Gold's role in the global financial system has undergone a fundamental transformation. Edward Dowd, founder of Phinance Technologies and former portfolio manager at BlackRock, stated that with the full implementation of Basel III "Endgame" banking regulations this year, gold has shifted from a speculative trading asset to a genuine "tier-one monetary asset." This change lays the foundation for gold prices to potentially reach $10,000 per ounce in the long term.
In an interview with Kitco News, Dowd explained that gold's current rally reflects a "repricing" of the significant risk posed by the collapse of the global sovereign debt bubble. He noted, "When Basel III was finalized, gold was reinstated as money... They reclassified gold as a tier-one capital asset."
This regulatory change, effective July 1, 2025, reclassifies allocated physical gold as a Tier 1 High-Quality Liquid Asset (HQLA). Banks can now count it at 100% market value for liquidity purposes with a 0% risk weight, placing gold on par with cash and government bonds like U.S. Treasuries.
Dowd further emphasized, "We all know a major cycle is coming to an end... A new monetary system will arrive sooner or later." The Bank for International Settlements (BIS) recently warned that gold and U.S. stocks have simultaneously experienced "explosive growth" this year for the first time in 50 years. Gold prices have surged 20% since September.
Despite BIS's bubble warnings, Dowd believes a "fiat currency crisis is imminent," positioning gold as a critical safe-haven asset. Based on technical analysis, he made a bold prediction: "Long-term charts suggest gold could ultimately rise to $10,000."
One key driver of structural gold demand, according to Dowd, is central bank purchases, particularly by China. Latest Chinese customs data shows the country's trade surplus has exceeded $1 trillion this year, driven by surging exports to Global South nations while U.S. exports plunged 29% in November, highlighting global supply chain decoupling trends.
"China's gold demand is exceptionally strong," Dowd said. "Facing demographic decline and internal economic collapse risks, their smartest and wealthiest citizens are buying gold." However, he cautioned investors against chasing gold during "emotional rallies," warning that a liquidity crisis similar to Lehman Brothers in 2026 could trigger short-term corrections in both gold and equities.
"If gold drops 20%, 30%, or 40%, I'd buy aggressively. It's the kind of asset you accumulate during every pullback," Dowd advised.
His bullish gold outlook stems from deep pessimism about the U.S. economy. He views recent GDP resilience as an "illusion" fueled by government deficit spending and mass immigration creating "artificial demand"—a mechanism now ending. "The U.S. government extended this illusion by importing 20 million illegal immigrants and subsidizing them," Dowd noted. With tightening border policies removing this "stimulus," he predicts "violent turbulence" in the U.S. housing market by 2026.
U.S. Census data shows new home permits declining since early 2022, while credit card delinquency rates hit 2011 highs. "Home prices must and should fall," Dowd stated.
He also warned tech investors that the AI boom resembles the 2000 dot-com bubble, with the sector forming a "bull trap." Comparing market leader Nvidia to Cisco during that era, Dowd said, "This cycle is nearing its end... Nvidia could ultimately drop 80%." Historical data shows Cisco took nearly 20 years to recover its nominal peak after crashing 80% in 2000. "Buying Nvidia at current prices might require 10-15 years to break even," he added.
Dowd highlighted the $2+ trillion global private credit market as one of the financial system's most dangerous segments, with opaque valuations and poor liquidity rapidly accumulating systemic risk. "It's like Jenga—removing certain blocks could trigger chain reactions," he warned.
Facing impending systemic risks, Dowd's advice is straightforward: prioritize capital preservation. "We expect 2026 to be extremely turbulent financially. Cash itself is an asset... I'd increase cash holdings to seize opportunities during asset price declines," he concluded.
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