Gold to $20K? Tavi Costa on the Great Rotation That Will Reshape Markets
What this covers
Is gold still undervalued, even after hitting record highs? Tavi Costa says yes, and makes the case for $20,000+ gold.
In this insightful interview, Crescat Capital’s macro strategist Tavi Costa joins Trey Reik to explain why we’re in the early stages of a “Great Rotation” out of overvalued U.S. equities and into hard assets like gold, silver, and commodities. Tavi also lays out why traditional 60/40 portfolios are set to underperform for years, how U.S. debt levels and deglobalization are pressuring the dollar, and why central banks (and possibly even the U.S. Treasury) are quietly turning back to gold.
He also reveals: - Why the 2-year Treasury yield could collapse - Why the S&P 500’s best years may be behind it - Why silver may be “the cheapest metal on Earth” - And how AI, onshoring, and infrastructure needs are creating a boom in commodity demand
Chapters:01:09 - Crescat’s Three‑Pronged Strategy 05:45 - Defining the “Great Market Rotation” 10:14 - What’s Driving Crescat’s 2025 Outperformance 13:38 - Why the 60/40 Portfolio Is in Trouble 16:49 - Commodities vs. Equities: The Historic Discount 20:36 - Three Forces Fueling Gold’s Surge 24:36 - Why This Gold Cycle Could Be the Biggest Yet 30:03 - When Will It Be Time to Sell Gold? 36:32 - Valuing Gold: A $20K+ Playbook? 41:25 - Gold’s Role in the Next Monetary System 44:48 - 2025 Outlook: Rates, Commodities, and Markets 47:35 - Is Silver the Cheapest Metal on Earth?
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#Wealthion #Wealth #Finance #Investing #Gold #Silver #Commodities #MacroEconomics #DeDollarization #GreatRotation #TaviCosta #EconomicShift #MonetaryPolicy #MarketOutlook #Mag7 ________________________________________________________________________ The opinions and information shared by Tavi in this discussion are his own, and not necessarily those of Crescat. Any investments discussed may or may not be held by Crescat. Investments carry risk including risk of loss. ________________________________________________________________________ IMPORTANT NOTE: The information, opinions, and insights expressed by our guests do not necessarily reflect the views of Wealthion. They are intended to provide a diverse perspective on the economy, investing, and other relevant topics to enrich your understanding of these complex fields.
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Costa argues that financial assets are severely overvalued relative to commodities and hard assets, positioning a "great rotation" where capital flows from equities into precious metals and natural resources as central banks accumulate gold, governments face debt constraints, and geopolitical de-globalization accelerates—making the early stages of a multi-year hard asset bull market.
- US equities trade at historically extreme valuations (CAPE 33) while commodities sit at multi-decade lows relative to equities, creating asymmetric risk/reward
- Central banks are accumulating gold at 60-year highs while the US sits at 90-year lows, signaling monetary regime transition and implicit gold revaluation
- De-globalization, onshoring, and AI infrastructure buildout require massive metal consumption while mining supply is constrained by lack of new discoveries
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De-globalization and onshoring of industrial production will require massive new metal consumption beyond what the current supply capacity can accommodate, particularly as AI infrastructure buildout will add one US-equivalent of electricity consumption in the next five years.
“we're about to add one US equivalent of electricity consumption in the next five years because of AI...countries are again going above and beyond to build their back their their infrastructure um you know revitalize their industrial capabilities and that comes at a cost and the cost is higher electricity costs. you have more metals”
Gold production is currently in a declining trend with minimal new gold discoveries and exploration budgets, mirroring the supply constraint dynamics of the 1970s gold bull market, which supports continuation of price appreciation.
“there has been not much of a conversation about the supply of gold and the fact that we usually see before or in the middle of a bull market for the metal. We tend to see production actually in a declining trend and certainly is what we're seeing today...lack of discoveries, lack of exploration budget uh across most of the mining companies”
The US dollar is likely to enter a multi-year depreciation cycle versus other fiat currencies as the current administration's focus on trade deficits forces currency weakness to rebalance trade, creating tailwinds for commodities and hard assets.
