposite.Central banks are pulling out liquidity by reducing balance sheets, getting bonds maturity and maintaining stricter policies than in recent years to combat inflation.
This fluid withdrawal is like taking oxygen out of the room.Suddenly, every asset is competing for a smaller pool of capital.In this competition, hedging assets that do not generate returns often lose priority first.Imagine: When liquidity is abundant, investors are free to diversify their investments widely, including assets that do not generate returns; when liquidity is scarce, they become more picky and tend to provide income, growth, or direct protection.Precious metals, while providing long-term stability, have no cash flow and therefore rank less in the priority list.
These two forces—ascending yields and tightening liquidity—are not temporary fluctuations, but structural shifts that reflect deeper problems.The government is burdened with historic debt levels, which makes higher yields a necessity to attract buyers.Central banks are struggling with tensions in fighting inflation and avoiding system collapse.These dynamics will not be resolved within a week or a month.They define the entire cycle phase.That’s why the pressure on gold and silver may last longer than many people expect.
History has a clear lesson on this.In the early 1980s, gold fell from above $800 to below $300 when Paul Volker raised interest rates to nearly 20% to curb inflation.In a few years, the fundamentals of gold have not changed: it is still scarce, durable, and still an asset to store of value.What changes is the environment.Suddenly, yields become attractive and liquidity becomes scarce.The cycle turns, gold pays the price.Although the situation today is not exactly the same, the pace is similar.The upward pressure of yield and the downward pressure of liquidity are sending the same signal: wind directions that once supported precious metals may be turning against them.
Why cycles are more important than narrative
The lesson is not about panic, but about understanding causality.If you hold gold and silver, you need to ask: Is the force driving them up still dominant, or is the factors that drag them down stronger now?Ignoring this shift would be expensive.The market doesn’t care about your loyalty to an asset.They care about capital flows, incentives and returns.
In fact, this means investors should reevaluate asset allocation.This does not mean giving up precious metals altogether, but rather questions whether they should still occupy the same weight in the portfolio as when they are low-yield, liquidity-enriched.The world has changed, and the configuration must also change.
The difficulty with this change is that it does not declare itself in a single headline.It occurs week by week through the steady rise in yields and the gradual withdrawal of liquidity.It feels like background noise until you suddenly realize that the environment is completely different.This is what we are experiencing now.
Successful investors must learn to see these background changes before they become obvious.You have to connect the points of monetary policy, liquidity flow and asset performance.Most people don’t.They only react after price changes.But those who can take a step back, study the mechanism of causality and adapt as soon as possible can protect their wealth.
The bottom line is simple: gold and silver are no longer competing in areas without competitors.They now compete with assets that provide profits and security, and are in a world where liquidity shrinks rather than expansion.All this changed everything.This does not destroy the long-term investment logic of precious metals, but it means that the cycle has changed.Those who fail to recognize this will experience the consequences of holding it for too long in a tragic way.
Liquidity loss and its impact on the market
One of the most misunderstood aspects of the market is the concept of “safety”.Investors often regard safe-haven assets as a fixed and eternal category: gold is safe-haven assets, the US dollar is safe-haven assets, and treasury bonds are safe-haven assets.But the truth is that security is not absolute, but relative.It changes with time, environment and investor psychology.Now, what we see is that the direction of capital seeking hedging is changing.
Gold and silver have taken prerogative positions for decades.Whenever fear rises—whether it is a financial crisis, a war or a reckless monetary policy—investors instinctively flee to precious metals.They become the default protection storage place, waiting for the storm to pass.This pattern lasts so long that many people think it is eternal.But nothing in the market is eternal.The expression of fear evolves just as the expression of greed.This reality has become even more obvious in the past week.
We see that the capital that once almost entirely flows to gold and silver is now spread across a wider range of security options.Geopolitical shocks no longer push up precious metals with the same regularity.Instead, funds are flowing to defense and energy stocks, relatively strong currencies, and digital assets that younger generations believe are replaceable.Fear has not disappeared, on the contrary, it may have intensified, but the tools for expressing fear have become diversified.
