Market Review 29th September 2025

Everything you need to know, Simplified!

Summary

• Gold hit a record US$3,788/oz, up 44% this year, with silver also performing well

• Demand for non-fiat assets – those not issued by a government - has risen as nation’s fiscal positions have deteriorated with US debt costs now exceeding defence spending, a historic marker of structural decline

• Persistently high inflation underscores the risk of fiscal erosion, driving central banks and investors toward gold, commodities and other diversifiers

• Key data this week: Euro area inflation expected slightly higher at 2.2% and US job growth likely subdued, with unemployment steady at 4.3%.

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Market Review

Beyond fiat

Gold hit a fresh all-time high on Tuesday of US$3,788.42/oz and is up 44.3% this year and 105.7% over two years. Gold mining shares have risen 135.3% year-to-date. The rally in many non-fiat assets has accelerated in recent weeks: silver is up 59.4% year-to-date and Bitcoin is up 16.3%. Why?

Ferguson’s law

Governments have printed and spent too much money since the Global Financial Crisis, culminating in the ultra-stimulative policies adopted during the Covid-19 pandemic. Excessive government spending became entrenched over this period and the US has built up US$37trn of debt, with many developed nations in the same boat.

Adam Ferguson, the 18th century Scottish enlightenment philosopher, warned against the risks of excessive debt. History shows that over-indebtedness is the most significant predictor of decline for great powers: the British crown lost America (no taxation without representation), the French monarchy collapsed into revolution and the British Empire waned after two costly world wars.

Economic historian Niall Ferguson revived these lessons with what he has coined Ferguson’s law: once a nation spends more on interest costs than defence, it has passed the tipping point of structural decline. In 2024, the United States breached this threshold for the first time in modern history.

Initially the Trump administration seemed determined to escape the decline through reduction in spending and ‘government efficiency’. Since April all talk of efficiency has been dropped and fiscal consolidation has been thrown to the wind, the fiscal taps are wide open and the administration’s plan has morphed into outrunning the debt through growth and stimulus.

With the scale of innovation and productivity in the US, this may be a realistic strategy. It may also be the final gambit before the US too faces the last resort of bankrupt governments: the universal tax.

The universal tax

“Inflation is always and everywhere a monetary phenomenon… in the modern era the important reason for excessive increases in the quantity of money has been because governments wanted to spend money and were unable to raise taxes sufficiently to pay for it.” - Milton Friedman.

Inflation remains high in the UK and the US and although pressures are arguably subsiding, there is great uncertainty. Over the medium to long term, another inflationary cycle is not just plausible but likely, particularly without fiscal consolidation – a drastic reversal in government spending habits.

“Inflation is taxation without legislation. It is the most universal tax of all – as violent as a mugger, as frightening as an armed robber, and as deadly as a hitman.” – insights from Milton Friedman, Ronald Reagan and Ludwig von Mises.

The rally in gold is about far more than gold itself. It is about fiat money. Central banks, sovereign wealth funds and private investors are steadily diversifying away from US dollars. This de-dollarisation is not a US dollar collapse, but a gradual erosion of its dominance.

Since 2022, central bank gold purchases have quadrupled, lifting gold to the second-largest reserve asset globally, now surpassing the euro.

For investors, this raises the importance of holding assets that protect against fiscal erosion – not only gold but broader commodities, inflation linked bonds, alternative diversifying strategies and some areas of credit and equities.

In today’s world of rising debt burdens, geopolitical fragmentation and macro uncertainty, the rush into gold is structural. It is a search for money that governments cannot debase. Gold has been the dominant expression of this theme.

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The week ahead

Wednesday: Euro area inflation

Our thoughts: Inflation is anticipated to rise slightly to 2.2% in September from 2.0% in August, driven entirely by base effects (last year’s high print dropping out of the calculation). Monthly inflation is expected to remain muted at 0.1%.

Friday: US employment data

Our thoughts: Job growth is expected to remain subdued in September while the unemployment rate is anticipated to remain at a healthy 4.3%. It seems that with immigration tightening the economy may now require fewer new jobs to keep unemployment low. In that case, weaker job growth may not be a sign of weakness at all.

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Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity. Where investment is made in currencies other than the investor’s base currency, the value of those investments, and any income from the m, will be affected by movements in exchange rates. This effect may be unfavourable as well as favourable. Past performance and future forecasts figures are not a reliable indicator of future results.