“clearly this administration has a big focus into trade deficits and fiscal deficits. How do you fix that? Two ways...number two is is the dollar. You don't fix a trade balance issue by strengthening your currency. You do it the other way around...When you're trying to fix all these trade agreements we've had for over decades...what you may cause is is a complete change or a turning point of your own currency”
Central bank gold acquisition in the early 2000s was minimal or net selling, yet gold prices still appreciated significantly due to capital rotation from overvalued US equities into undervalued hard assets globally.
“in the early 2000s, there was no central bank buying gold. In fact, there was selling, net selling of central banks of gold. And still, gold prices did very well. But that's because we saw a rotation out of the market, right? The market was too overvalued in the US and then investors had to sell their US-based assets, start buying other things.”
MSCI index concentration in US equities at 70% weight, with no other single country having double-digit weighting, creates structural vulnerability in global equity indices and reflects problematic market structure.
“if you look at the MSEI index, we're about 70% weight on the US and, you know, no other country has uh double digits weights in uh in that index alone. So, it's a it's a real troubling situation”
The last 15 years of S&P 500 performance has been extraordinarily unusual, and corporate earnings growth over the last 15 years was the best since 1900, with the only comparable period being the 1920s which preceded the Great Depression.
“just looking back for the last 15 years of performance in S&P 500, it's just quite unusual to see another 15 years of this level of performance. And so, starting from that point, you know, gravity still works. And so, I it's hard to be extremely bullish after one of the most uh outstanding performances for overall equity markets we've seen in history”
Financial assets, particularly US mega-cap technology stocks (Apple, Microsoft, Google), are at extreme valuations after 15 years of unprecedented performance, making a multi-decade rotation into commodities and hard assets highly probable as valuations mean-revert.
“the last 15 years was by far the best corporate earnings growth we've seen all the way back to the 1900s. The last time we saw something close to that was in the 1920s and then that led to the Great Depression”
The 60/40 portfolio (60% stocks, 40% bonds) faces a structural headwind for the next 5-10 years because the historical assumption that Treasury bonds provide a hedge during equity downturns is breaking down, with both equity and Treasury markets now falling together.
“this recent change of behavior in the macro environment is absolutely critical. I mean what we're seeing in terms of equity markets falling and the Treasury market also falling is something to be aware of...equity markets don't usually bottom at a 30 plus cape ratio...the 6040 allocation is is kind of embedded in this view that you know treasuries will always come for the rescue when the equity markets fall”
China's emergence as a global manufacturing center and massive commodity consumer in the early 2000s created unprecedented demand for metals, a structural dynamic that didn't exist in the 1970s gold bull market.
“China became, you know, which didn't happen in the 70s. China became a manufacturing plant of the global economy. It was it was importing metals like it was entering a war or something. It was very strange how much of a demand China was sucking into that period and still is the case today.”
Gold mining companies' costs are not rising proportionally with gold prices, creating a 'golden age of mining' where producers can sell gold at double their extraction costs, ensuring strong cash flow generation.
“you also have companies that produce the metal and they're not seeing their cost rise anywhere close to gold prices...this is one of what we call the golden age of mining. You know this is a a wonderful environment to be producing hard assets particularly gold when you can produce it almost double your cost to produ to uh to extract the metal from the ground.”
Crescat's three funds achieved top-tier performance in the Preqin hedge fund universe (ranks 2, 3, and 6 year-to-date) with approximately one-third attribution from mining positions and two-thirds from short positions, particularly in mega-cap technology stocks and widening credit spreads.
“I would say onethird of that came from the mining space...Secondly, I would say that a lot of the short positions have maybe done the other twothirds of this...we've had a lot of shorts on the technology front...Apples, Microsofts and uh Google's of the world...we also had a very uh long trade on credit spreads”
Commodities will rotate through different leadership cycles with gold currently favored but likely to rotate to other commodities (energy, steel, zinc) within 6-12 months as the market reprices relative valuations and sector leadership changes.
