In the 15th century, when European explorers began venturing into unknown oceans, maps were often filled with guesswork. The edges of the known world might feature a dragon or a warning: Here be monsters.
But the most valuable tool wasn’t the map. It was the compass. Maps could be wrong. The compass told the truth. It did it quietly, steadily, without emotion. North was always north. The compass didn’t care about the storm or the mutiny or the politician funding the voyage. It just pointed and guided, quietly.
This week, I’ve thought a lot about compasses. Because we are once again in uncharted waters.
Gold breached $3,400 per ounce again this week. It didn’t float upward on sentiment alone. It was carried by a confluence of risk, uncertainty, and distrust in the system.
In the Middle East, what had been cautious diplomatic progress between the U.S. and Iran has turned sharply. The threat of military confrontation now looms larger, adding to a volatile region already burdened by the Gaza conflict and the long war in Ukraine.
Then came Israel’s direct strike on Iran. Markets flinched. Oil jumped 15%. The World Bank, just days prior, had already cut its global growth outlook for 2025. Now, investors are staring at stagflationary winds: rising prices, slowing economies, and a diminished set of policy tools to respond.
The Central Bank Reserve Shift They Didn’t Prepare You For
Meanwhile, the Trump administration continues to sow economic ambiguity with threats of reciprocal tariffs and the absence of any concrete trade deals. That’s not just tough talk. That is uncertainty priced into every container ship, stock market chart, and central bank model.
So it’s no surprise gold surged. The dollar, curiously, didn’t. Nor did U.S. Treasuries move as much as history would have predicted. In fact, the financial instruments we once turned to in a crisis didn’t seem to be leading the charge this time. Pretty telling, if you ask me.
There’s something deeply revealing about the way markets are responding (or not responding) to risk today. The two most important benchmarks in global finance, the U.S. dollar and Treasuries, showed only modest reactions to Israel’s strike on Iran.
Perhaps that’s because the world is no longer sure the U.S. is the safe haven it once was. Decades of economic dominance have led to an overweight in U.S. assets. But what happens when confidence wobbles? When political dysfunction makes even interest rate forecasts feel more like guesswork than guidance?
Then, like the explorers of old, you stop relying on the map. You follow the compass. (In case you didn’t get it yet, gold is the compass in this analogy).
Gold doesn’t tell you where the danger is. It doesn’t tell you where the world is going. But it does something even more important: it shows you where you are.
It responds to uncertainty not with theory but with price. When investors buy gold, they aren’t hoping it’ll go up, instead they are acknowledging that something else is going down.
This week’s rally is not just about the Middle East, or even diplomacy. It’s not even about inflation. It’s about the creeping recognition that the tools we once used to steady the ship, whether it be monetary easing, fiscal stimulus, reserve currencies, just aren’t as reliable as they once were.
So gold moves. Quietly and steadily. Like a compass needle returning to true north.
Enjoy your weekend. Keep your compass close.
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