After a bruising couple of weeks, gold and silver markets have started to look more constructive again.
Gold fell heavily last week, briefly trading close to $4,100 per ounce, its weakest level for several months. Since then, it has recovered to around the $4,300 to $4,350 area. Silver followed a similar pattern, falling toward the mid-$60s before rebounding back toward $70 per ounce. That does not mean the correction is definitely over, but some believe it does suggest the panic phase may have passed, at least for now.
The immediate trigger has been the market’s response to the memorandum of understanding between the US and Iran, and the impact on the oil price. The prospect of reduced tensions, a possible reopening of the Strait of Hormuz and a return of Iranian oil flows has taken some of the heat out of energy prices.
So, is the correction over?
No one can tell, right now gold and silver are still volatile as markets are still waiting for more detail on the US-Iran agreement, the Federal Reserve’s next steps and whether (official) inflation really is cooling again. A failure of the agreement, a renewed oil shock or a more hawkish Fed could all unsettle the metals in the short term.
But (for fear of repetition) short-term price action should not be confused with the long-term case.
Gold remains significantly higher than it was a year ago, while silver is also still trading at levels that would have looked extraordinary not long ago. More importantly, the structural reasons for owning physical gold and silver have not disappeared because prices corrected. If anything, the recent volatility is a reminder of why investors hold them in the first place.
Today’s GoldCoreTV video looks at one of the most important developments in the gold market: central banks are not only buying gold, they are increasingly thinking about where that gold is held.
That is why we believe the recent correction should be seen in context. Corrections are normal, especially after strong rallies and of course they can feel uncomfortable, but they do not invalidate the case for physical precious metals. They often remind investors that gold and silver are not held for a smooth ride. They are held because the financial system does not always provide one.
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