Gold & Silver Get Hammered as Fed Fears Return -

Welcome to this week’s Market Wrap Podcast, I’m Stefan Gleason.
Coming up in a moment, we will be joined by Axel Merk, president of Merk Investments and a frequent commentator in the financial news media and here on our Money Metals podcast.
Merk offers a different take on the recent gold correction, arguing that markets are treating the Iran conflict as a temporary shock rather than a lasting structural change.
Merk also tackles the bigger picture—government debt, monetary policy, and gold's long-term outlook.
So, stick around for another tremendously insightful conversation with Axel Merk, coming up after this week's market update.
And as a reminder please download, like, rate and subscribe to this podcast wherever you consume this content.
Gold and silver are ending the week under significant pressure after a surprisingly strong U.S. jobs report fueled expectations that the Federal Reserve may keep interest rates elevated for longer than previously anticipated.
The major market-moving event came Friday morning when the Labor Department reported that the U.S. economy added approximately 172,000 jobs in May, nearly double economists' expectations. The unemployment rate remained relatively stable while wage growth continued to show resilience.
The stronger-than-expected employment data immediately pushed Treasury yields higher and strengthened the U.S. dollar as traders reduced expectations for near-term Federal Reserve rate cuts. In fact, some market participants are now questioning whether the Fed will be able to cut rates at all this year if inflation remains stubbornly above target.
That shift in interest-rate expectations appears to be the primary catalyst behind today's sharp correction in both gold and silver.
The jobs report landed just one day after several Federal Reserve officials reinforced a cautious stance on monetary policy.
Kansas City Federal Reserve President Jeffrey Schmid said policymakers currently face a choice between remaining patient or potentially tightening policy further if inflation fails to move convincingly back toward the Fed's target. Meanwhile, San Francisco Fed President Mary Daly emphasized that future policy decisions will depend on incoming economic data, while noting that monetary policy remains in a good position to respond as conditions evolve.
Taken together, the message from policymakers is clear: the Federal Reserve is growing a bit worried about the inflation it has caused.
Meanwhile, geopolitical tensions continue to provide an important backdrop for precious metals markets.
Hopes for a broader diplomatic breakthrough between the United States and Iran faded this week after Iran-backed Hezbollah rejected a new ceasefire proposal in Lebanon. Israel also signaled it would not withdraw forces from the region, complicating efforts by the Trump administration to reduce tensions and pursue broader negotiations with Tehran.
Ordinarily, escalating geopolitical risks would provide support for safe-haven assets such as gold. However, for now, the market's focus remains squarely on interest rates, inflation, and the strength of the U.S. economy.
From a technical perspective, both gold and silver had already been showing signs of weakness before Friday's selloff accelerated downside pressure.
While prices have largely moved sideways in recent sessions, today's decline reinforces a mildly bearish short-term outlook.
Gold remains within a broader trading range, with support near $4,365 and resistance around $4,600. Traders will be watching closely to see whether today's selling pressure produces a decisive breakdown below support levels or simply extends the ongoing consolidation phase.
Silver tells a similar story.
The white metal continues to struggle with a lack of bullish momentum.
In the near term, stronger economic data and a more hawkish interest-rate outlook may continue to create headwinds for precious metals.
Despite recent price action, the larger fundamental drivers supporting gold and silver remain in place. Inflation continues to run above the Federal Reserve's target. Federal deficits and national debt continue growing at historic rates. Central banks around the world remain major buyers of gold. And geopolitical tensions show little sign of disappearing.
What changed this week was the market's expectation for how soon the Federal Reserve might begin easing monetary policy.
For long-term investors, corrections driven by shifting Fed expectations have often proven temporary, while the structural forces supporting precious metals have persisted.
Checking in on the specifics here: gold is currently trading at $4,372 an ounce, declining 4% since last Friday. Silver has moved down 7% over the past week, checking in at $69.77 as of this Friday late morning recording.
