Luke Gromen's Gold Thesis: Why $10,000+ Gold by 2028

How China’s Strategic Shift from Dollars to Gold Could Trigger a Monetary Reset

Executive Summary

Luke Gromen, founder of macroeconomic research firm Forest for the Trees (FFTT), has developed one of the most compelling and well-researched gold theses in contemporary financial markets. His argument is straightforward: gold must reprice to serve as collateral for US foreign-held debt and function as a new neutral reserve asset in a post-dollar world.

With gold trading above $5,500 per ounce as of January 2026—having surged from roughly $2,000 in early 2024—the gold-to-foreign-debt ratio has improved from crisis-level lows of ~7% to approximately 16-19%. A substantial portion of the repricing has already occurred, yet structural pressures suggest further appreciation remains likely. Our analysis projects a base case target of $10,100-10,600 per ounce by January 2028, representing approximately 90% upside from current levels. This post examines Gromen’s complete thesis, China’s strategic role in driving gold accumulation, and provides concrete projections with an associated trade recommendation.

1. The Core Thesis: Gold as Collateral for US Debt

1.1 The Historical Metric that Matters Most

Gromen’s analysis centers on a single, historically significant ratio: the market value of US official gold holdings relative to foreign-held US Treasury debt. This isn’t arbitrary—it’s the metric that served as confidence backing for the dollar after Nixon severed the gold-dollar link in 1971.

Why This Metric Matters

When President Nixon closed the gold window on August 15, 1971, he effectively ended convertibility of dollars into gold at a fixed price. However, this didn’t eliminate the need for confidence in the dollar’s value—particularly among foreign holders of US debt. The ratio of gold-to-foreign-debt became the market’s way of assessing whether the US had sufficient backing to maintain confidence in its obligations.

Think of it this way: foreign countries hold trillions of dollars in US Treasury debt. They want to know that if something goes wrong—if inflation spirals, if the dollar weakens, or if geopolitical tensions rise—there’s something tangible backing their claims. Gold serves as that psychological and practical collateral.

When this ratio is high, foreign holders can look at US gold reserves and feel reasonably confident that the US has “skin in the game.” When the ratio is low—particularly when it falls below 20% as it did in early 2024 at roughly 7%—those foreign holders may start to question whether their dollar-denominated assets are adequately backed. While gold’s recent surge has improved the ratio significantly, it remains below historically comfortable levels.

Historical context: [2]

• 1970-1989: Gold collateralized foreign-held debt at never less than 20%, averaging 40%
• Late 1970s (peak dollar concern): The ratio spiked to 135%
• Post-Soviet collapse: Fell to 5%
• Early 2024: Approximately 7% (when gold traded near $2,000/oz)
• Today (2026): Approximately 16-19% (gold at $5,525/oz has already done significant heavy lifting)

The Volcker Precedent

This isn’t just theory—it’s what actually happened during the last major dollar crisis. In the late 1970s, confidence in the dollar collapsed as inflation surged. Paul Volcker eventually raised interest rates to crushing levels to defend the currency, but gold played a crucial supporting role. Gold’s high price during this period (peaked at $800/oz in 1980) provided the necessary collateral backing to help restore confidence. The spike to 135% wasn’t an accident—it was part of the mechanism that allowed the dollar system to survive.

Why the Current Ratio Remains Concerning

At approximately 16-19%, gold coverage of foreign-held Treasury debt remains below the historical minimum of 20% that provided adequate confidence in earlier crises. More critically, foreign-held Treasury debt continues to expand alongside ongoing US fiscal deterioration.

Foreign holders of US debt—particularly China, which has reduced holdings to roughly $682 billion—are looking at this ratio and making rational risk assessments. They’re effectively asking: “If something goes wrong with the dollar, does the US have enough gold backing to make me feel secure holding this debt?”

The answer remains ambiguous. This creates structural pressure for these holders to either:

1. Reduce their Treasury holdings
2. Accumulate more gold themselves (which is what we’re seeing with China)
3. Push for continued repricing of gold to improve the collateral ratio

The market mechanism that resolves this imbalance is straightforward: when enough foreign holders trade Treasuries for gold, the gold price rises, increasing the dollar value of US official gold holdings and bringing the ratio back toward sustainable levels.

Gromen argues that despite current improvements, continued growth in foreign-held Treasury debt—projected to reach $9.8-10.3 trillion by early 2028—creates additional pressure for gold to reprice further. Even reaching the lower end of historical coverage (25%) would require gold to appreciate approximately 75% from current levels.

