How (And When) Gold Could Reach $10,000
"Frankly I think very few people really appreciate how much higher gold can go from here."
By James Hickman, Schiff Sovereign
The Persian Sasanian Empire– also known as the Empire of the Iranians– had become a major problem for Rome by the middle of the 3rd century AD.
The Iranians were ruled by an extremely aggressive king named Shapur I who had little respect for the Roman Empire’s grandeur and authority. And with limited Roman presence in the Middle East, Shapur saw an opportunity to pounce.
From their capital in southwestern Iran, the Sasanids invaded west into Roman lands (modern day Syria and Turkey). And Rome’s 13-year-old emperor, Gordian III, personally led an army to repel his new enemy. But the Romans were vanquished, and Gordian was killed.
His successor, Philip the Arab, sued for peace and offered Shapur a tremendous amount of money to stop fighting. Needless to say, Shapur took the money… but continued the war.
By the year 260, the war was going very badly for Rome; their forces were depleted, their treasury exhausted, their supplies running thin. And at the Battle of Edesssa that summer, the Roman Emperor himself was captured by Iranian forces… and marched back to Persia as a captive.
This wasn’t necessarily THE singular moment that shook up the ancient world. Rome was already in deep trouble at that point– and everyone knew it.
The Roman economy was weak. Inflation was kicking in to high gear. Political corruption was rampant. The once great empire that built extraordinary works of architecture and engineering couldn’t manage to get anything right anymore. It was embarrassing.
So, when news of the Roman Emperor’s humiliating defeat, capture, and forced march back to Iran spread across the ancient world, people probably just shrugged their shoulders and thought, “well that figures…”
Even just a century before, such news would have been met with disbelief. But by the third century, Rome’s extreme failures and incompetence had become normalized… almost expected.
One key impact was that foreign kingdoms– most of whom happily traded with the Roman Empire to access its vast and relatively prosperous consumer market– started to lose confidence in Rome… and Roman currency.
Rome’s primary silver coin, for example, had been debased from 98% silver purity during the reign of Augustus in the first century AD, down to just 15% by the middle of the third century.
Yet for more than two centuries, Rome’s foreign trading partners continued to use those heavily debased coins… simply because Rome had a large and terrifying army.
That’s easy to understand; when everyone believes you’re a military superpower, you can get away with some pretty outrageous currency dilution.
But that military defeat (plus the Roman Emperor being captured and marched back to Persia) shredded the perception of Roman invincibility. Suddenly the empire looked weak… and trading partners revolted.
Over time, merchants began rejecting Roman coinage and instead demanded payment in either premium goods (like spices or silk) or in hard assets– like gold.
More importantly, because foreign merchants no longer wanted to use them, those Roman coins rapidly made their way back home… and the flood of currency back into the Roman economy caused yet another severe bout of inflation.
This is not a particularly unique story. The cycle of power, the rise and fall of empire, the loss of reserve currency status, is all too familiar in history. And it’s worth wondering if we’re witnessing the same cycle now.
Perhaps. Despite its challenges, I am and always will be rooting for America. And I’ve argued many times before that the US has a [narrow] window to escape the gravitational field of its fiscal black hole… to reassert the dominance of the US dollar… and to reestablish its place atop the global order.
It helps that the US economy is ridiculously innovative, that Europe keeps shooting itself in the testicles in the most inconceivable ways, and that China has its own extreme demographic and economic challenges. So, it’s still a jump ball from here.
But there is a distinct possibility that, like Rome in the 3rd century, America’s trading partners could rapidly move away from the US dollar. Again, I’m in no way rooting for this to happen. But some evidence is already in front of us.
The gold price is an obvious example. Gold isn’t some sh!t-coin or meme stock that suddenly became popular in a Reddit chat room.
Gold’s rise, as we have been predicting and reporting for years, is because foreign governments and central banks have been losing confidence in the United States.
They saw an American president shake hands with thin air. They saw the humiliating withdrawal from Afghanistan. They saw the Treasury Department routinely freeze US dollar assets that were held by foreign countries. They saw eye-popping US budget deficits and a Congress unwilling to stop it.
All of this prompted foreign governments and central banks to reallocate just a tiny portion of their US dollar assets into gold. And just that tiny (few hundred billion dollars) reallocation caused gold to hit $5,000.
Frankly I think very few people really appreciate how much higher gold can go from here.
Foreigners are sitting on $40+ trillion in US “cash-adjacent” assets, like Treasury bonds, bank deposits, money market funds, etc. And if just a few hundred billion dollars pushed the gold price up to $5,000, what will happen if they invest, say, $4 trillion in gold? Even that would only be 10%.
After modeling with a few AI simulations, and a little help from JP Morgan’s analysts, a $10,000 gold price would entail foreign governments and central banks scooping up about 10,000 metric tons over the next few years.
Now, to be fair, this would be unprecedented. The highest annual central bank purchases reached 1,000 tons in 2024, so it’s literally never happened. Such a shift into gold would only occur if there were a key geopolitical shift signaling that other countries have truly lost all confidence.
That’s unlikely as long as the US is able to maintain military dominance. But it’s also why so much is riding on the outcome of Iran.
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That wave of returning money is what interests me. As long as foreigners can buy oil and respectable weapons with the dollar, it’ll probably stay on top ( not ahead) of the currency devaluation “race to the bottom”.
If it doesn’t, what then? Massive inflation as those dollars look for something to buy? Would the foreign holders buy stocks? It’s certainly the easiest way to dump cash (and a way to lose it, too). Or would they buy farm land and real property? Hmmm, already happening. An old timer once told me that deficit spending was ultimately selling off parts of the country to foreign interests. Gold is just one signal.
Interesting historical analogy and thought-provoking scenario.
However, I tend to think the deeper driver behind gold is much simpler and more structural.
Economic theory and history both suggest that goods whose supply grows slowly tend to preserve their value relative to those whose supply expands more rapidly.
Gold mining increases the above-ground stock by roughly 1.5 per cent per year, while fiat currency supply has typically grown much faster over long periods.
This helps explain why currencies also tend to depreciate relative to one another, depending on their respective rates of supply growth. The euro has weakened against the Swiss franc, and the Swiss franc, in turn, has weakened relative to gold.
Governments can finance spending through three main channels: taxation, debt issuance, and money creation. The last option is often the most politically convenient and the least immediately visible to voters. Throughout history, many governments have relied on this source of financing, frequently with negative consequences for long-term currency stability.
From this perspective, the key question may not be whether gold can reach 10,000 or even much higher levels. The more relevant question is under what conditions, and over what time horizon, such a repricing could occur.