As debt, war, and energy strain the system, gold has re-emerged as a foundation of financial security
When Pressure Builds Beneath the Surface
For years, a city can sit quietly above a fault line. Streets remain busy, buildings stand firm, and daily life carries on as if nothing is wrong. Shops open each morning, traffic flows, and people plan for the future with confidence. Yet far below ground, pressure is steadily building. Tiny shifts occur deep beneath the surface, unnoticed and unreported. The structure above appears stable, but its foundations are quietly being tested.
When movement finally comes, it feels sudden. It looks like chaos. But it is not random. It is the release of forces that have been accumulating over time, following a pattern that was always there, even if it went unseen.
That is where we are now.
What many people are reacting to today is surface-level noise. Volatility. Contradictory signals. But beneath that, the system is not behaving unpredictably. It is responding to pressure in a way that is structured and, in many ways, inevitable.
The shift is not new. It is simply becoming visible.
A Cycle We Have Seen Before
The current environment is not a series of disconnected events. It reflects a system reaching its limits and adjusting, much like it did in the 1970s.
Energy remains central to the story.
There is constant talk of shortages, disruption, and geopolitical tension. Yet the issue is not that oil has disappeared. Production capacity still exists. What has changed is the flow and pricing of that supply.
In 2020, we saw the opposite dynamic. Demand collapsed, storage filled, and prices briefly turned negative. Today, instead of excess supply, we see constrained availability. This is not purely physical. It is a function of how the system needs prices to behave.
Oil does far more than power vehicles. It feeds into transport costs, manufacturing, and food production. When its price rises, the entire economy adjusts.
In the past, OPEC acted as the catalyst. Today, tensions surrounding Iran play a similar role. But the underlying mechanism remains unchanged. Energy becomes the tool through which the system recalibrates.
The deeper cause sits elsewhere.
‘Petrol Panic’ – London, 1973
Debt: The System’s Central Constraint
At the heart of Western economies lies a structural imbalance: excessive levels of debt.
This issue is not confined to a single nation; it is deeply embedded across the Western world.
Decades of monetary expansion have created a system that cannot operate under normal conditions. To manage this, it alternates between weakening the currency and reducing the real value of debt. One supports the other in a continuous cycle.
This helps explain a key contradiction in today’s markets. Economic activity is softening, yet interest rates remain elevated.
This is not solely about controlling inflation. It is about adjusting the value of debt. As yields rise and bond prices fall, the real burden of debt is gradually reduced. It is a necessary process, but one that introduces instability.
Source: In Gold We Trust Report, Incrementum AG
Now add war into the equation.
The financial cost of conflict is consistently underestimated. Initial figures focus on direct spending such as equipment and operations. However, history shows that the true cost is far higher.
Estimates following the Iraq war were revised multiple times, eventually reaching several trillion pounds once long-term obligations were included. These extended costs include healthcare for veterans, rebuilding efforts, and the ongoing servicing of debt used to fund the war.
The current conflict involving Iran appears to be following a similar path. Early projections suggest spending could move into the trillion-dollar range, with daily costs already running into the billions. Requests for additional funding continue to emerge, indicating that initial estimates are likely conservative.
There is also an imbalance in modern warfare. Lower-cost technologies such as drones can be deployed relatively cheaply, while the systems required to counter them are significantly more expensive. This drives costs higher at an accelerating pace.
Much of this expenditure is financed through borrowing. With debt levels already elevated, the impact compounds quickly. Interest payments now account for a significantly larger portion of government budgets than in previous decades.
Wars do not just cost money in the present. They create financial obligations that persist for decades.
$1B a day! Source: irancostticker.com
A More Fragile System
Compared to previous cycles, today’s economic structure is more sensitive.
Debt relative to economic output is considerably higher. Financial markets are more interconnected. The tolerance for rising interest rates is lower.
In earlier periods, the system could absorb shocks more easily. Today, it does not necessarily require a sudden event. Ongoing pressure alone is enough to expose weaknesses.
Even modest increases in borrowing costs can trigger wider stress. Liquidity tightens, asset valuations adjust, and confidence begins to erode.
This is not about a dramatic collapse. It is about a gradual process that reveals underlying fragility over time.
War Is Inflationary, and Households Can Feel It
While much of the focus remains on the United States, the consequences are global. In many cases, the impact is more pronounced elsewhere, particularly in the UK.
As a net importer of energy, the UK is highly exposed to rising oil and gas prices. Recent forecasts have already reduced expectations for economic growth this year, with the downgrade being among the largest across advanced economies.
Inflation remains elevated, and energy costs are a primary driver. For households, this is not abstract. It is visible in higher fuel prices, increased utility bills, and rising costs across everyday goods.
War feeds directly into inflation.
It raises input costs, disrupts supply chains, and limits the ability of governments to provide financial support. In the UK’s case, fiscal constraints mean there is limited room to offset these pressures.
At the same time, policymakers face a difficult balancing act. Increasing interest rates too aggressively risks slowing the economy further. Acting too cautiously risks allowing inflation to persist.
This tension is now a defining feature of the economic environment.
For households, the result is clear. Living costs rise, growth slows, and financial pressure increases.
Source: IMF, BBC
Gold and the Shift Towards Protection
As confidence in traditional financial assets weakens, capital begins to move.
The focus shifts away from maximising returns and towards preserving wealth.
Government bonds, once seen as the safest assets, are no longer as stable as they once were. Rising yields, increasing supply, and negative real returns have changed their role.
Gold is becoming relevant again, not as a speculative asset, but as a store of value.
It sits outside the debt-based system and carries no counterparty risk. In periods of uncertainty, these characteristics matter.
That does not mean its price moves in a straight line. During periods of stress, investors often prioritise liquidity. Assets that can be easily sold, including gold, may be temporarily pressured.
These movements reflect liquidity dynamics rather than a breakdown in the underlying case.
Gold: Shielding your wealth
Positioning in This Environment
In this type of environment, priorities shift.
The objective is no longer to chase returns. It is to maintain resilience.
For individuals, that means focusing on tangible assets, maintaining access to liquidity, and reducing reliance on complex financial structures. Precious metals and accessible cash reserves become increasingly important.
For larger portfolios, there is scope for more advanced strategies, including selective positioning and risk management within debt markets.
However, the sequence matters.
Stability should come first. Opportunity should follow.
Looking Beyond the Headlines
Short-term market movements can be misleading. Daily headlines create the impression of unpredictability.
But when viewed over a longer timeframe, the direction becomes clearer.
The system is adjusting under the weight of its own structure. Debt levels, monetary policy, energy markets, and geopolitical tensions are all interconnected.
The 1970s did not result in an immediate breakdown. Instead, they brought a prolonged period of inflation, volatility, and economic adjustment.
Today, the starting point is more fragile.
Which suggests the path ahead may be more complex.
When pressure builds within a system, the focus should shift from prediction to preparation.
Some assets depend on stability within the system. Others exist outside of it.
Recognising that distinction is essential.
Because when underlying stress begins to surface, outcomes are no longer driven by chance. They are driven by structure.
We are continuing to build Goldwise with content that helps investors understand what is really happening beneath the surface. If there are specific topics you would like us to break down further, or areas you feel are not being covered clearly enough, let us know!
This content is for informational purposes only and does not constitute financial advice. Investments can go down as well as up, and you should conduct your own research or speak to a qualified financial advisor.