“I think there's going to be a catchup of other commodities to gold...I think the other commodities will will will do quite well...commodities work in a rotational dynamic. Sometimes you have the flavor of the day and then uh things change and the flavor of the day now is gold and um I just know that's not going to be the case, you know, probably 12, six months from now and it would change to a new commodity”
Silver is the cheapest metal on Earth and likely the most interesting asset to own over the next 5-10 years, with the gold-to-silver ratio at 100:1 suggesting potential for silver to reach $100+ per ounce if the ratio compresses to historical norms.
“Silver is probably...the cheapest metal on Earth, and it's most likely one of the most interesting uh things to own in the next 5 to 10 years...with this gold to silver ratio at 100. What a dream. You know, that means we could see easily, you know, $100 plus dollars of silver”
De-globalization is occurring as countries secure their own borders and ensure mineral/commodity self-sufficiency; evidence includes surging Chinese copper imports as nations protect themselves and pursue inward-looking policies, reversing decades of globalization.
“what we're seeing in terms of del globalization of which countries are going above and beyond to secure their boards and also make sure that they have uh all the necessities of metals and commodities and you know there's a reason why you're seeing Chinese copper imports surge and all sorts of things you know everyone is looking uh inwards and and trying to protect themselves.”
The 1980s saw prolific gold discoveries and was one of the most productive periods for finding gold deposits, coinciding with a period of falling gold prices and attractive treasury market yields (double-digit interest rates), demonstrating the inverse relationship between supply and demand cycles.
“in the 1980s, we saw the opposite of the 70s. We actually had a ton of new discoveries. uh it was one of the most prolific periods of finding gold this gold deposits in the world and so which is in line with the fact that gold prices fell significantly. It was also a period where the treasury market became really cheap. Imagine you're getting doubledigit interest rates at that time”
Equity market valuations (CAPE ratio at 30+) do not typically mark bottoms; owning fundamentally cheap assets that fall further creates psychological comfort for value investors who can increase positions on weakness.
“equity markets don't usually bottom at a 30 plus cape ratio...I just I just can sleep and I very well owning things that I know are fundamentally cheap and if they fall in prices, I feel comfortable stepping in, purchasing more. I mean that's the virtual value investing.”
Changes in Federal Reserve leadership could materially alter equity market dynamics; if the Fed chair is replaced with someone willing to 'play ball' with the government, market outcomes could shift drastically.
“if if if they remove the Federal Reserve, you know, uh chair chairman um J Pal from his role and put somebody there to play ball with the federal with the government. I think things can change drastically in the equity market.”
Stock market downside remains muted due to continued liquidity in the system and policy-driven support, making a sharp equity crash unlikely despite valuation concerns.
“I'm not sure we're going to see a real crash in equity markets either. Um so, you know, there's still a lot of liquidity out there. Still a lot of liquidity. And also it's very policy uh driven.”
The relationship between onshoring and AI is not a chicken-and-egg question—metals must come first before artificial intelligence infrastructure can be built, not the reverse.
“in order to build AI in order to build data centers in order to build industrial capabilities we need metals no It's not the other way around. That one is not a chicken and an egg question. It's pretty simple. You need that first.”
Using CAPE ratio as a bullish indicator at 33-34 times because early 2000s peak was 40 times represents poor risk management; accepting 70% of 2000 peak valuation risk for minor upside is unjustifiable compared to rotating into undervalued alternatives.
“when you show some folks that are bullish the equity market, they will look into that chart, they will tell you, well, look at the n the the early 2000 who went all the way to 40. So, you're telling me you're going to take the risk from 33, 34 to 40 versus just stepping, you know, and or stepping back and saying, well, look, there's too much risk here. I am the type of guy that's not willing to take that type of risk.”
Gold backing of US government securities is 'really backed by gold' ultimately, regardless of claims about military backing, because historically whoever has more gold has their currency valued better in negotiations.