1.2 The Trump Administration’s Role

The current administration appears to be constructing a set of policy incentives designed to redirect foreign capital flows. The February 2025 “America First Investment Policy” effectively told China: take your money and go home. By raising the cost of carry on Treasuries and Mag 7 equities while conspicuously not tariffing gold, policymakers are creating incentives for foreign capital to flow into the one asset that doesn’t threaten US economic security: physical gold.

This mirrors a proposal floated in declassified State Department documents from the 1970s, when Kissinger and Volcker faced a similar problem with Arab petrodollar surpluses. The solution then was to recycle those surpluses into gold at floating market prices.

2. China’s Strategic Pivot to Gold

2.1 Why China Is Buying

China’s gold accumulation is not speculative—it’s strategic national security policy. Several factors drive this:

1. Dedollarization: Reducing vulnerability to US financial sanctions
2. Yuan internationalization: Gold backing increases confidence in the yuan for commodity trading
3. Balance sheet deleveraging: China needs to reduce dollar-denominated debt while maintaining reserves
4. Trade settlement: Increasingly settling bilateral trade in gold rather than dollars

Gromen notes that “yuan oil demand is turning gold back into an oil currency.” This matters enormously because the annual dollar production of the oil market is 12-15 times larger than the physical gold market [2]. Even a small percentage shift creates massive buying pressure.

2.2 The Scale of Accumulation

Official figures show China holds 2,298 tonnes of gold [4]. Gromen and other analysts believe the actual figure is likely 10,000-15,000 tonnes [4]. This would make China the world’s largest gold holder by a substantial margin.

Central banks collectively purchased over 1,200 metric tons of gold in 2023 alone [2]—more than one-third of total global mine production. This represents a structural shift that shows no sign of abating.

2.3 Trade Settlement in Gold

Trade between Russia and China, and increasingly among BRICS nations, is being settled directly in gold. This is a practical matter: when sanctions cut off access to dollar and euro payment systems, gold remains the universally accepted medium of exchange. Gold flows across borders relatively easily, allowing trade to continue outside the Western financial system.

3. The Monetary Reset Thesis

3.1 Gold Running Global Deficits Instead of the Dollar

The post-Bretton Woods system was built on a simple premise: run trade deficits in dollars, recycle those surpluses into US Treasuries. This model is breaking down because:

1. US fiscal deterioration: 120% debt-to-GDP with structural deficits [1]
2. Weaponization of the dollar: Sanctions make holding dollars risky for adversaries
3. Declining US Treasury appeal: Four consecutive years of negative returns have eroded confidence [1]

Gromen argues we’re in the early stages of a “messy attempt to restructure the system in a way that gold runs the deficits, so to speak, instead of the United States.” When foreign holders use excess dollars to buy Treasuries or US equities, they’re financing US deficits. When they buy gold instead, those deficits don’t get recycled back into dollar assets.

3.2 The Systemic Pressure

Gromen has noted that substantially higher gold prices may serve as a release valve for the monetary system. In various interviews, he has discussed how gold at $20,000-$30,000 per ounce could potentially help address US debt issues by increasing the value of official gold holdings relative to foreign-held debt [6]. While he doesn’t frame this as a choice between alternatives, the structural pressures building in the system create incentives where higher gold prices become increasingly attractive relative to other possible outcomes.

From a policy perspective, coordinated acceptance of higher gold prices allows major powers to address imbalances without more disruptive alternatives.

4. Price Predictions for January 21, 2028

4.1 Current Market Context

As of January 29, 2026:

• Gold spot price: ~$5,525 per ounce [8]
• GLD ETF price: ~$506
• Gold YTD performance (2026): +24.8% [8]
• Gold 1-year performance: +93.8% [8]
• Foreign-held Treasury debt: ~$9.35 trillion (November 2025)
• Current gold-to-debt ratio: ~16-19%

Gromen’s earlier $3,000 near-term target was clearly made when gold was trading closer to $2,200. With the metal now above $5,500—having surged from approximately $2,000 in early 2024—we need to reassess his longer-term targets using current data. The gold-to-foreign-debt ratio has improved substantially from crisis-level lows of ~7% in early 2024, yet structural pressures suggest further appreciation remains likely as US debt continues to expand.

4.2 Price Targets for January 21, 2028

Our analysis projects foreign-held Treasury debt to reach $9.8-10.3 trillion by January 2028, driven by ongoing structural deficits averaging $1.8-2.3 trillion annually. Using Gromen’s methodology of gold collateralizing foreign-held debt, we derive the following scenarios:

Conservative scenario (20-25% collateralization): $7,500 - $9,600/oz Base case (25-30% coverage): $10,100 - $10,600/oz Bullish scenario (30-40% coverage): $11,500 - $15,400/oz Extreme scenario (40%+ coverage): $15,800+/oz

The base case represents approximately 83-92% gain from current levels over 722 days, requiring roughly 36-39% annualized returns. This reflects our assessment that reaching 25-30% coverage is the most probable outcome, requiring moderate but sustained dollar weakening and continued foreign Treasury diversification. The bullish scenario would require a confidence crisis or major geopolitical escalation, while the extreme scenario represents a systemic monetary reset.

