In a landmark moment for gold bulls, the price of gold has touched $5,000 for the first time ever. Since last August, the rally has been exceptionally strong, with gains of 17% year-to-date.
While gold's performance has been impressive, it still pales in comparison to silver, which has surged 48% since the start of the year.
For investors holding precious metals or mining stocks, this is significant positive news, and the momentum could continue after this week's strong start. Many had anticipated some profit-taking after these key psychological levels were breached, but that has not materialized. Silver, after hitting $100 last Friday, has continued its ascent, gaining another 5%. Currently, the "hard asset" camp appears to be shifting from Bitcoin to precious metals.
For those not currently invested in precious metals, this rally is instead a cause for concern. The global order seems to be unraveling, and violent incidents over the weekend in Minneapolis are not conducive to a swift return to calm in the United States. Influenced by these events, the probability of a government shutdown, linked to funding issues for federal agents/the Department of Homeland Security (DHS), is also increasing.
The international situation is equally pessimistic. In Ukraine, peace talks continue, but it is difficult to remain optimistic about the situation until substantive progress is made. Protests in Iran appear to have subsided after a strong crackdown by the regime, yet discussions about potential US intervention persist; furthermore, there is talk of potential escalation in situations in Cuba and even Mexico.
This is a world full of uncertainty, and gold is sounding a loud "alarm" in an unprecedented way.
Adrian Ash, Research Director at BullionVault, stated that the gains for precious metals in just the past week have been substantial, with gold's weekly performance being its "strongest since the depths of the 2020 COVID crisis."
He noted that gold and silver bulls have long predicted that "any wobble in the fiat currency system would trigger a surge in global demand for 'hard money' metals."
From a price action perspective, the market is currently at the tail end of a seasonal pullback—a pattern that has held for 15 years. This is one reason to remain cautious. However, if gold prices break through $5,000 without significant profit-taking and continue to rise, it could signal that precious metals are experiencing a "once-in-a-lifetime" momentum trade.
Stephen Innes, Managing Partner at SPI Asset Management, said, "In the short term, headlines matter—today it's Greenland, tomorrow it could be Iran or Venezuela, the next day it could be Federal Reserve independence." He mentioned that these stories ebb and flow, indeed causing short-term volatility, where traders either chase the trend or engage in contrarian plays "chasing/fading the narrative."
What's Next?
The core question for the market now is: where will precious metals go from here?
Before gold broke $5,000, Innes told MarketWatch that he believes the "real story" behind gold is "fiscal," meaning how governments manage money and fiscal balances.
He said, "In a world of persistent deficits, tested policy credibility, and sovereign balance sheets speaking louder than central banks, investors are paying for stability, not leverage. Even if a particular geopolitical risk temporarily eases, this overarching backdrop hasn't changed."
Innes pointed out that there is indeed "crowdedness" in gold trading currently, which might also imply elevated valuations. But as long as the price action continues in its current manner—"consolidating instead of collapsing"—the overall uptrend remains intact.
Speaking about silver, Andrew Thrasher, Senior Portfolio Manager at Financial Enhancement Group, said silver's rally is "truly incredible."
He noted that the current silver price is more than 100% above its 200-day moving average, meaning "that proverbial rubber band is stretched extremely tight." Furthermore, "it appears both investors and traders are reducing exposure."
Thrasher stated that silver could still move higher, but he also warned: "The price trend has become extremely volatile and is characterized by euphoria."
Comments