Expert Insight
The real threat to wealth isn’t a crisis event. It’s the slow, compounding erosion of dollar purchasing power already underway.
With the federal deficit hitting $1.8 trillion in the 2025 fiscal year and the CBO projecting that figure more than doubling by 2036, institutional investors have moved from skeptics to structural bulls on gold.
The more pressing challenge for most investors isn’t whether to own gold but how to own it without surrendering liquidity or triggering a punishing tax event when life demands cash.
Frank Trotter, President of Battle Bank, outlines how metals-backed lending solves that problem, allowing investors to borrow against vaulted holdings rather than selling them.
There is a question every gold owner eventually faces, and most never fully answer: what scenario am I actually preparing for?
It sounds obvious. But the honest answer usually reveals a gap between the reason someone bought gold and the way it sits in their portfolio—unmoving, unproductive, quietly doing what it was always supposed to do while the bills keep coming in dollars.
The Scenario Is Already Here
Most investors – and that includes me – think of gold as insurance against any one of a number of large events such as a dollar collapse, a geopolitical shock, or a financial system seizure. Those risks are real and we would anticipate that gold would perform well in each case. But the more important scenario is the one unfolding in slow motion, right now.
Call it the debasement trade. The United States federal government spent $7 trillion in fiscal year 2025 against receipts of just over $5.2 trillion. That is a deficit approaching $1.8 trillion. The Congressional Budget Office projects that number swelling to $3.1 trillion by 2036, with the federal government paying over $10 trillion in interest alone over the coming decade. The national debt-to-GDP ratio ended 2025 near 99%, against a historical average of 53%.
Gold surpassed $5,500 an ounce in the early days of 2026, with silver rising past $80 and platinum hitting its first record highs since 2007. These are not crisis-driven spikes. They are the market’s verdict on a structural monetary reality.
The underlying driver is arithmetic. When money supply expands faster than the economy produces goods and services, the purchasing power of each dollar declines. That process has been underway through this century, and especially since the pandemic-era monetary expansion flooded the system with dollars. This historic rise in prices reflects a fundamental shift in how investors view precious metals—not as short-term safe havens, but as structural hedges against the decline in the day-to-day value of their US dollars.
The scenario you are protecting against is not an asteroid. It is the quiet, compounding erosion of what your dollars will buy ten years from now.
Reported core PCE inflation stood at 3.1% in January 2026. That is well above the Federal Reserve’s stated 2% target, which is increasingly regarded by experienced analysts as a political aspiration rather than an achievable policy outcome. For middle-income American households whose spending skews toward food, shelter, energy, transportation, and healthcare – all of which have risen far faster than headline CPI – we believe the lived inflation experience is closer to 8-9%.
- Ground beef: up 72% over five years.
- Auto insurance: up more than 50% in three years.
- Electricity costs: rising at 7% annually even before the recent events in the Middle East.
There is the old saying that gold cannot be printed. Supply constraints are not an artifact of sentiment; they are geological fact. When fiat currency expands at will, a fixed-supply asset does not merely hold value — it appears to appreciate relative to the currency that is being diluted. In reality of course the value of gold holds relatively steady while the value of the US dollar has declined.
What the Largest Investors in the World Are Doing
Institutions are famous for ignoring gold most of the time. It’s Warren Buffett’s “barbarous relic”, after all. But the big players have been paying attention lately. Individual investors often wonder whether institutional consensus has already captured the gold trade. Our answer is almost certainly not.
Gold’s share of total global financial assets has risen to about 2.8% as of the third quarter of 2025. That sounds significant until you consider the scale of the shift required to move it meaningfully higher. “The Street” has written that J.P. Morgan says that if private investors move from roughly a 3% allocation to 4.6% over the coming years, the incremental demand could justify a price range between $8,000 and $8,500 per ounce. The implication is that western private investors remain structurally underallocated.
J.P. Morgan has become one of the most prominent institutional bulls in this cycle. The bank now expects gold to reach $6,300 by the fourth quarter of 2026, citing an “ongoing, unexhausted trend of reserve diversification” and stating it remains “firmly bullishly convicted in gold over the medium term.” The bank lifted its projection for central bank gold buying to approximately 800 tonnes in 2026. Goldman Sachs has reaffirmed its year-end price target of $5,400 per ounce, signaling continued conviction in the underlying drivers of demand even after a sharp 10% correction in March 2026.