“we may say that the government uh securities are backed by military and other things but ultimately is really backed by gold um and and people will learn a lesson on this as well. I mean a lot of people are changing their tune saying no it's about military. It's really about the gold. I mean ultimately whoever got more gold will their currency will be valued u you know better accordingly”
The Treasury Department may be acquiring gold to increase collateral value in the TGA (Treasury General Account) cash balance, allowing it to manipulate interest rates lower without Federal Reserve cooperation, and higher gold prices would expand available capital for deployment.
“I wouldn't shock me at all if it's the Treasury in the US that is buying gold recently and driving the metal price higher...they need is cash in the TGA account...in order to improve that cash balance, what you need to do is to have more collateral. And so gold prices are still value at ridiculous low level...if you revalue gold...the change that it does is that increases the collateral value, increases the value of your cash available”
De-globalization is happening not because it's unique in history but because it coincides with all-time highs in global debt, and historically de-globalization cycles occur at similar debt peaks.
“de globalization this is not unique I mean we've seen de globalization in the past uh they happen to happen when you are at all-time highs in debt as well so you know it's um they're not they're not a coincidence”
Mining industry capex-to-cash-flow ratios will reach all-time highs as the sector approaches peak euphoria, with companies making acquisitions and funding projects lacking economic merit, signaling when to exit hard asset positions.
“you're going to see companies throwing, you know, big capital into the projects that are not worth any money. Um, and those are going to be more signs of of why, you know, capex is going to be at all-time highs relative to what they earn in in in cash flows...if we start seeing all these boxes checking, you're like, 'All right, well, that's we've gone up too much'”
Value investing combined with macro analysis offers superior risk-adjusted returns versus traditional value investing alone, particularly when identifying legacy industries and companies trading at discounts due to macro regime changes not yet reflected in prices.
“the idea of value investing with macro uh with the potential change fundamentally uh likely ahead that is not reflected in the price yet of most of these things and a lot of these hard asset businesses are falling into that category today...I very well owning things that I know are fundamentally cheap and if they fall in prices, I feel comfortable stepping in, purchasing more. I mean that's the virtual value investing”
Gold will eventually stop being an attractive portfolio asset when deleveraging occurs or when the debt-to-GDP ratio normalizes, eliminating the uncertainty and imbalance that drives gold's appeal.
“deleveraging is going to be a big one...we're going to have to reduce the amount of debt to GDP uh either through a contraction of of or or just you know uh defaulting on the debt or inflating our way out...There's you know not a lot of reasons to own gold in that world...gold likes uncertainty”
Zinc is historically at the lower end of a multi-decade trading channel and deserves attention due to its role in onshoring and rebuilding of America infrastructure; zinc has been off-radar of many investors but could come on-radar in coming months.
“zinc. um you know it's its uh role into onshoring and the building of America rebuilding of America could be critical and so I think that should be uh it's a metal that has been if you look at the long-term story of silver of uh zinc over 1900s you see a big big channel where it hits the peak and then the bottom and we're right at the very lower end of that uh lower range”
US government debt is backed by less than 2% of gold reserves when valued at current prices, versus 40% backing during World War II and 10-15% during the 1970s bull market, implying gold price targets of $20,000-$50,000 per ounce if revaluation occurs to historical ratios.
“the government debt in the US is backed by about less than 2% of gold reserves...back in the 40s...we were about 40% of the government debt was actually backed by gold...if you just revalue at more appropriate levels, let's say 10 15% which we saw back in the 70s, you get a gold price somewhere closer to $20,000 an ounce or so. If you get it closer to the 40% which is a very extreme number, you get it close to 50,000.”
Gold market dynamics progress predictably through phases: first capital flows into gold (least risky hard asset with lower volatility and high liquidity), then into senior mining companies, then into junior explorers as investors gain confidence and seek higher risk/reward asymmetry.