4.3 Why the 722-Day Timeline Makes Sense

The choice of 722 days (January 21, 2028) as our forecast horizon aligns with several key structural factors:

Debt Maturity Catalyst

$3.5+ trillion in US debt matures between 2026-2028, creating forced rollover decisions for foreign holders. As investors face these decisions at potentially higher yields, they must reassess US debt sustainability. This provides concrete catalyst points rather than speculative timing.

Policy Implementation Cycle

The Trump administration’s February 2025 “America First Investment Policy” has been in place for approximately 11 months. Policies this structural—redirecting trillions in global capital flows—typically take 24-36 months to fully materialize as market participants adjust positions gradually. The next two years capture the period where these policies shift from announcement to implementation.

Central Bank Accumulation Trajectory

Central banks collectively purchased 1,200+ metric tons of gold in 2023. The People’s Bank of China has been buying gold consistently for 18+ consecutive months. Large institutional portfolio rebalancing occurs incrementally rather than overnight, and the 2-year window allows for this steady accumulation to potentially accelerate as structural pressures mount.

Historical Precedent

The most explosive phase of the 1970s gold bull market occurred between 1978-1980 as confidence in the dollar collapsed, with gold rising from ~$200 to $800/oz over approximately 24-30 months. We’re positioning for a similar potential acceleration phase, recognizing that once foreign holders reach their breaking point with Treasury holdings, the shift into gold can move rapidly.

Structural Pressure Buildup

US debt-to-GDP at 120% with structural deficits averaging $1.8-2.3 trillion annually creates relentless pressure on the dollar system. Two years provides sufficient time for these pressures to either resolve through fiscal consolidation (highly unlikely) or force a repricing mechanism.

4.4 Confidence Range

$7,500 - $15,400 per ounce

This range encompasses:

• Conservative outcome (60% probability): $7,500-9,600/oz (20-25% coverage) - gradual repricing with contained dollar weakness
• Base case: $10,100-10,600/oz (25-30% coverage) - moderate dollar deterioration and continued foreign Treasury diversification
• Bullish outcome (25% probability): $11,500-15,400/oz (30-40% coverage) - confidence crisis or major geopolitical escalation
• Extreme outcome (<10% probability): $15,800+/oz (40%+ coverage) - systemic monetary reset

The key insight is that the most probable outcomes cluster around 25-30% coverage, representing substantial but not explosive appreciation. Reaching 40%+ coverage would require a major confidence crisis, which is possible but less probable than continued gradual deterioration.

5. Trade Recommendation

5.1 The Setup: Long-Dated GLD Call Option

Recommended Trade: Buy GLD January 21, 2028 $600 Call

• Current GLD price: ~$506
• Strike price: $600 (implies gold at ~$6,000)
• Current option price: ~$62 per contract
• Breakeven at expiration: GLD $662 (gold ~$6,620)
• Days to expiration: 722

5.2 Why This Trade Makes Sense

1. Duration alignment: The January 2028 expiration perfectly matches our forecast horizon, capturing the full revaluation period
2. Balanced leverage: The $600 strike offers meaningful upside exposure while maintaining reasonable probability of profit given our base case targets
3. Liquidity: January 2028 GLD options have active trading with tight bid-ask spreads
4. Asymmetric payoff: Maximum loss is $6,200 per contract; upside provides 5-13x leverage
5. Attractive breakeven: GLD $662 sits below both our base and bullish scenarios, providing solid probability of profit if structural drivers continue

The $600 strike provides an optimal balance for positioning on Gromen’s thesis. With gold having already appreciated substantially to $5,500 from crisis lows of ~$2,000 in early 2024, this strike sits below our conservative target of $7,500/oz. This gives investors meaningful upside exposure to our base case ($10,100-10,600) and bullish scenarios while maintaining defined risk.

5.3 Potential Outcomes at Expiration (January 2028)

Gold Price	GLD Price	Call Value	Return on Investment
$6,500 (below conservative)	~$650	$0	-100%
$7,500 (conservative)	~$750	$150	+142%
$10,500 (base case)	~$1,050	$450	+626%
$13,500 (bullish)	~$1,350	$750	+1,110%
$16,000 (extreme)	~$1,600	$1,000	+1,513%

The trade provides leveraged exposure to Gromen’s thesis with defined risk. Even in our conservative scenario, investors would realize over 140% returns on capital. The base case delivers over 6x returns, while the bullish scenario provides 11x+ upside potential. This asymmetric payoff structure allows investors to participate meaningfully in continued gold appreciation while limiting downside to the premium paid.