Platinum is down 5% to trade at $1,831 an ounce and palladium is off 6% to come in at $1,282.
Well now, without further delay, let’s get right to our exclusive interview.
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Mike Maharrey: Greetings, I'm Mike Maharrey and I am joined once again today by Axel Merk. Axel is the founder, president and chief investment officer of Merck Investments. He's a great analyst, and honestly, you're one of my favorite people to talk to. Axel, how you doing today?
Axel Merk: Good, good. Since my speech is sensitive, I immediately have to say that you calling me great is not an endorsement of any of my financial acumen. So, just so everybody knows that when I talk, I have a regulator behind my neck breathing down.
Mike Maharrey: Well, and let's be honest, that humility is probably not necessarily a bad thing in this day and age.
Axel Merk: I have enough gray hair to be humble.
Mike Maharrey: Yeah. The older we get, I think, especially in this realm of investing and the economy and finance, I think the older you get, the more you realize how little you actually know. And again, I think that's kind of a healthy attitude to have. We'll leave folks with that disclaimer, but always good to know. So the last time we were together was actually about eight days before the US launched this attack on Iran. So we've had a monumental shift since the last time that I was able to speak to you. So what I'd really like to do to kick off is just kind get your sense of how you are looking at the precious metals markets in the context of this war. We were kind of in a bull market. We'd had a big correction leading up to the conflict, but now basically everything seems to be war headline driven.
So, kind of how are you reading the tea leaves here?
Axel Merk: Sure. No, that's fantastic. And let me try not to be too technical, but I think there are a few important things to say that I don't hear many others talk about. And so let me dive into them. The primary one I think that people miss is that the market is pricing what's happening Iran as a shock, not as a structural change. And that becomes relevant when you look at various aspects in the market. Most notably, as many people have noticed, is whenever the fear about the war is flying up, bonds are selling off. But because it is only pricing as a shock rather than as a structural change, real interest rates, long real interest rates in the market are moving higher because inflation expectations in the long run haven't changed. Now, I've probably lost half your audience by now, but the reason I say that is ultimately what gold is competing against is the purchasing power of the currency in the long run.
And clearly nobody has a clue about what the purchasing power of the currency will be in 10 years, but what happens in the microstructure of the market matters for prices in the short term. And so when bonds are selling off but those long-term inflation indicators are not budging, the market says real interest rates are higher and all else equal that makes gold less attractive. And so the price of gold has been reacting to changes in real interest rates and that happens to be correlated with the S&P 500. And I phrase it that way because some people say, "Oh, gold is lost, that safe haven status has this and this and this." Well, the safe haven status, one aspect of that is coming from is when there's a crisis, a typical crisis, there's a perception that the Federal Reserve is going to cut rates and so then you want to be in gold whereas this one is a supply shock.
And as policymakers were reminded the hard way, just cutting rates and reaction is probably not the right thing to do. And that doesn't mean there won't be an intervention by policymakers because the politically attractive solution is normally economically counterproductive. But in the short term, the dynamics that we are seeing is that even though last year gold decoupled from real rates that correlation has come back in. And then so I can't emphasize this enough how important this is because this is just the market doing its thing. There is nothing too unique about it. And obviously depending on how this works out over time, well, we'll have to see. Now the other aspect I should mention that's not particularly news to most people is obviously heading into this, there was a lot of optimism, which means that people were levered and that means in a shark people de- lever, and that was another headwind to the price of gold.
At the other end of the spectrum, as you know, and many of your audience know, we manage a good little over four billion in the precious metal space. And so we have, I think, a decent insight to some investor behavior. And the one thing I've seen is that long-term investors are net bias throughout this, which reconfirms this notion that this is more of a shock rather than a structural change. I'm not going to speak to whether these long-term investors are right or wrong, but I do think it is consistent, at least with how I have convinced myself of how to read the Iran war in the context of precious metals.
