(Kitco News) - Gold briefly surged to an all-time high of $3,509.90 an ounce Tuesday before easing on profit taking, while Bitcoin crossed $90,000 and the U.S. dollar index hovered near three-year lows. According to Axel Merk, President and Chief Investment Officer of Merk Investments and portfolio manager of the ASA Gold and Precious Metals Fund, these moves may be signaling deeper structural shifts in the global financial order.

“I sometimes call gold the most direct indicator of the mania of our policymakers,” Merk told Kitco News. “What has changed is that the tariffs are disrupting financial flows.”

Merk compared the U.S. financial structure to a hedge fund, where both foreign and domestic actors borrow dollars to invest abroad. “When you disrupt trade flows, financial flows will be impacted,” he said. “That means fewer financial flows make it back... which means that the deficits going forward will have to be financed more domestically.”

Central banks, including the People’s Bank of China, have been aggressively buying gold. “Yes it is,” Merk said when asked if this was a de-dollarization story. “On the margin, future allocations might be different and gold is one of the beneficiaries.”

With the IMF now forecasting global growth at just 2.8%, the slowest since the pandemic, and U.S. Treasury yields rising above 4.37%, Merk warned that “the cost of doing business is going up. The world is a more expensive place to operate in.”

President Trump’s recent public attacks on Federal Reserve Chair Jerome Powell added fuel to market volatility, calling Powell “Mr. Too Late” and a “major loser.” Merk cautioned, “If they were to lower rates, people may say that this is due to pressure.” He added, “If indeed there was true interference more than just rhetoric, we would see that in long-term inflation expectations. We don’t see that yet.”

Merk said investors should closely monitor who replaces Powell when his term expires in 2026. “That decision will tell the market how much pressure Trump can have,” he said, referencing speculation around potential successor Kevin Warsh. “To the extent that if he were the next Fed chair, I would think that the independence is going to be retained.”

Still, Merk sees significant risk. “The real fundamental risk is the changing plumbing of the financial system,” he said. “That the cost of borrowing for the U.S. is going to be elevated for an extended period.”

As for gold, Merk said, “We have not seen any retail frenzy... There hasn't been anything out of the ordinary in that sense.” He emphasized that “gold isn’t all that liquid when it comes to global financial markets. And so if there's a flight into gold, you can see dramatic volatility... I think that volatility could even get more exacerbated.”

While he declined to name individual stocks, Merk said ASA is positioned in junior gold miners. “They don't actually mine anything yet. That said, because they have this implicit leverage... you tend to see disproportional returns.”

Asked what a sound portfolio looks like in this new era, Merk advised: “One that you can sleep with at night... you gotta be looking at your portfolio. And if you're not comfortable with the volatility, that means you're overexposed to risk assets.”

For Merk, gold remains a strategic allocation. “My personal risk tolerance includes a lot of gold and gold mining, but I'm not going to impose that on others,” he said.

Watch the full Kitco News interview with Axel Merk above.

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