Setting aside recent volatility, gold has delivered an extraordinary rally over the past two years. Now, one fund manager believes the precious metal is poised to resume its long-term uptrend following the latest pullback, arguing that despite months of consolidation signaling a maturing market, prices remain far from their peak.
The Math Is Not on the Fed's Side
Larry Lepard, managing partner at Equity Management Associates, explains that the global monetary system is only beginning to confront an uncomfortable mathematical reality: governments have accumulated so much debt that they can no longer fight inflation the way they once did. Even with Kevin Warsh, a presumed inflation hawk, set to take the helm at the Federal Reserve, Lepard contends that monetary and fiscal constraints will ultimately dictate policy. Warsh has spoken of shrinking the Fed's balance sheet as he prepares to lead the U.S. central bank, implying tighter monetary conditions, but Lepard suggests the incoming chair will eventually be forced to reckon with the numbers. "The math won't work for him," Lepard says, noting that the gap between mainstream monetary policy narratives and the underlying fiscal reality is widening. "On one side, you have the narrative; on the other, the mathematical facts," he adds, pointing to the ever-expanding government deficits. This distinction, he argues, is critical for gold investors, even after the metal's dramatic ascent, as the fundamental forces driving the market remain largely unchanged.
Volcker's Prescription Is No Longer Viable
The core problem, according to Lepard, is that policymakers no longer possess the flexibility that existed during the inflation crisis of the late 1970s and early 1980s. Former Fed Chair Paul Volcker broke that inflationary cycle by pushing interest rates to levels that generated deeply positive real yields. However, Lepard notes that U.S. government debt stood at roughly 30% of GDP back then, compared to approximately 120% today. "I don't see how we get out of this without either years of very high inflation like South America, which may be the outcome, or a total failure leading to a currency reset," he warns.
The Fiscal Doom Loop: How Currencies Fail
Lepard describes this dynamic as a potential fiscal doom loop: higher interest rates drive up interest payments, larger interest payments widen deficits, governments issue more debt, and the additional supply places greater upward pressure on borrowing costs. "That's how currencies fail," he says. In this context, he views currency debasement as the politically more likely path. Faced with the dilemma of either allowing excessive debt and leverage to clear through defaults and economic contraction, or creating more money to shore up the financial system, he expects policymakers to choose the latter. "Given the choice between printing money and collapse, they will print," he asserts.
AI Won't Save the Day, and Growth Won't Escape Inflation
Even stronger economic growth may not offer a way out. Lepard acknowledges that artificial intelligence could deliver substantial productivity gains, but he doubts these will arrive quickly enough or prove large enough to overcome the existing fiscal imbalances. Escaping the debt burden would require significantly faster nominal growth, which he believes would almost certainly come with inflation. If bond investors realize that governments intend to inflate away their debt, Lepard says that realization alone could push yields higher, forcing policymakers to intervene. For gold, this means the long-term investment thesis remains intact regardless of short-term volatility. "We don't know how it will play out politically," Lepard says. "But from a mathematical standpoint, we're on the right side of this trade."
Last Year's 65% Gain Is Only the Early Stage
Lepard's conviction persists even after the precious metal's substantial rally. He notes that gold rose roughly 65% last year, a performance he considers highly unusual for the metal and reminiscent of the explosive phase of the late 1970s bull market. Rather than viewing this as the end of the cycle, he sees it as an early signal of growing investor concern over currency debasement. A shift in investor psychology is already emerging, he says, with many people hesitating to buy gold precisely because it has already risen so much. But Lepard believes gold remains significantly underweighted in mainstream portfolios, and the current monetary cycle is still relatively young. "Even though it has rallied a lot, we're still only in the early stages of the cycle," he says. This latest surge, he suggests, could mark the beginning of another major upward phase as markets increasingly recognize the constraints facing the Fed and the U.S. government. "Based on how these markets are behaving and what the Fed is doing, we're just starting the next leg up," he adds.
Meanwhile, Lepard also points to changing attitudes toward inflation as another crucial component of the precious metals narrative. Before the pandemic, inflation was largely an abstract issue for most Americans; today, consumers are experiencing it firsthand through everyday purchases and increasingly view it as a tangible problem. This awareness has not yet translated into widespread adoption of monetary hedges like gold, but Lepard predicts a dramatic shift if inflation persists. He estimates that only 5% to 10% of people currently recognize the risk and seek protection through assets like gold. If that figure eventually reaches 50% to 60%, he says, the impact on traditional financial assets and fiat currencies would become significantly more dramatic.
Price Targets: $5,000–$7,000 Is Certain, $10,000 Highly Likely
Lepard remains unfazed by the prospect of significantly higher gold prices. "I tell my investors I'm very confident gold will reach $5,000 to $7,000, and I'm highly confident it will hit $10,000," he says. More extreme forecasts depend on a notably worse monetary outcome. In a full currency reset scenario, Lepard suggests gold could eventually reach $20,000, $30,000, or even higher. While he does not use these scenarios as his base investment assumption, he adds that they remain tail risks. Drawing comparisons to the 1970s gold bull market, he says the current cycle still offers valuable lessons. During that inflationary period, gold ultimately rose roughly tenfold from its early base, and a similar move today would push prices toward approximately $10,000 per ounce. The bigger difference, Lepard notes, is that today's policymakers have far less room to apply the prescription that ended the last inflation crisis. With debt levels significantly elevated, aggressive deeply positive real interest rates could place intolerable pressure on government finances. For Lepard, this mathematical constraint outweighs any hawkish rhetoric from the Fed.
Conclusion
At its core, Lepard's thesis is a matter of mathematics: with debt at roughly 120% of GDP, the Volcker-style high-interest-rate remedy is no longer viable. Each rate hike increases interest burdens, widens deficits, and drives more borrowing, plunging the system into a doom loop. Consequently, policymakers are left with only one politically feasible route: printing money, and every round of printing adds fuel to gold's ascent. In Lepard's view, last year's 65% gain is not a final signal but merely the early overture of this monetary cycle, and the underweighting of gold among mainstream investors suggests the rally is far from fully priced. As for Warsh's hawkish posture, it will ultimately be drowned out by mathematical reality. For gold bulls, the only question that remains is this: when the money-printing train truly arrives, will you climb aboard, or continue waiting on the platform?
Spot gold's annual chart is sourced from Easy-forex. As of 12:13 Beijing time on August 28, spot gold was quoted at $4,579.29 per ounce.
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