“it's almost like the less the least risky key way of investing in in hard assets when you think about it's probably gold. Um it's got less volatility, it's got a lot of liquidity, it's a huge market. Um so that's where people went for it. Um and then as they feel comfortable and make money on that idea uh they start thinking about okay what where else can I take more risk and and more asymmetry hopefully uh in order to uh uh you know accomplish my goals and and that's when you start seeing this this um capital movement into the seniors and then finally into the other parts”
Energy commodities, steel producers, and car manufacturers may experience significant comebacks as AI infrastructure buildout and onshoring drive new demand cycles, reversing recent underperformance.
“I think energy commodities could make a comeback. I think they've been out of favor...particularly steel producers. Um, you know, you've got uh you've got things like car manufacturers that may have a comeback...that I'm focused on on the equity markets.”
Interest rates at double-digit levels would make Treasury bonds attractive again, reversing his bearish stance on fixed income and indicating a regime where gold is no longer mandatory.
“if go back to a world where interest rates, let's say, 10 years from now, are double digits. Yeah, I'm happy to own treasuries at double digit interest rates. I mean, why not?”
Attempts to fix geopolitical and trade issues after decades (or centuries) of established trade agreements can trigger unintended consequences, including currency regime changes, similar to how fixes in personal relationships can trigger unexpected second-order effects.
“when you're trying to fix one thing, you may trigger another issue that you're not aware of. When you're trying to fix all these trade agreements we've had for over decades, in some cases even centuries, what you may cause is is a complete change or a turning point of your own currency”
International central banks are at 60-year highs in gold reserves while the US is at a 90-year low; the US must aggressively accumulate gold to match international peers and restore historical balance.
“international central banks are at a 60-year highs in gold reserves today. And the US is at a 90year low. So, they better get cranking here.”
If a large party intends to buy something, they don't announce it publicly; they buy secretly and announce later—therefore the fact that the US Treasury hasn't announced gold buying is extremely bullish and suggests covert accumulation.
“if if a large party is really interested in buying something, they don't announce it to the whole world. they buy it and they they announce it. And so the fact that we have not announced to the world that we're doing something on gold is extremely bullish.”
The 'trifecta of macro imbalances' comprises: (1) inflation of the 1970s, (2) debt problem of the 1940s, and (3) valuation issue of the late 1920s and late 1990s—all occurring simultaneously in the current environment.
“I've always called this environment sort of the trifecta of macro imbalances. You have the inflation of the 1970s. You have uh the debt problem of the 1940s and at the same time you also have the valuation issue that we saw in the late 20s and also the late 90s.”
Scott Bassen's hedge fund position was primarily gold, and Trump's properties are heavily decorated with gold, indicating these policy figures understand gold's value and may be accumulating it quietly.
“Scott Basson's, you know, biggest position in his hedge fund was what? Was gold. And the same goes for Donald Trump. He knows the value of gold. Everything that he builds has got gold everywhere.”
Costa maintains high conviction that the 2-year Treasury yield could fall potentially to single digits (described as 'at least in a two handle') if the Fed maintains its current stance and the economy contracts or slows significantly.
“the two-year yield, you know, could uh potentially be uh reduced even in half as the Fed plays sort of a stubborn um you know role into the economy and and we see things completely changing... the contraction of the economy or even a slowdown would reward a a two-year yield at least in a two handle”
Commodities to equity valuation ratio is at historic lows; after commodity prices bottomed near 2020 levels and policy response unleashed hard assets thesis, there has been no real transition from equities into commodities, making this the critical rotation opportunity.
“there's a two stories when you look at that chart. I mean, there's a story of uh the fact that we've had um commodity prices go into one of the worst periods in history all the way down to all the way back to the 2020 levels. Uh and then after the response from the policy makers that we've had uh from the COVID recession that sort of unleashed the hard assets thesis in a large way. What we haven't seen is that real transition from uh equities overall equities into commodities.”
