Paul Wong, managing partner and market strategist at Sprott Inc., stated that rising debt and inflation levels are repricing markets while constraints on available policy responses favor hard assets. This assessment appeared in an in-depth analysis published Monday. Wong noted that despite gold's rangebound performance since the mid-March selloff, with futures anemic and ETFs seeing outflows, central banks including China's appear to be treating dips as buying opportunities. He attributed the market repricing to resurgent inflation pressures and rising concerns about fiscal sustainability. Wong noted that equities extended their AI-driven rally in May with the S&P 500 Index gaining 5.15%, while global bond markets experienced a sharp sell-off with yields rising to levels not seen in nearly two decades. He emphasized that gold's price action is consistent with a consolidation phase rather than a breakdown, as annual PCE inflation has held consistently above the Fed's 2% target over the past five years and is now accelerating.
Wong Attributes Bond Market Repricing to Inflation and Rising Debt
Wong pointed out that bond markets have responded with a synchronized global repricing. "Yields have risen across both the front and long ends of the curve, reflecting not only cyclical inflation dynamics but also a structural increase in term premia," he noted. "Short-end rates have moved higher as markets reprice the path of monetary policy, with U.S. two-year yields exceeding the Fed funds rate, implying renewed risk of monetary policy tightening. At the same time, long-end yields have climbed sharply, with the 30-year yield reaching levels last seen in 2007."
Wong said this repricing of sovereign debt "is the result of post-pandemic fiscal expansion, persistently high debt levels and a transition away from the low-inflation regime that defined the prior decade." He added that elevated deficits, combined with supply-driven inflationary pressures particularly in energy, have forced markets to reassess the trajectory of interest rates.
"Term premia (the extra return investors demand for holding long-term bonds) are rising as bond buyers seek compensation for inflation uncertainty, increased bond issuance and concerns over long-term debt," he stated. Wong noted that after the global financial crisis, term premia declined amid the Fed's QE and ZIRP policies, but post-COVID, term premia have risen steadily as inflation returned, QE and ZIRP ended, and debt and deficits accelerated. "Until the cycle of higher inflation, rising debt and deficits ends, term premia may continue to climb," he wrote.
Wong said traditional policy tools to respond to this dynamic appear to have weakened, with long-term bond yields continuing to rise despite the 2024-2025 Fed rate cuts. "This is different from past cycles, and it suggests markets are increasingly focused on structural risks rather than central bank guidance," he stated. "In some cases, developed markets are beginning to look a bit like emerging economies, with rising bond yields alongside weaker currencies, pointing to a decline in the credibility of official policy and a re-rating of sovereign risk. The UK and Japan are recent examples."
Wong said policymakers are increasingly constrained by this dynamic. "If they tighten policy, they may trigger fiscal instability and cause financial stress," he said. "If they ease policy, they could entrench inflation and weaken currencies." He noted that markets are beginning to anticipate a bias toward official intervention, particularly if bond market stress grows, but such interventions effectively monetize debt and can reinforce an inflationary bias.
Central Banks Purchased 244 Tonnes of Gold in Q1 2026
Wong stated that as real and perceived risks in bond markets continue to rise, investors are turning to gold as a store of value. "Even if policy adjustment remains orderly, the underlying shift is toward a regime in which real yields are difficult to sustain at positive levels," he wrote. "The rising supply of sovereign debt, coupled with structural shifts in demand, is eroding the effectiveness of bonds as a store of value."
Wong noted that continued demand for gold from central banks reinforces this view. "Over the past four years, official sector purchases have averaged over 1,000 tonnes annually, driven by diversification, geopolitical considerations and concerns over currency stability," he wrote. "These purchases tend to occur during periods of price weakness, creating a durable floor under the market."
"Central banks continue to accumulate gold, buying a net 244 tonnes in the first quarter of 2026---higher than the quarterly and longer-term averages," Wong stated. He noted that at the same time, Turkey liquidated an estimated $14 billion (roughly 85-90%) of its U.S. Treasury holdings during the quarter. To access liquidity, Turkey also sold 60 tonnes of gold via gold swaps rather than through outright sales.
"This distinction highlights the functional hierarchy within central bank reserve assets," Wong said. "Treasuries serve as transactional liquidity instruments, whereas gold is retained as core collateral, even in periods of stress." He attributed these actions largely to surging energy and fertilizer costs due to the closure of the Strait of Hormuz, which created a need for import-dependent economies to raise U.S. dollars.
Wong noted that structural factors are tightening the physical gold supply. "Mine supply growth remains limited, and steady official sector demand continues to absorb a significant portion of available supply," he said. "This reduces the amount of freely tradable gold and increases the market's sensitivity to incremental demand shifts."
Silver Market Records 762 Million Ounce Cumulative Deficit
Wong stated that silver's prospects reinforce the case for gold. "The silver market remains in a sustained structural deficit, a condition that has persisted for most of the past several years, according to the Silver Institute's 2026 World Silver Survey," he noted. "Except for a brief surplus in 2020, the market has consistently undersupplied demand since 2021, resulting in a cumulative deficit of roughly 762 million ounces over the past six years."
"When you include ETF flows, the imbalance is even more pronounced, exceeding 1 billion ounces," he added. "This points to a prolonged structural shortfall rather than a temporary cyclical imbalance."
Wong said the overall picture is of a silver market that is structurally constrained. "Supply growth is limited, industrial demand is structurally higher, and investment demand is returning," he stated. "Behind cyclical fluctuations in individual segments, the broader supply-demand balance continues to tighten. This suggests a sustained period of constrained availability and asymmetric pricing dynamics lies ahead."
"For gold investors, silver continues to serve as a useful cross-check on the broader narrative of monetary debasement versus hard assets," Wong concluded. "Gold serves as the monetary anchor and balance sheet hedge. At the same time, silver translates that macro impulse into a market where limited supply flexibility and industrial demand can amplify price moves. In this context, persistent silver deficits, especially with revived investment demand, are a sign that gold's strength is not an isolated event. Rather, it is part of a broader attempt by investors to reprice scarce real assets amid fiscal dominance and fading trust in fiat systems."
FAQ
What did Paul Wong say about gold's performance since mid-March?
Paul Wong stated in an analysis published Monday that despite gold's rangebound performance since the mid-March selloff, with futures anemic and ETFs seeing outflows, central banks including China's appear to be treating dips as buying opportunities. He emphasized that gold's price action is consistent with a consolidation phase rather than a breakdown.
Why are bond yields rising according to Wong's analysis?
Wong attributed rising bond yields to post-pandemic fiscal expansion, persistently high debt levels, and a transition away from the low-inflation regime that defined the prior decade. He noted that elevated deficits combined with supply-driven inflationary pressures, particularly in energy, have forced markets to reassess the trajectory of interest rates, with the 30-year yield reaching levels last seen in 2007.
How much gold did central banks purchase in Q1 2026?
According to Wong, central banks purchased a net 244 tonnes of gold in the first quarter of 2026, which he noted was higher than the quarterly and longer-term averages. He stated that over the past four years, official sector purchases have averaged over 1,000 tonnes annually, driven by diversification, geopolitical considerations and concerns over currency stability.