6. Key Risks and Counterarguments

6.1 What Could Go Wrong?

• US fiscal consolidation: Successful deficit reduction could restore confidence in Treasuries
• Gold supply response: Higher prices eventually bring new mine production online
• Central bank selling: Western central banks could sell gold if the price moves too aggressively
• Dollar strength: Unexpected US economic outperformance could strengthen the dollar

6.2 Timeline Risk

Gromen acknowledges “executional risk and volatility associated with this transition.” The process could be messy, with sharp corrections along the way. The 722-day horizon is long enough for multiple false starts and reversals.

6.3 Regulatory Risk

While the current administration appears supportive of gold accumulation, future administrations could take different approaches. However, given that both China and Russia have entrenched positions, dedollarization trends likely continue regardless of US policy.

7. Investment Implications Beyond Gold

7.1 Silver and Mining Shares

Gromen is less bullish on silver for central bank purposes, noting that a massive price increase in industrial metals could collapse the global economy. However, mining equities typically provide levered exposure to gold prices with lower volatility than long-dated options.

7.2 Non-US Assets

As capital flows rotate out of US Treasuries and equities, opportunities may emerge in non-US markets—particularly China, where real estate affordability is at 25-year highs and valuations are attractive on a relative basis.

8. Conclusion

Luke Gromen’s gold thesis is compelling not because it predicts a specific number, but because it identifies structural imbalances that require resolution. The math on US debt and foreign dollar holdings is unsustainable. Gold repricing to serve as collateral for that debt—or simply to absorb the flows that previously went into Treasuries—is one of the few plausible mechanisms for restoring equilibrium.

With gold currently trading above $5,500—having surged from roughly $2,000 in early 2024—the gold-to-foreign-debt ratio has improved from crisis-level lows of ~7% to approximately 16-19%. This represents substantial progress, yet structural pressures suggest further appreciation remains likely as US debt continues to expand toward $9.8-10.3 trillion by early 2028.

Our analysis projects a base case target of $10,100-10,600 per ounce by January 2028 (25-30% coverage), representing approximately 90% upside from current levels. This path requires moderate dollar weakening and continued foreign Treasury diversification—both plausible given current trajectories. The January 2028 GLD $600 call offers a structured way to participate in this potential continuation of one of the most significant monetary transitions since Bretton Woods.

As Gromen himself has noted, we’re likely still “in pregame warmup, not even in the first inning” of flows moving from Treasuries and Mag 7 equities into gold. The question for investors is whether the remaining upside to $10,000+ justifies current entry levels given gold’s substantial advance. For those who believe structural monetary imbalances will continue pressuring the dollar system, the asymmetric payoff structure of long-dated call options provides an attractive risk-reward profile.

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Sources:

1. In Gold We Trust Report 2025, “From Trade Restructuring to Monetary Reset? Luke Gromen Debates Louis-Vincent Gave,” April 7, 2025. https://ingoldwetrust.report/special/from-trade-restructuring-to-monetary-reset-luke-gromen-debates-louis-vincent-gave/

2. Investing News Network, “How High Can the Gold Price Go? Mining Billionaires Share Big Predictions,” 2024. https://investingnews.com/gold-forecast-mining-billionaires/

3. Kitco News, “Gold - the New Reserve Asset: Price Target of $7k-$15k by 2030 is Just a Return to the ‘Long-Term Average,’” June 2024. https://www.kitco.com/news/article/2024-06-14/gold-new-reserve-asset-price-target-7k-15k-2030-just-return-long-term

4. Economic Times, “Will the Next World War Be Fought with Gold? Here are the Glaring Statistics,” 2025. https://m.economictimes.com/news/international/us/will-the-next-world-war-be-fought-with-gold-here-are-the-glaring-statistics/articleshow/125017937.cms

5. Metals and Miners, “A Deep-Dive Into the Luke Gromen Gold Thesis: Why Gold Must Rise to AT LEAST $12,000 to Avert a US Debt Crisis,” 2025. https://metalsandminers.substack.com/p/premium-a-deep-dive-into-the-luke

6. William Blair Podcast, “Gold, Energy and the Future of the Global Monetary System with Luke Gromen,” December 17, 2025. https://www.williamblair.com/Insights/Gold-Energy-and-the-Future-of-the-Global-Monetary-System-with-Luke-Gromen

7. Yahoo Finance, GLD options chain and pricing data, January 2026. https://finance.yahoo.com/quote/GLD/options

8. Real-time gold price data, January 29, 2026: $5,525.27 per ounce