Costa has been constructive on gold and metals since 2018-2019, and believes gold is still in the beginning stages of its bull market despite recent 27% gains in the prior year and 33% gains in the first four months of the current year.
“I've since 2018 2019 I've been uh very constructive on gold and the metals...I believe gold is just at the beginning. It's, you know, a lot of people see this as the potentially the end...Know we've seen some of that move, but there's a lot of other assets that need to catch up”
The current gold bull market has a longer list of supporting fundamentals than the two prior major bull markets (1970s and 2000-2010) combined and doubled, making this cycle unique.
“the list in the current environment is as long as the other two put together and doubled. So, what what specifically is coming together here that gives you that confidence that we're early in the cycle?”
Crescat Capital is a Denver-based asset management firm with a strong macro focus that manages three primary investment strategies: a global macro fund, a long-short equity fund, and a precious metals fund launched in mid-2020.
“Crescat Capital, a Denver-based asset management firm with a uniquely macro bent...Cresca is is really focused on three strategies. We have a global macro where we can invest on any asset and then a long short fund that is only equity uh focused and then a precious metals fund that we launched uh in uh mid 2020”
Building conviction in a thesis despite short-term price movement against the position shows strong discipline; if the fundamental thesis remains intact, price declines create accumulation opportunities rather than reason to exit.
“I don't lose my conviction because price is going against me. I it's quite the opposite. You you earn you know you you gain even more conviction in fact if if the thesis is is intact and that's the case here.”
Crescat separates its precious metals strategy from its global macro fund to address institutional investor hesitation about macro fund opacity, creating a dedicated strategy that generates similar asymmetric returns while being easier for institutional clients to understand and hedge.
“when you're trying to be a large institution uh hedging an exposure to a macro fund it becomes it could become a little bit challenging because that exposure is is somewhat unknown. And so when you creating these sort of pockets of strategies on the side uh that then um you know generate um you know just as good as of an asymmetry...I think it's it's quite attractive”
The activist approach to precious metals mining investments—engaging with small-cap and junior mining companies on drilling strategy and operational improvement—mimics venture capital structures and improves portfolio odds relative to passive mining exposure.
“we are taking risk of of investing in small companies that we believe have um you know securing uh mineral deposits that are incredibly valuable and and by doing that we also improve our odds by by doing activist approach uh towards those companies to uh help them uh in their drilling uh seasons...it's almost like a hybrid venture capital approach”
Macro investing is one of the most attractive ways to invest compared to value investing, but the main complexity is that institutional investors struggle to understand the long-short positioning, making it difficult to hedge exposure and harder to market to clients.
“I I love macro. I think macro is one of the most uh attractive ways of of investing when you compare that with value investing. However, the big the big uh complexity of it is for a lot of people, they have issues understanding what you're long and what you're short overall”
Platinum is significantly undervalued versus gold due to supply-demand imbalances related to catalytic converters, creating a relative value opportunity similar to silver's asymmetry.
“platinum's not something that I spent a lot of time thinking about for a couple of different reasons, supply and catalytic converters, but he [Dave Ivan] points out that platinum's just gotten way too cheap versus gold”
Costa prefers not to lock into a specific view for the end of the year, instead remaining open-minded to multiple scenarios given the policy-driven nature of markets.
“I don't want to be put in a position where I have a view that it's, you know, that is, you know, locked into the end of the year. I'm, you know, I'm trying to be very open-minded at this”
Costa is currently relocating to Brazil and was recently moved there at the time of this interview.
“Tavi is actually joining us from Brazil today...I know that you're relocating down there for at least part of the year...I literally moved in two days ago.”
Being 'too old' for another significant portfolio drawdown motivates Costa to size positions carefully and exit cycles more elegantly than past experiences (like 2011).
“I'm too old for the next draw down. So I I want to make sure that we, you know, round this up a little bit more elegantly than we did in 2011.”
Trey Reich is the host of the Wealth Beyond show and founder/principal of Bristol Gold Group, a precious metals investment firm.
“My name is Trey Reich of Bristol Gold Group”