Mike Maharrey: Yeah, I think that's a really solid analysis. And it's interesting that you say that a lot of the long-term investors still seem to be in that buying mood. And I guess the next question … Well, I kind of have two questions. Let me think about which one I want to ask first. Let me just ask you this first. At what point does the war drawing out turn from a shock into more of a structural problem? I mean, can you kind of put your finger on what that is? It's so hard to read right now because I mean, today we're on the path to peace tomorrow we may be bombing again. So, it's still really difficult to determine what the trajectory of the war is, but is there a point that it becomes more of a structural problem and not just a shock?
Axel Merk: Yes. So, before I do that, let me add one more thing to the thing I previously said, because I'm pretty sure that half your audience is still scratching their head via talking about long-term inflation expectations. Long-term inflation expectations are a measure of the confidence that the market has in the Fed's ability to manage inflation in the long run. And as many of this audience may think the Fed can't do that, the market as a whole does believe the Fed controls the bazooka. They can control inflation and so forth. Obviously with debts going up, fiscal deficits going up, there are all kinds of things we can discuss, but the market believes there's confidence. So, that's part of the reason why these measures are important. Now to your question, it's an excellent question and I don't think there's an easy answer. Again, I think one thing that's important is to understand the microstructure of these markets.
Neither you or I are active oil traders. At least I believe you're not an active oil trader.
Mike Maharrey: I'm not.
Axel Merk: And I do like to remind people that we once had negative oil prices and people were scratching their head as to why that is happening. People talk about the spreads in these markets. Well, have they noticed that the delivery specifications of Brent and West Texas are different. In West Texas, you deliver to Cushings (Chushing hub in Oklahoma) and for Brent, you deliver to the ship and the delivery time after the first notice date is several weeks. And so that's one of the reasons why you don't look at contracts that are aligned. There are things in there. And so similarly as these microstructures, the nature of these markets is that they quote unquote normalize in the long run. The same happens, by the way, in the Federal Reserve. If we're in an extreme interest rate environment, extremely high or extremely low, the market will always price in some sort of normalization in the medium term.
And that doesn't mean they're right. The market is right, but that just happens based in these markets. And so there will always be this element that this is a shark modern structural change, so that's one answer. The other one is, of course, the other answer I'd like to give or one of the other answers I'd like to give is let's think about what it means that will go to a more permanent state in Iran. Ultimately, as far as equity markets is concerned, is that there's enough energy there. Well, we're not quite as dependent on the energy as we used to be. Clearly Asia and Europe is much more dependent than the US is. Energy prices are set on a global stage. Let's assume for a moment the scenario that Iran prevails and will charge a fee for every ship transferring a million bucks, two million bucks.
Well, that's a dollar or two a barrel and odds are that at least part of that will need to be absorbed by the local producers because the price is set at the global stage. Now, if that were the case, we can talk about the geopolitical implications that the US has weakened, that they allowed Iran to have done that, but as far as the global machinery is concerned, there will be a day after. And so the question then really becomes, well, what does it mean to move on? Now, obviously if the blockade and the straight Hamoud lasts forever, if that is the permanence you're talking about, well, we'll figure out different ways of getting the oil out. I mean, there are thousands of truck shipping fertilizers. They're thinking about building a pipeline. It's a fantastic incentive to build another nuclear power plant or build more windmills if that's what you're into.
So, the market will adjust to whatever it is that will be given. And so there is no such thing really as permanence. We'll figure out something along the way. Quite frankly, I've been surprised that Israel hasn't done more bombing things in Iran because they're probably not happy. They're clearly not happy based on the communication coming out of the White House.
We will somehow come to the next day, one day after the other, there's always a tomorrow. And so this structural change can happen if we have a more severe interference by policymakers. And what I mean with that is typically in a supply shock we had the check sent in the pandemic in the 70s we had price controls. And so if you have an intervention that is so severe that it really disrupts markets in different ways, then we can talk about the structure of change. If populism rises so much as a result, it can happen. If we limit other trade and say, "Oh, this is all unfair what's happening, and therefore we have to do this, or look at these bad oil companies making so much money now of this," those sort of things are, I think, what we have to watch for. If it's just the next tweet coming out of the White House, that might keep us wondering and our head scratching, but in many ways that's mostly noise.