This is important because the market is not only about fundamentals, but also about capital flows.If investors believe that digital assets or defensive stocks are better hedges to instability, these flows will support these assets at the expense of precious metals.As the flow of funds changes, the price changes accordingly.Gold and silver may still have intrinsic value, but their ability to capture marginal fear funds is no longer guaranteed.
It is worth exploring the reasons for this transformation.Part of it is generational differences.A new generation of investors grew up in the era of digital currencies and blockchain, and they believe that protection can come from decentralization rather than shiny metal stored in vaults.For them, Bitcoin or other digital store of value is not a speculative novelty, but a legitimate alternative.This did not make gold obsolete, but it did dilute its monopoly position as a general safe haven asset.
Another part of the reason is practical.In an interconnected global economy, security is often found in fast and flexible use of assets.Sovereign wealth funds or large institutions may find it easier to hedge geopolitical risks by investing in energy or defense companies that directly benefit from turbulent moments than holding metals that passively wait for their sentiment to rise.These choices may not always be rational in the long run, but in the short term they determine the flow of funds, and the flow of funds determines the price.
There is also a question of trust.In the past, distrust of government and financial systems automatically translated into trust in gold and silver.But now, distrust is more dispersed.Some distrust flows to gold, but some also flows to digital assets, hold foreign currencies, and even real estate in politically stable areas.Security becomes decentralized.This decentralization of fear means that gold and silver can no longer assume that it will capture most of the protective capital as it used to be.
This does not mean that precious metals have lost their use.They remain long-term stores of value, protecting wealth from currency depreciation.But in the short term, their role as a major safe-haven asset is being challenged.When monopoly becomes a competitive market, returns change, profit margins shrink, and stability weakens.What was once reliable became uncertain.
The key insight is that investors have not given up on the idea of hedging.Instead of becoming reckless, they are dispersing the definition of “protection”.The fear still exists, just finding a different outlet.This psychological change, although seemingly subtle, may redefine the entire cycle of precious metals.
Safe-hazard demand shifts to alternatives
From a causal perspective, the cycle is obvious.First, instability increases; second, investors look for security; third, security options expand; fourth, capital is dispersed among these options.As a result, gold and silver, once dominated the third step, must now share this step.In the market, sharing capital flow is equivalent to losing momentum.
This is important because most people are still anchored to the old assumption that gold and silver will always soar in crisis.They would think that past capital flows must continue, even if the evidence suggests that is not the case.This is how they are trapped, holding positions that no longer perform as expected.
It is wiser to recognize the evolution of risk aversion needs.This does not mean giving up precious metals, but adjusting expectations and strategies.Gold and silver still have a role, but are no longer the only insurance policy.They are a layer of protection, not the entire fortress.
So when we say that the past week may have changed everything, partly it means: it marks a clear break in the monopoly of precious metals as a safe-haven asset.Fear is still there, but the capital associated with fear is being expressed in new ways.This shift may not reverse, and in fact, it may deepen further as more investors adapt to the alternative.
For those willing to face reality, this is both a warning and an opportunity.The warning is not to over-rely rely on yesterday’s assumptions; opportunity is to diversify, think more creatively about protection, and be consistent with the way fear actually drives capital flows.
Gold and silver once dominated.Under appropriate conditions, they may rise again.But recognizing the expansion of the definition of hedging is crucial.To ignore this is against the trend, accepting it means adapting.And adaptation is the only way to survive in an evolving market.
Fundamentals and timing: Investor traps
One of the biggest mistakes for investors is to confuse fundamentals with timing.They assume that if an asset has a strong fundamentals, it is always a good investment.But the market doesn’t work that way.Even if the asset fundamentals are good, if you buy in the wrong stage of the cycle, you may lose half of your value.This is the current danger of gold and silver.
