Global precious metals markets have staged a strong rebound, with gold rallying despite signals of a potential Fed rate hike. Florian Grummes, founder and managing director of Midas Touch Consulting and a 25-year financial market veteran, has ended six months of waiting by increasing his investment exposure from 50% to 80%. However, he remains measured, skeptical that gold will hit a new all-time high in 2026, and is focusing his strategy on small-cap mining stocks.
A shift in macroeconomic policy triggered a reallocation into gold. Grummes noted that while he has remained bullish on gold for the past six months, he chose to stay on the sidelines. The catalyst for his re-entry was not a move in gold prices themselves, but a significant change in Japan's currency policy. On August 3, Japan's Ministry of Finance announced it would use the Federal Reserve's Foreign and International Monetary Authorities (FIMA) Repo Facility for future currency interventions. This allows foreign central banks to pledge US Treasuries for dollar liquidity without selling them directly on the secondary market, with a single-day limit of $60 billion per institution. US Treasury Secretary Scott Bessent stated the US is considering expanding the facility, viewing it as an important backstop mechanism. Grummes believes this seemingly technical tool adjustment is essentially an accommodative policy decision, logically similar to the dollar swap lines introduced during the bailout of Credit Suisse. While many analysts argue that the facility has constraints in terms of limits and Treasury holdings, he does not believe these restrictions fully negate its market impact.
Concurrently, US stock markets experienced a sharp downturn in early Asian trade on July 24. The 'Magnificent Seven' tech giants saw their combined market capitalization evaporate by $797 billion in a single day. Compared to their peak in late May, their total value has shrunk by about $2 trillion, with the S&P 500 recording its first monthly decline for July since 2014. This pressure is beginning to transmit through the financial system. Against this confluence of macroeconomic factors, precious metals have launched a powerful counterattack. Spot gold surged from $4,020 to $4,300 in just over two trading sessions, a move of $280, with silver, platinum, and palladium also rallying in tandem. Notably, this rally occurred despite multiple headwinds. Minneapolis Fed President Neel Kashkari publicly stated that inflation remains high and the Fed should raise rates immediately. Oil prices also edged lower. Yet, even with these pressures, gold forged its own independent path higher.
Regarding price targets, Grummes diverges from the consensus of many market bulls. He suggests gold could challenge $4,500 this summer, a level near the 200-day moving average of $4,490. If it can break through effectively, the next target zone is $4,800-$4,900, with a silver target of $70. However, he is clear that gold is unlikely to set a new record high in 2026, and he cannot even confirm that the ultimate low of this correction has been seen. Reflecting on his own buying, he admits he entered a bit early, opting not to wait for the absolute bottom but instead building his position on dips, adding around $4,400, $4,100, and $4,000. For stock selection, he has avoided the common market strategy of buying deeply beaten-down names. Instead, new funds are being allocated to small-cap mining companies that have already outperformed the gold price, rather than larger, established producers. His focus is on Silver Tiger Metals and First Mining Gold. He explains that these strong performers have already demonstrated their resilience, and if gold continues to rise, their share prices should have more powerful upside momentum. Looking out one to three years, he notes that even with gold at $4,000, large mining companies can generate ample cash flow, a wave of industry M&A is likely to begin, and junior miners will be key acquisition targets. For investors holding junior miners that are down 30% to 60%, he suggests that if their position allows, they can average down on dips, but must strictly set stop-losses and manage risk.
Beyond gold and silver, Grummes also holds platinum assets. He suggests it offers value below $2,000, with $1,500-$1,700 being an excellent accumulation zone. Compared to the start of his career, the ratio between platinum and gold has fundamentally changed. He observes a geographic shift in global physical precious metals trading, with Asia's market influence rising and gradually becoming a force that can balance London and New York. Following the settlement on July 24, several major US banks have suspended retail wealth management products linked to Asian gold exchanges. Physical gold, gold ETFs, and institutional exchange trading remain unaffected, confirming that demand-side policy direction is shifting. After 25 years in the market, his key observation is that many critical precious metals moves originate during Asian trading hours, while European and US sessions are more prone to selling pressure. In terms of asset allocation, he avoids short selling, viewing it as an emotional gamble. He is also steering clear of semiconductor and AI stocks, noting that the semiconductor sector has already corrected roughly 22% since July.
In summary, the liquidity expectations from the FIMA facility, combined with the US stock market pullback, have fueled a gold rally. However, fundamental constraints remain, and upside is not unlimited. Even as macro tailwinds build, investors should not be blindly optimistic. They need to carefully consider price levels, asset quality, and risk management, while continuously monitoring demand shifts in the Asian physical market.
Spot Gold Daily Chart Source: Easy-forex
As of 10:26 Beijing time on August 6, spot gold was trading at $4,292.75 per ounce.
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