Mike Maharrey: Yeah, that's a really great point. I really, really like the way that you sum that up and it does go to show, right? Markets are extremely resilient. I think much more so sometimes than we think. We'll see a thing happen, think, "Oh my gosh, end of the world." And somehow the market's managed to figure out a way, especially if governments will get out of the way and let it happen. So, you called it noise. I think that's a great term for it. How does the average person out there that maybe isn't watching every single headline, but how do you look through that noise and kind of move forward? I feel like a lot of people right now are just kind of sitting on the sidelines and waiting, and maybe that is the best strategy. But in your head, how do you cut through the headline noise and focus on, okay, here's the fundamentals, here's what we're looking at as we move forward.
Axel Merk: I may have mentioned this on your program, but my view is the most important thing for investors is to have a process. It does not need to be a good process, have a process. And what I mean with that is precisely that you don't change your positioning based on every headline. Don't change your positioning based on our conversation, for goodness sake. I mean the value I think we can add is to get people out of their comfort zone to get them thinking about their portfolio to investments in slightly different ways, stress tested with the process that they have. But for goodness sake, don't sell everything and do something else because the latest person has said something. And my initial position is usually, oh, the market is right. And if I disagree with it, I need to do some digging as to why I believe the market has it wrong. And if I convince myself, well, then I can take a position in that. But one of the things just on a high level is that we talk about professional investors, they do risk management. Retail investors panic. The dirty secret is it's the same thing because the risk management of the professional means they take down leverage and the joking aside is when we invest based on a certain risk profile
And when volatility goes up, we are more exposed to risk than we had signed up for. And so we got to trim something back. And it's one of the reasons why in good times it is helpful to rebalance one's portfolio so that when the bad times come, you're not as surprised. Similarly, one of the things I have said is that in the spring of 2009, people may recall it was the low of the markets and some people said, "Hey, just like there's always people. Hey, you got to invest in the markets, you double down on the stock portfolio." I believe for the most part that was utterly irresponsible. And the reason I say that is most people in the run up to 2008 did not rebalance. And so they were overexposed in risk assets. Now they lost a dramatic amount in the downturn, which means they lost more than they could afford to.
That is not the time to double down on the risk. That's like going to the casino and having a doubling down strategy.
You can do that if you have a discretionary budget, which we can have some play money and see, "Hey, maybe you're lucky and the odds are going to play in your favor and more often than not, you're probably going to win on that. " But the challenge is that if you take more risk than you can afford to take, it can end badly. And so the best thing is that one takes precaution that ahead of time … Now, if you're in an environment where just anything happens, well, people will take different choices. And the one measure I have, by the way, for risk, if you have too much risk is whether you can sleep at night with the sort of positioning that you have. Yeah, we're joking, but I'm actually very serious.
Mike Maharrey: No, that's a good … Yeah.
Axel Merk: If you are restless because, oh my God, I don't know. And that can be gold mining or that can be the S&P 500 or whatever it is that one invests in. If you are restless because of what you have and you have to check the codes every five seconds, maybe you want to trim that down. And then the other end of that equation or the other side of it is if you have your expenditures in check, you can afford to take more risk. If you're spending less than you're making, it doesn't really matter what happens to your investments. And I'm oversimplifying here, of course, but you are able to take much, much more risk. And so if your expenses are under control, that's probably the best thing that you can do in a time of severe uncertainty.
Mike Maharrey: Yeah, that's fantastic. Something you said just prick something in my mind. I'm going to run this past you and see how you react to it. You mentioned the fact that if you think the markets are wrong, then you kind of have to do the research and that makes sense to me. Here's what I thought in my head though I'm just arrogant enough that I often think the markets are wrong because I tend to not be a mainstream kind of thinker. That being said, if I think the market's wrong, that's not really relevant because the market's still going to do what it's going to do, right? Wrong in my head or not. And I think sometimes we maybe need to check that arrogance and just because we think something's wrong doesn't necessarily mean the market's going to react in the quote unquote right way. Does that make sense?
