Gold & Silver Surge Again As Trump & Powell Go To War

Key Concepts

• Silver Rally (2025-2026): A significant price increase in silver, reaching over $86/ounce, driven by geopolitical factors, supply concerns, and monetary policy.
• Dollar Devaluation: The long-term decline in the purchasing power of the US dollar, contributing to the rise in precious metals.
• Minsky Moment: A point of unsustainable credit and asset bubbles, potentially reached due to current economic conditions.
• Supply Concerns: Limited silver supply, exacerbated by geopolitical events and declining production, driving up prices.
• Dolly Varden Silver & Contango Silver & Gold Merger: A strategic merger aimed at transitioning Dolly Varden from an exploration company to a producing silver and gold miner.
• RBI Silver Policy: The Reserve Bank of India’s pegging of silver at a 10:1 ratio to gold, signaling confidence in silver’s value.
• Silver-to-Gold Ratio: The historical and current relationship between silver and gold prices, currently at around 60:1, with potential to move towards 10:1.
• Geopolitical Risk: The impact of events like the Russia-Ukraine war and tensions with China on precious metal demand.
• Federal Reserve Independence & Political Pressure: Concerns about the Federal Reserve’s independence and potential political interference in monetary policy.

Silver Price Surge and Market Dynamics (January 12, 2026)

The discussion centers around a historic silver rally, with prices exceeding $86 per ounce on January 12, 2026. This surge is occurring amidst a complex geopolitical and economic landscape, including a perceived “war” between Donald Trump and Jerome Powell/the Federal Reserve, evidenced by subpoenas and threats of indictment related to a $2.5 billion Fed renovation. The price of gold is also experiencing significant gains, reaching just under $4600. Notably, in Canada, silver is already trading above $117 CAD due to currency exchange rates. The rally began accelerating in mid-August, interestingly, without a corresponding decline in the dollar index, a departure from historical trends. Sean Kung suggests this is a sign of broader currency issues and potential further devaluation.

The Devaluation of the US Dollar and Precious Metals as Preservation of Purchasing Power

Sean Kung emphasizes the long-term devaluation of the US dollar since the creation of the Federal Reserve, noting it has lost over 80% of its purchasing power since 1920. He argues that the current price increases in precious metals are a consequence of this devaluation and the need to inflate the way out of the current economic situation. He highlights that gold and silver serve as a means of preserving purchasing power, particularly for those not benefiting from the creation of new money. He points to the increasing interest rate on the national debt as a sign of unsustainability. He describes the current situation as a “Minsky moment,” suggesting a point of no return in the economic cycle.

Supply Concerns and Global Demand for Silver

A significant driver of the silver rally is identified as concerns about the silver supply. David Stein of Kuya Silver reported receiving inquiries from Chinese and Indian groups, including solar manufacturers, offering premiums of 8-10% above market price for silver production. This suggests a real supply issue, not merely speculation in the COMEX market. Sean Kung notes India’s historical affinity for silver and gold, and the Reserve Bank of India’s recent move to peg silver at a 10:1 ratio to gold (compared to the current 60:1 ratio) as a signal of confidence in silver’s future value. He points out that the silver-to-gold ratio has historically ranged from 2:1 to 16:1, with 10:1 being a common level.

Dolly Varden Silver & Contango Merger: A Strategic Response to the Bull Market

Sean Kung, President of Dolly Varden Silver, details the company’s strategic merger with Contango Silver & Gold. This merger is a response to the rising silver price and a desire to transition from an exploration company to a producing miner. Contango brings $100 million in cash and $100 million in annual cash flow from Alaskan gold operations. The combined entity, to be named Contango Silver & Gold (CTGO), will have approximately $200 million in the bank, a $1 billion valuation, and a focus on both silver and gold production. The merger aims to leverage Contango’s existing processing facilities and expertise to accelerate Dolly Varden’s silver production. The shareholder vote is expected in late February/early March 2026.

Mining Stocks and Investment Opportunities

The discussion addresses the question of whether it’s too late to invest in mining stocks. Sean Kung argues that it is not too late, as mining companies are still trading at valuations based on lower silver prices (Q3 reporting). He suggests that investors can find value in silver and gold equities, particularly those focused on exploration and production. He notes that the market values mining companies based on the amount of silver/gold “in the ground,” and that Dolly Varden’s value has increased from pennies per ounce to dollars per ounce. He recommends considering royalty companies, large producers, emerging producers, and ETFs (SILJ, GDXJ) for exposure to the sector.

Geopolitical Factors and the Future Outlook

The conversation touches on the broader geopolitical context, including the Russia-Ukraine war and tensions with China. These events are contributing to a loss of confidence in the US dollar and driving demand for precious metals. Sean Kung expresses concern about the “fall of the West” and the shift of power and wealth to other parts of the world. He emphasizes the importance of finding solutions to the current economic problems, but cautions against simplistic approaches like military intervention. He highlights the importance of a functioning rural economy and domestic manufacturing.

Federal Reserve Independence and Political Interference

The discussion highlights the tension between the Federal Reserve’s independence and political pressure from the Trump administration. Jerome Powell’s statement about potential criminal charges for setting interest rates based on economic assessment rather than presidential preferences is seen as a significant development. This situation adds to the uncertainty and contributes to the demand for safe-haven assets like gold and silver.

Notable Quotes:

• Sean Kung: “Be careful what you wish for… these prices are manifesting because of some problems.”
• Jerome Powell: “The threat [is]… a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public rather than following the preferences of the president.”
• Sean Kung: “We are past the point of no return… that’s why the metals are doing what they’re doing.”
• Sean Kung: “The first place you can find value is in silver and gold equities.”

Technical Terms:

• COMEX: The Commodity Exchange, a futures and options market.
• Minsky Moment: A sudden collapse of asset values following a period of unsustainable credit growth.
• Enterprise Value per Ounce: A valuation metric used in the mining industry, representing the total value of a company relative to its silver/gold reserves.
• Direct Shipping Model: A mining approach where ore is shipped directly to an existing processing facility, avoiding the need to build a new one.
• ETF (Exchange Traded Fund): An investment fund traded on stock exchanges, providing exposure to a basket of assets. (SILJ - Junior Silver Miners ETF, GDXJ - Junior Gold Miners ETF)
• Fiat Currency: A currency declared by a government to be legal tender, but not backed by a physical commodity.

Synthesis/Conclusion:

The current silver rally is driven by a confluence of factors: geopolitical instability, concerns about the US dollar’s long-term value, and a tightening silver supply. The merger between Dolly Varden Silver and Contango Silver & Gold represents a strategic move to capitalize on this bull market by transitioning to production. While mining stocks have not yet fully reflected the price increases, they offer a potential investment opportunity. The situation is complex and volatile, but the underlying fundamentals suggest that precious metals are likely to remain in demand as a hedge against economic uncertainty and currency devaluation. The key takeaway is that the current environment presents a unique opportunity for investors to protect their purchasing power and potentially profit from the continued rise in precious metal prices.