If you take a step back, the fundamentals of gold and silver have not changed.They are still scarce, durable, and widely recognized as a store of value.They cannot be printed by the government, have no opponent’s risk, and have saved their wealth through wars, depressions and currency collapse.These truths are as effective today as they were centuries ago.But fundamentals only tell you what the asset is, and the timing tells you how the asset is priced in the market.Pricing determines whether you make money or lose money.You may hold the best assets in the world, but if you own them in the wrong cycle, the market will make you feel like you are holding something worthless.This is the paradox that most investors fail to understand.
Think about the early 1980s.Gold soared more than 20 times in the 1970s, and fundamentals did not deteriorate.It is still a scarce metal and a hedge against currency depreciation.But cycles have changed, interest rates have risen, liquidity has tightened, inflation has been controlled, and the capital flows that once supported gold have reversed.The result is a brutal bear market that lasted for twenty years.Any investor who confuses fundamentals and timing will suffer greatly.
The same principle applies today.The fundamentals of gold and silver may still be excellent, but if the environment changes through rising yields, shrinking liquidity and competition for alternative safe-haven assets, their prices may stagnate or fall even if the inherent quality remains unchanged.Ignoring this will lead to a long and painful retreat that destroys rewards and confidence.
That’s why timing is so important.Investing is not only about identifying good assets, but about understanding when these assets will be rewarded by market capital flows and psychologically.Investors holding gold during currency expansion and currency depreciation cycles seem smart; investors holding gold during tightening cycles and rising yields seem stupid, although the assets themselves have never changed.
The psychological challenge is the story of people falling in love with assets.They tell themselves: “Gold is real money, always valuable, protect me.” These are true in the long run.But when this truth becomes a reason to ignore timing, it becomes a trap.They hold on stubbornly, and the cycle goes backwards, and the losses accumulate, but refuse to adapt because they believe that fundamentals will save them.But fundamentals cannot save you at the wrong opportunity.Fundamentals only ensure that assets remain valuable decades later and do not protect you from fluctuations in the middle that can destroy your capital or make you miss other opportunities.
Therefore, successful investors think about the two separately.They respect fundamentals, but act according to timing.Think about how professionals deal with bonds, stocks, or currencies.They ask not only if the asset is fundamentally strong, but if the environment supports it now; where the capital is flowing; what are the incentives for investors; and whether the cycle is in a favorable stage.Gold and silver must also apply the same discipline.Otherwise, it is to confuse belief with stubbornness.
Now, the signal indicates that the cycle of precious metals has become less favorable.This does not negate their fundamentals, but simply means that timing may no longer be on their side.If you continue to hold onto the belief that conditions are different, you may mistakenly regard a long retracement as safe.This security is an illusion.
Discipline, adaptation and a clear view of reality
This distinction is crucial because it distinguishes between those who protect wealth and those who lose it.Investors who can say that “gold is valuable but not at this cycle stage” have the flexibility to preserve capital and redeploy when conditions improve.Investors who insist on “gold is always good, no matter what” tie themselves to narrative rather than adapting to reality.
Ultimately, fundamentals tell you what to hold and timing tell you when to hold.Ignore either side of the equation and you will face unnecessary risks.Holding gold and silver without considering timing is like sailing without considering tides.The boat may be strong, but if the tide recedes, you will still be stranded.
Therefore, what investors must ask is not “Are gold and silver good assets?” The answer is always yes.The real question is: “Are gold and silver the right assets at this cycle stage?” The answer may be changing.
The wrong timing is not only a financial danger, but also a psychological one.Long-term poor performance can erode confidence, leading to being forced to sell, and even giving up precious metals completely before the cycle becomes favorable again.This is why awareness of timing is not optional, but the key to survival.
A prudent approach is to respect fundamentals while being consistent with the cycle.This means reducing exposure when the environment is unfavorable, preserving capital during the drawdown period, and preparing to increase exposure when conditions are once again favorable to precious metals.This discipline distinguishes resilience from regret.