Axel Merk: Yes. So let me give you several answers on that. First of all, you can take the rate value approach. Rate variability is a meritocracy so you check yourself. If you're wrong all the time, take note of that and listen to yourself a little bit less. And if you're right all the time, it's okay to have a little bit more courage. The second answer is it makes a big difference whether you have a positive or negative alpha trade and at the risk of sounding not too technical, let's say you believe that the bond market is going to rally and you buy bonds, then you're going to make money if bonds rally. And if they stay steady, then you're still going to get the yield. And if they go down, well, you've got some interest rate risk. But if you believe that bonds are going to go down and do short bonds, you've got to bet the timing right because you constantly have to fight, you have to pay the interest all the time if you're shorting bonds.
And so, if you like to invest in green energy because it's the next big thing and size spread, but you are in a QE environment where quote unquote everything goes up, it doesn't really matter what you buy. And so all these things become more important when the markets are a little bit rougher, but more broadly as to when one believes that the market is wrong, I'm also by nature, having been in the markets for many, many decades by now, I always like to question as what is happening, but at the same time, it helps to be somewhat humble to say, all right, market probably has a point as to why they're pricing in, what they're pricing in, and now I see the opportunity. But it's also, again, important to understand the market. If you take our sector, the mining sector, ETFs don't provide funding to junior mining companies.
Active management was rooted out during the many years of QE. Active managers is kind of a rare species these days. And so why would you give money to an active manager when quote unquote everything goes up? And so we're an environment where the expertise in some segments of the market is just not there, which of course then provides more opportunities. And so one thing I tell people is that if you want to invest, the more arcana market is, the more specialized the market is. Don't expect to make money just with a push of a button, roll up your sleeves and get to know it. I remember it was 25 years ago a friend of mine, oh, you want to invest in these emerging markets? Yeah. Well, roll up your sleeves and go there. Don't just buy it on the screen, but get on the ground, do your homework.
Now, of course, there are people who believe in technical analysis and that's great. I'm going back to have a process and if that's your process, that's fine. And if you're happy with that process, that's fine. But if you think that the market is quote unquote wrong, a technical analyst will not say a market is wrong, but if you think that the market is wrong, do your homework and stick to your knitting. And I'm just mentioning the negative oil prices the same in the precious metals market. People were concerned about distortions without the terrace and I think we've talked about it here on your show that you've got to understand what are the limitations of the Bank of England, of the liquidity providers in London, of Comex, how does this all work? And if you don't know the details, you just throw out one thing here, how many in your audience know what the price of gold is?
And I'm not talking about the price you see quoted on Bloomberg, but what does that represent? The price of gold you commonly hear quoted is the price of a London bar in London as quoted by a bullion dealer in London. And that matters in times of stress because the gold in another country, different types of gold might have a different price point. And so those things matter. And so if you think something is wrong, do your homework and try to understand, well, why is the market pricing this differently?
Mike Maharrey: Yeah. A good example of that is the last time I was reading about the price in India, gold is selling it at a bit of a discount in India due to the recent implementation of tariffs over there. So yeah, you make a very good point. I want to hit one other kind of big thing before I let you go. We've talked a lot about interest rates and that seems to be kind of the driving topic in the precious metals world in terms of the gold pricing. And you mentioned the fact that every time we get the negative war news, people assume that interest rates are going to rise, that's bad for gold. One of the things though that seems to be missing and I don't hear as much talk about is debt and interest rates and debts, of course, those two things are important. They impact each other.
Why is it there more attention being paid to the debt in terms of the interest rate discussion?
