Why Gold and Silver Are Going Much Higher | Rick Rule and Jimmy Connor

Key Concepts

• Precious Metals Bull Market: Current stage and potential trajectory of gold and silver price increases.
• Dollar Purchasing Power: The inverse relationship between the US dollar’s value and gold prices.
• M2 Money Supply: The growth of the money supply and its impact on inflation and asset prices.
• Royalty & Streaming Companies: A preferred investment strategy within the precious metals sector due to lower risk and predictable cash flow.
• Central Bank & Tether Gold Buying: The impact of increased gold demand from both traditional and new sources.
• Futures Market Dynamics (Silver): Potential disruptions and volatility in the silver futures market due to delivery issues.
• Disintermediation from Long Bonds: The shift of investment from long-term bonds to gold as a hedge against inflation and currency devaluation.

Investor Sentiment & Market Overview

Rick Rule, following a five-week trip visiting investors in Europe and the US, reports a highly positive mood surrounding precious metals. Conferences in Switzerland, Germany, and Great Britain saw record attendance, particularly among institutional investors. The recent surge in silver prices (over $50/oz) and gold prices ($4,100-$4,200/oz) fueled this enthusiasm. Analyst reports from Bay Street banks are using $3,200/oz gold assumptions, suggesting significant potential for near-term earnings beats for gold equity companies. He characterizes the current market as early in a bull run, though the junior mining sector may be ahead of itself, potentially needing a period of consolidation.

The Dollar & Gold Price Relationship

Rule firmly believes the gold price is inextricably linked to the purchasing power of the US dollar. He predicts the dollar will lose 75% of its purchasing power over the next 10 years, which, if gold maintains its purchasing power, could translate to a threefold or fourfold increase in the gold price. He draws a historical parallel to the 1970s, when the dollar lost 75% of its value and gold rose 28-29 fold. He acknowledges this is a high-end projection but believes a three to fourfold increase is realistic.

Money Supply & Inflation

The transcript highlights the significant increase in the M2 money supply over the past five years, rising from $15.4 trillion in January 2020 to over $22 trillion currently – a 42% increase. This expansion of the money supply is identified as a primary driver of the 30-50% increase in the cost of goods, services, and assets. Rule emphasizes that the officially reported CPI inflation rate is misleading, as it excludes essential expenses like food and fuel, estimating actual inflation for his personal basket of goods and services at 8-9% compounded.

Investment Strategy: Focus on Quality & Royalties

Rule strongly advocates for a focus on quality within the precious metals sector. He recommends starting with physical gold to anchor savings, then diversifying into well-established companies like Franco-Nevada, Wheaton Precious Metals, and Agnico Eagle. He particularly favors royalty and streaming companies, describing them as the “best basic business in the mining business.” He explains that these companies benefit from predictable, high-margin revenue streams without the operational risks and capital expenditures associated with direct mining operations. He notes their management expense ratios are remarkably low (e.g., 11 basis points for Franco-Nevada). He suggests investors lacking deep geological or engineering expertise should prioritize royalty and streaming companies.

Silver Market Dynamics & Potential Risks

While bullish on silver’s potential to outperform gold as the bull market progresses, Rule cautions about potential disruptions in the silver futures market. He explains that daily trading volume in silver futures often exceeds the amount of silver available for physical delivery by a significant margin (up to 200 times). Recent arbitrage opportunities between North American and London pricing have led to increased demand for physical delivery, potentially straining the market. He acknowledges a physical shortage of retail silver denominations but notes that larger institutions like Sprott haven’t reported difficulties acquiring silver. He warns of potential market manipulation and the possibility of exchanges declaring force majeure and cash-settling contracts if delivery demands become unsustainable, referencing similar events in the nickel and tin markets.

Bitcoin & its Impact on Gold

Rule expresses skepticism towards Bitcoin, stating he doesn’t understand it and therefore won’t invest in it. He differentiates between the motivations of Bitcoin buyers (speculation, greed, technology) and gold buyers (fear, preservation of capital). While acknowledging Bitcoin and gold may attract some of the same speculative capital, he believes the primary driver for gold will be disintermediation from long bonds, as investors seek a hedge against inflation and currency devaluation. He notes that Bitcoin’s market capitalization remains small relative to overall global savings and investment assets.

2026 Outlook & Key Takeaways

Rule anticipates continued gold price increases in 2026, potentially at a slower pace than recent gains, contingent on the actions of the US Federal Reserve. He expects silver to continue to outperform gold, driven by retail inflows and the broader market narrative. He advises investors to prioritize physical gold, then diversify into high-quality royalty and streaming companies. He emphasizes the importance of understanding the risks associated with junior mining stocks and the potential for market disruptions in the silver futures market. He concludes by offering a free ranking service for investors’ natural resource stocks through ruleinvestmentmedia.com and promoting an upcoming boot camp focused on the Golden Triangle in British Columbia.

Notable Quotes

• “If the quarter estimate is predicated on 32 and you're selling the stuff for 42… You know, I mean, I suspect uh the near quarter beats are going to be pretty extravagant uh and fairly ubiquitous through the sector. That is the stuff that bull markets are made of.” – Rick Rule on expected earnings beats in the gold sector.
• “Savers right now, US dollar savers, Canadian dollar savers too for that matter, um, need to diversify out of long bonds.” – Rick Rule on the dangers of holding long-term bonds in an inflationary environment.
• “With a royalty company, u your gross is your net.” – Rick Rule on the simplicity and profitability of the royalty business model.
• “Borrowing money even at low interest rates uh tied to the price of a commodity…flywheels unwind in a bad market.” – Rick Rule on the risks of leveraged investments like MicroStrategy.

Technical Terms

• Bullion: Physical gold or silver in the form of bars or coins.
• Equities: Stocks or shares of ownership in a company.
• M2 Money Supply: A measure of the money supply that includes cash, checking deposits, and savings deposits.
• NAV (Net Asset Value): The value of a company’s assets minus its liabilities.
• Disintermediation: The removal of intermediaries (like banks) from a financial transaction.
• Force Majeure: A clause in a contract that excuses a party from fulfilling its obligations due to unforeseen circumstances.
• Streaming Company: A company that provides upfront financing to mining companies in exchange for a percentage of future metal production.
• Royalty Company: A company that owns the right to receive a percentage of revenue from a mining operation.
• Arbitrage: The simultaneous purchase and sale of an asset in different markets to profit from a price difference.