See also presentation by Frank Giustra.
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1. The Central Thesis – Capital Flows Drive Everything
Michael Howell’s core argument is simple but powerful.
Markets are not driven primarily by narratives, valuations, or even fundamentals.
They are driven by capital flows.
Capital flows – the movement of liquidity between credit, equities, commodities, and the real economy – operate in long, observable cycles.
Historically, these cycles last around five to six years.
• Liquidity first enters credit markets
• Then flows into equities
• Finally moves into commodities
• And ultimately spills into the real economy
According to Howell, we are now firmly in the commodity phase of this cycle.
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2. Why A Commodity Boom Is Already Underway
From late 2022 onwards, global liquidity has been rising strongly.
That liquidity is now reaching the point where it expresses itself through real assets.
Evidence Howell points to:
• Multiple commodities at or near all-time highs
• Gold leading the move
• Industrial metals beginning to follow
• Capital migrating away from financial assets
This is not speculative enthusiasm.
It is the mechanical result of money moving through the system.
Importantly, Howell argues that 2026 real-economy growth is likely to surprise on the upside, particularly in the US, precisely because liquidity has been elevated for over a year.
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3. Gold – Not A Debasement Trade (Yet)
One of Howell’s most contrarian claims concerns gold.
Gold is often described as an inflation hedge.
He refines this sharply.
Gold is a hedge against monetary inflation, not necessarily consumer inflation.
Monetary inflation – expansion of money supply by central banks
Consumer inflation – rising prices experienced by households
If today’s gold rally were driven by global monetary debasement:
• Bond markets would be selling off sharply
• Bitcoin would be surging
• Inflation expectations would be exploding
None of these are happening.
This is the “dog that didn’t bark”.
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4. China As The Marginal Price-Setter Of Gold
So why is gold rising so strongly?
Howell’s answer is China.
Key points:
• The People’s Bank of China has injected roughly $1.1 trillion into its system
• China is monetising debt rather than defaulting
• The yuan–dollar rate is managed and misleading
• Gold priced in yuan reveals the truth
Measured against gold, the yuan has effectively devalued by 25–30% over two years.
Gold is acting as the true currency benchmark.
Through persistent gold buying, China is exporting its internal monetary expansion into global prices.
This is why Howell argues that:
• The Shanghai Gold Exchange is now the marginal price-setter
• COMEX and London are increasingly price-takers
Asia, not the West, is setting the gold price.
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5. Valuing Commodities – Ratios, Not Prices
Howell dismisses single-price thinking.
Commodity valuation has two moving parts:
- Real exchange ratios
- Currency of denomination
Examples:
• Copper-to-gold ratio
• Oil-to-gold ratio
In recessions, these ratios fall.
In booms, they rise.
Today:
• Gold is rising due to monetary expansion also geopolitical adventures
• Industrial ratios are rising due to economic growth
When both move together, a commodity boom is inevitable.
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6. How Long Does The Boom Last?
Howell expects the cycle to run well into 2026.
Supporting factors:
• Strong US growth momentum
• Fiscal expansion in the US and Europe
• Heavy AI-related capital spending
• Chinese stimulus
• German fiscal easing
However, he issues a crucial warning.
Strong real economies do not guarantee strong financial markets.
2008 is the historical reminder:
• Commodities surged
• Oil exceeded $100
• Financial markets collapsed
Liquidity in the real economy means less liquidity for financial assets.
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7. Investment Implications - Think Real, Not Financial
Howell’s positioning guidance is pragmatic.
Avoid:
• Over-concentration in US tech
• Pure financial-asset exposure
Favour:
• Commodities
• Mining and resource equities
• Energy stocks
• Consumer staples
He suggests a barbell approach:
• Real assets on one side
• Defensive cash-flow businesses on the other
Gold, in his view, remains a strategic hold, not a trade.
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8. The Dollar – Dominant But Politically Pressured
Howell rejects claims of imminent dollar collapse.
• There is no credible reserve-currency rival
• Dollar credit markets remain dominant
However:
• US policymakers want a weaker dollar
• Short-term weakness is plausible
• Longer-term demand for dollars may return due to growth and safety
Gold may be the only meaningful competitor, but it is not a functional reserve currency.
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Glossary
Capital Flows – Movements of liquidity between asset classes that determine market cycles.
Global Liquidity – The total availability of money and credit within the financial system.
Monetary Inflation – Expansion of money supply, usually by central banks.
Commodity Phase – The stage in a liquidity cycle where capital concentrates in real assets.
Marginal Price-Setter – The market where the last buyer or seller determines global price.
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Sources
• Market Insider interview transcript with Michael Howell
• CrossBorder Capital research notes
• Historical commodity and liquidity cycle studies (IMF, BIS)
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