Gold and silver are always important, but they won’t rise forever.If the past week marks a change in timing, relying solely on fundamentals won’t protect you.Recognizing this difference and taking action may be the difference between protecting wealth in the coming years and watching it erode.
Conclusion: Action is earlier than knowledge
The hardest part about investing is not understanding the mechanism.Anyone can learn how interest rates affect currency, or how liquidity affects asset prices.The most difficult thing is psychological adaptation.When reality changes, most people can see data and read headlines, but few people can get rid of their assumptions and adjust their strategies in time.This is why the cycle punishes the majority and rewards the minority.
Now, gold and silver are testing this discipline.Over the years, the logic of precious metals has been strengthened by consistent forces: monetary easing, currency depreciation and global instability.Investors build strategies around these assumptions, believing that precious metals are the ultimate hedge and will not fail.They have been right for a long time.But the conditions have changed.Returns rise, liquidity is lost, and risk aversion demand is diverted by alternatives.The cycle that once strongly supported gold and silver is no longer the cycle today.
The question is whether investors can accept and act accordingly.Most people won’t.They will stick to old stories and insist that precious metals must continue to behave because they have been.They will treat each small rebound as confirmation, each decline as manipulation, and each warning signal as irrelevant.They will rationalize, and this rationalization will lead to losses.
A successful few can strip away emotions.They don’t ask what should be happening, but what is happening.Instead of conserving the old narrative, they observe actual capital flows, incentives and psychological changes.When they see these changes, they act, even if it means defiance of past beliefs.
This discipline separates the adapter from the stubborn.In history, most people resist adapting at every major turning point.When stocks enter a long-term bear market, investors hold them because they cannot recognize changes in conditions; when bonds enter a long-term retreat, people overweight because they remember good times.The pattern is always like this: people fight yesterday’s battle, stick to yesterday’s strategies, and today’s reality erodes their wealth.
Gold and silver now face the same risks.Discipline investors recognize that they may need to be reduced, not because they lack value, but because the environment no longer rewards them in the same way.This discipline is not to give up precious metals forever, but to protect current capital for effective redeployment in the future.
Adaptation also means broadening your horizons.If the definition of security is changing, the portfolio must reflect this.Rather than relying on a single hedge, considering multi-level protection: partly in precious metals, partly in bonds, partly in defensive stocks, partly in alternatives.This diversification of defense is resilience in a changing world.
The key is to see the reality clearly without prejudice.Reality is not what you want, nor is it what your emotions think should be.It is the sum of the forces driving the market: yield, liquidity, policy, psychology.These forces are not static, so your strategy cannot be static.To succeed, you have to evolve with them.
Discipline needs to be humble.No one can predict perfectly.You can never be sure if the turning point is coming.What you can do is interpret the probability and manage the risk accordingly.If precious metals have a chance of winning, reducing exposure is discipline, even if you are not sure.If the chances of winning will rebound later, even if it feels too late, increasing exposure is discipline.
This mentality is rare because it is uncomfortable.It forces you to admit that you might be wrong, or that the conditions you depend on have disappeared.Most people avoid this discomfort by double the old beliefs.But avoid not protecting wealth, only by adapting.
The past week may have been a quiet but critical signal, marking the power that supports precious metals gives way to the forces that restrict them.If true, the adapter will preserve capital and the resister will watch it erode.
The real challenge now is not whether gold and silver are good or bad, but whether you have the discipline to realize that the story has changed.Precious metals will not disappear, and they will still be valuable for decades.But your wealth is not built over the decades of theory, but through year after year, cycle-to-cycle cycles, by aligning with current important forces.
The lesson is simple but difficult to practice: adapt or be punished.The market will not succumb to your preferences and will not reward you for your loyalty to your assets.They only reward those who can see the reality and act accordingly.A week that could change everything is a test of this discipline.Those who pass will move forward with wealth, and those who fail will learn again that stubbornness is the most expensive trait of investors.