I’ve written before about the most striking institutional call which came from Morgan Stanley CIO Michael Wilson, who recommended allocating 20% to gold. This replaces half the bond allocation in the traditional 60/40 portfolio, and he argues that bonds have lost their safe-haven status amid persistent inflation and unsustainable debt.
For many years we have heard financial advisors and analysts recommend an allocation of between 5% and 15% of a diversified portfolio to precious metals, depending on risk tolerance and financial goals. Conservative investors anchored to wealth preservation tend toward the higher end of that range; growth-oriented investors balance gold with other hard assets. The consensus range has been shifting upward as gold’s role has evolved from niche hedge to core portfolio component.
The framework that follows from this data is straightforward: a meaningful but not dominant allocation somewhere between 10% and 15% for investors who share the macroeconomic view outlined here, with the position constructed to do more than sit inert on a shelf.
The Liquidity Problem and What to Do About It
Here is where most precious metals discussions stop, and where the real work begins.
Physical gold is not a stock. Unless you are storing it with a dealer, you cannot click a button and convert it to spending power by the next day. Unlike a margin loan on a brokerage account or a line of credit against a securities portfolio, precious metals have historically required you to sell in order to access their value. That means realizing a taxable event on any appreciation. It means potentially selling during a drawdown when life demands cash. It means losing exposure to the asset at precisely the moment the macro thesis is playing out most powerfully.
The IRS classifies gold and other precious metals as collectibles, subject to a 28% capital gains rate on long-term holdings—not the 15% or 20% applicable to equities (and of course check with your accountant).
For investors who have held gold through a multi-year appreciation cycle, the tax cost of liquidation is not trivial. It can represent the difference between preserving real wealth and merely locking in nominal gains that inflation then quietly reclaims.
This is the core tension of physical gold ownership: the characteristics that make it an excellent long-term store of value – its physical nature, its scarcity, its independence from counterparty risk – are also the characteristics that make it less liquid than financial assets.
The solution is not to avoid physical gold. It is to structure your gold ownership so that you can access its value without selling it.
Metals-backed lending has matured considerably. You can obtain a line of credit against vaulted physical gold, silver—allowing you to borrow against the metal at favorable loan-to-value ratios without triggering a taxable disposition. The metal stays in vaulted. The macro thesis remains intact. The owner accesses dollars for opportunities, expenses, or capital needs.
This approach mirrors what sophisticated real estate investors have understood for generations: the goal is not to sell an appreciating asset to access capital. The goal is to borrow against it, use the proceeds productively, and let the underlying asset continue to compound. With gold at current valuations – and with institutional price targets suggesting meaningful further upside – the logic of borrowing against metal rather than selling it is compelling.
Building the Position Practically
A few principles for investors thinking through allocation and structure:
- Physical ownership should be the foundation. ETFs and mining equities have their place, but they introduce counterparty risk and, in the case of miners, operational risk that is distinct from the commodity itself. For the inflation-protection and currency-hedge functions gold serves best, physical metal – held in an insured vault – is the cleanest expression.
- Dollar-cost averaging can remain sensible at current prices. Gold has delivered attractive annual returns of approximately 12% over the twenty years ending in 2025, but its price can be volatile—it sank nearly 40% from September 2011 to December 2015 before recovering. Investors who concentrate purchases at market peaks have historically been rewarded with patience, but the process is more comfortable when built over time.
- The scenario you are protecting against is already visible in the data. The institutional consensus is forming around it. The only question left is whether your position is structured to let the thesis fully play out.
Frank Trotter
P.S. Note from the editor: Frank mentioned the ability to borrow against precious metal assets. His bank, Battle Bank is a national community bank that offers traditional day-to-day bank accounts but with high yields, along with precious metals trading. But, in the most untraditional way, they also offer MELOC™ – a Metals Equity Line of Credit – where clients can unlock the value of their allocated metals holdings without being forced to sell their long-term investment.
