After what seemed like a promising run in late August to early September, the gold and silver bullion markets once again faded into the background. Since hitting a peak on September 8, gold prices have dropped 5%. Its counterpart silver is experiencing an even more frustrating run. The white metal is down more than 6% over the same timeframe.
The long-in-the-tooth consolidation period is incredibly frustrating for precious metal investors, not in small part due to the incredible cryptocurrency rally. Mainstream editorials are now questioning whether gold bullion is still the universal safe-haven asset, or if its historical status is under fire from Bitcoin. Further pouring salt on open wounds, Bitcoin is just under $4,800.
The sudden burst in the king of cryptos puts it a mere 4% below its all-time record high. On the flipside, gold prices are down roughly 36% from its record peak, while silver is down a ridiculous 66%.
Nevertheless, precious metal investors have three major catalysts to look forward to, any one of them could spark another leg higher.
North Korea has been in the news recently, so its role as a potential catalyst for silver and gold prices is not a novel concept. But whenever a lull in the geopolitical flashpoint occurs, the general public becomes complacent to the hermit nation’s threats.
This would be a dangerous mistake to commit at this juncture. Tensions have never been higher, and both North Korea and the U.S. are contemplating military options to end their dispute. Although it’s a long-shot, don’t count out another armed conflict in the Pacific theater.
Such an event would be devastating, inevitably creating a fear rush into gold and silver bullion.
Skewed Supply-Demand Dynamics
Currently, gold prices are lingering a few bucks shy of $1,300. In sharp contrast, platinum is priced a few dollars above $900. Right now, palladium, which is considered the “silver” of the platinum group metals, is traded ten dollars higher than platinum. This is absolute lunacy!
All the platinum that has ever been mined in the world would fit into an average-sized living room. All the gold that was mined throughout history would fit in an Olympic-size pool. Though both are extremely rare, one is clearly rarer than the other. Yet gold prices are 40% higher than platinum. Again, this makes no sense.
Such ludicrous trading in the face of stark supply and demand data suggests an artificial force suppressing the precious metal markets. If that force fails for whatever reason, we could see a dramatic “re-calculation” back to relative normalcy.
I’m not a big fan of the precious metal charts, to be quite frank. Gold and silver continue to fail time and again at their respective technical ceilings. Ordinarily, such persistent failures embolden the bears to short the market, creating downside pressure for the longs.
However, with major fundamental catalysts moving favorably towards the metals and commodities in general, I believe the bears are fearful of going in too aggressively. If so, the persistence of the gold and silver long-hands is an encouraging sign.