Axel Merk: Because we're talking about balance sheet versus cashflow, and balance sheet doesn't affect prices in the short term. That's a fancy way of saying is that the absolute level of debt of course matters, but you will not find any model that links that to just about anything. And that doesn't mean it's not important, but having a model that will give you a buy signal or this or that based on the level of the debt I don't think you can find. In addition to that, of course, when it comes to federal debt, governments can change the rules of the game along the way. That of course is a separate issue, but the debt level is important. It matters. It was already Hayek that said that you cannot have independent monetary policy when government has too much debt, and he's absolutely right on that, of course. But those things are creeping up on you and putting your finger on that, that tomorrow that's going to have that impact.
I mean, if you look at pictures to gold bugs in the 80s, they'd already said there's too much government debt and look at where we are today. And of course, hey, price of gold is 4,500 bucks rather than down there where it was back then. And so the markets will do the thing along the way. And if you're patient and early, there are some amazing opportunities there.
It is just as there is always a tomorrow in the Straight of Hormuz, we just don't know what it looks like. There's always a tomorrow in the world of finance and society adjusts. We have people who are in the late 60s and they're working and they are proud members contributing to society. Most households have dual incomes these days and they're proud of it. Whereas people used to think, "Oh my God, my wife has to work to make ends meet." And society adjusts and say, as we are eroding the purchasing power of the currency, we'll deal with it one way or another. And there, yes, this is what the market says. I happen to believe that, well, I'd rather have a little bit of financial independence and so I'm going to prepare for what's to come, but there will always be … And by the way, part of the reason I mentioned that is a lot of folks in the gold community think about a great reset that's going to come at some point.
No, it's not going to come. There's going to be more and more unstable dynamics that's going to come and populism is going to rise. When things go wrong with government finances, we see all kinds of things. But usually the thing you don't see is everybody's saying, "Okay, we messed up. Let's do a reset and let's live with our means starting tomorrow." That's usually not what happens
Mike Maharrey: Yeah, I agree with that. Okay. I've got one more just fun question to get you out. What are you reading lately, if anything?
Axel Merk: Well, actually I mentioned Hayek because I'm just rereading “The Constitution of Liberty” by Hayek and I said how timely. I had read it about a dozen years ago and it is so much more timely than it was then. Of course it was timely back then as well, but there are so many nuggets in there that are so applicable to today's world. And one of the things I had been scratching my head around is I'm a pragmatist in many ways. I have my views, but I also think, all right, yep, this is what reality is like. And Malay, for example, is kind of on the radical side as far as libertarians is concerned. And I've been wondering, well, I have always come from this idea that you got to have rules and you got to have visibility on the rules and within that framework you can have liberty.
And it was very refreshing to read that, not only does Hayek say that as much, but he says in order to have liberty, you need to have common values, you cannot regulate everything. And so there's lots of little tidbits that in today's society where everybody is so polarized, I think it would be worthwhile for everybody to read that again. So yes, that's a pitch for people to pick that up and read that again, the
Constitution of Liberty.
Mike Maharrey: I saw you post on X about that with the rulemaking. I thought that was interesting. Excellent. All right. So, where can folks follow what you do? I just mentioned you're on X. Where else would you like to send people?
Axel Merk: I'm X – @AxelMerk. MerckInvestments.com is our website mentioned we manage a good four billion in precious metals. We got two products in that realm, exchange products. I can't discuss them yet in more detail, but you can find more on the website. We have a newsletter, everyone that you can sign up for at the website. And then of course with you in a few months again to catch up on the latest and greatest.
Mike Maharrey: Absolutely. I will always be looking forward to that. I love talking to you. I like the kind of philosophical bent that you bring to the conversation. Every time we talk, I go away with my head churning and I'm sure that's going to be the case today as well. So I appreciate that. I always enjoy it and really appreciate you taking the time. I know you're a busy man, so I thank you for carving a little time out of your day to hang out with me. So we'll get you back on again here in the next few months and until then we'll journey on.
Axel Merk: Thank you and be safe in those markets.
Mike Maharrey: Absolutely. Thank you.
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