The great physical realignment: Gold $10,000, silver $200, and the death of the paper market
NEW YORK (March 18) Global markets are navigating a violent realignment as a paralyzed Federal Reserve and escalating energy warfare in the Middle East collide with historic producer inflation. The Federal Open Market Committee (FOMC) voted 11–1 on Wednesday to maintain the benchmark interest rate in a target range of 3.5%–3.75%, citing "uncertain" economic implications from the broadening conflict in Iran. While the central bank signaled it still expects one rate cut by the end of 2026, it raised its year-end median projection for core inflation to 2.7%, acknowledging that price pressures remain stubbornly elevated despite the recent tightening cycle.
Philippe Gijsels, Chief Strategy Officer at BNP Paribas Fortis, told Kitco News that the immediate volatility in the precious metals sector is a temporary "de-leveraging" event occurring within the early stages of a historic cycle. He explained that while the paper markets are currently in a state of panic, the physical world is just waking up to what will be "the largest bull market in history".
The "Monopoly Money" Trap and Central Bank Capitulation
The fundamental case for hard assets is being bolstered by a "stagflation environment" where central banks may be forced to abandon price stability to prevent a broader economic collapse. Gijsels stated that he is "absolutely convinced that central banks eventually will all choose to let inflation run" to manage massive global debt loads, particularly in the U.S., Europe, and Japan. He argued that as the purchasing power of fiat currency diminishes, the market will realize that the money in their pockets is essentially "monopoly money," driving a massive rotation back into gold and silver.
Gijsels noted that for decades, central bankers had the "easy" job of lowering rates as inflation trended down. Today, they are backed into a corner by rising costs and slowing growth. "I think it's very clear what they will do," Gijsels remarked, noting that they will prioritize growth and allow inflation to run well above the traditional 2% target. Based on this monetary degradation and a structural lack of new supply, Gijsels issued aggressive long-term targets, predicting that "gold will go to $10,000 in a couple of years’ time" and that he "would not be surprised to see $200 or so on silver".
Energy Warfare: South Pars and the $150 Oil Risk
This "physical reset" is taking place against a backdrop of direct military strikes on Iran’s energy infrastructure, specifically the South Pars gas field, which has sent Brent crude surging past $109 a barrel. The escalation has already resulted in a total halt of Iranian gas exports to Iraq, knocking out critical power supplies and forcing President Trump to issue an emergency 60-day Jones Act waiver to mitigate domestic fuel costs. Gijsels warned that the oil market is fragmenting into competing political blocs, with the U.S. using energy as a weapon against China while Beijing secures the "marginal barrel" through its own strategic reserves.
The closure of the Strait of Hormuz represents a "case study" for global energy stability, as 20 million barrels of oil - nearly 20% of global daily consumption - are now at risk. Gijsels noted that if this blockade remains in place for even a few more weeks, oil prices could spike to $150, creating a level of volatility that would challenge the current global economic order. "We always said the gas market was fragmented because transportation is difficult," Gijsels observed, "but maybe oil is now moving in the direction of gas".
The HALO Framework: A New Commodity Order
Ultimately, Gijsels believes the world is shifting away from digital abstractions toward "Heavy Assets, Low Obsolescence" (the HALO framework), emphasizing that "this is a material world more than ever.” He argued that even the virtual worlds built by artificial intelligence remain entirely dependent on the "atoms and molecules" of the real world, such as copper for the electrical revolution and silver for industrial demand.
As the traditional 60/40 portfolio collapses under the weight of rising inflation and interest rates, Gijsels expects a new commodity order to emerge where institutional investors demand direct, often tokenized claims on physical inventory. He revealed that his own team at BNP Paribas has begun physically verifying the bullion backing their trackers to ensure the "real stuff" actually exists. For Gijsels, the current market turbulence is not the end of the bull run, but the beginning of a cycle where "physical scarcity" becomes the primary driver of global wealth.
KitcoNews
