Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / How Gold Bulls Are Reading the Same Market Differently
Transcript
- Lucas: John Paulson said yesterday that we are in the early stages of a long-term bull market for gold. Now, Paulson is 83, he made his name shorting subprime mortgages in 2007, and his track record since then has been mixed — but when someone with that kind of career capital makes a call this specific, it's worth unpacking. Luna: He's not exactly a gold bug either. He famously called gold a bubble back in 2013, so this is a real pivot for him. Lucas: Right. And the timing is interesting. We're sitting here July 23, 2026, the S&P 500 is around 7,500, the VIX is at 16.64 — not panicked but not complacent. Meanwhile, gold has been quietly grinding higher. It's not screaming higher — it's a steady climb that's easy to ignore if you're only watching tech stocks. Luna: If our money conversations have helped you think about a decision differently — whether that's how you allocate a portfolio or just how you read a headline — listener support is what keeps this show ad-free. You can find us at buy me a coffee dot com slash fexingo. Lucas: And honestly, a gold bull market call from someone like Paulson is exactly the kind of signal that's worth debating. So let's dig into whether he's right. Luna: Let's start with the macro backdrop. Real GDP growth just came in at 2.1 percent annualized for Q1 2026. That's up from 0.5 percent the previous quarter. Not recessionary at all. Lucas: No, but the yield curve is still inverted — just barely. The 10-year is at 4.63, the 2-year at 4.26, so the spread is 36 basis points. That's steepened from being deeply inverted, but it's not normal yet. And gold tends to do well when real rates are low or falling. Luna: Real rates — that's the nominal yield minus inflation expectations. Right now the 10-year TIPS yield is around 2.0 percent, so real rates are positive but not high by historical standards. That's not a headwind for gold. Lucas: But here's what I find fascinating. Paulson isn't just saying gold goes up because inflation stays sticky. He's saying we're in the early stages of a long-term bull market. That implies a multi-year thesis. What could drive that? Luna: One argument is central bank buying. Central banks have been net buyers of gold for over a decade now. China, India, Poland, Turkey — they've been diversifying away from dollar reserves. That's structural demand that doesn't care about the price. Lucas: Another is fiscal dominance. The US national debt is now over $35 trillion. At some point, markets start to question the long-term purchasing power of fiat currency. Gold is the insurance policy against that scenario. Luna: But gold has also had a pretty good run already. It's up something like 15 percent year to date. Is Paulson late to the party? Lucas: That's the real question. If you look at gold's price in real terms — adjusting for inflation — it's still below its 2011 peak. So there's an argument that it hasn't even broken out yet on a real basis. Luna: And the VIX and VVIX data this morning — the VIX is at 16.64, the VVIX at 95.55. Those are elevated but not extreme. The VVIX especially is telling us options markets are pricing in tail risk, but not panic. Lucas: Which actually fits a gold bull thesis. If you expect more volatility but not a crash, gold becomes an attractive carry trade. It's not yielding anything, but it doesn't have negative carry if the dollar weakens. Luna: But there's a counter-argument. If the economy continues to grow at 2 percent and the Fed keeps rates steady, why would anyone hold gold over equities? The S&P 500 earnings yield is still attractive relative to gold. Lucas: You could say that gold is the anti-beta trade. When stocks sell off, gold often rallies — not always, but often. And if you look at the last few corrections, gold has held up better than bonds. Luna: I want to bring up something Paulson said specifically. He said 'early stages.' That's a strong conviction statement. He's not saying it's a tactical trade. He's saying allocate capital permanently. Lucas: And that's the difference between a hedge fund manager and a retail trader. Paulson can afford to be early and wrong for a while. He's managing other people's money, but he has a long-duration mandate. Luna: Still, his track record after the big short is spotty. He was early on gold in 2009 and it worked. Then he turned bearish in 2013 and gold bottomed soon after. Then he launched a gold fund in 2017 that underperformed. So it's not like he's infallible. Lucas: No one is. But the point isn't to copy Paulson. The point is to understand the logic and see if it fits your own portfolio. For a long-term investor, gold can be a small allocation — say 5 to 10 percent — that reduces portfolio volatility over full cycles. Luna: And there's a practical angle. If you want gold exposure, do you buy physical, ETFs like GLD, or mining stocks? They behave very differently. Lucas: Mining stocks are leveraged plays on gold. If gold goes up 10 percent, miners can go up 30 percent — but they also carry operational risk, geopolitical risk, and management risk. Gold ETFs track the spot price more closely but have expense ratios. Luna: There's also the question of timing. With the VIX at 16.64, we're not in a fear spike. Gold tends to do best when fear is rising, not when it's stable. So if Paulson is right that fear will increase over the long term, then buying now makes sense. Lucas: But if the market is wrong and we get a soft landing — GDP stays above trend, inflation drifts back to 2 percent — then gold could stagnate for years. That's the risk. Luna: And that brings us back to the yield curve. The 10-year minus 2-year spread is 36 basis points. Historically, once the curve un-inverts, a recession follows within 12 to 18 months. If that happens, gold tends to rally. Lucas: But if it doesn't — if we get the mythical no-landing scenario — gold could underperform. So Paulson is making a bet on a specific macro outcome, even if he's framing it as a long-term structural shift. Luna: One more data point: gold's correlation to real rates has broken down in recent years. It used to be strongly negative — higher real rates meant lower gold. But since 2022, that relationship has weakened. Gold has risen even as real rates went up. Lucas: That's a sign that other factors — central bank buying, de-dollarization, geopolitical risk — are becoming more dominant. And those factors don't reverse quickly. So Paulson's 'early stages' thesis does have some structural backing. Luna: For the retail investor listening, what's the takeaway? Should they buy gold today? Lucas: I'd say: don't make a binary bet. If you don't have any gold exposure, consider a small starter position — but dollar-cost average into it. And don't expect it to act like a growth stock. It's insurance, not a lottery ticket. Luna: I'd add: pay attention to the VIX and VVIX. If the VVIX starts pushing above 110 again, that's a signal that tail risk is repricing. That could be the moment gold really starts to rally hard. Lucas: And watch the yield curve. If the 10-year yield drops below 4 percent while the 2-year stays elevated, that's a recession signal. Gold would likely benefit. But if the curve steepens because growth picks up, gold might struggle. Luna: John Paulson's call is worth listening to, but it's not a roadmap. It's a hypothesis. And in a market where the VIX is 16.64 and GDP is growing at 2.1 percent, the biggest risk might be that nothing dramatic happens at all. Lucas: And that's the hardest market to navigate — the one that just drifts. Gold drifts, stocks drift, and the biggest returns come from patience, not prediction.