Gold And Silver Are Getting Ready To Explode

Fundamentals

Volatility in gold is increasing as we deal with trying to resolve the political, health, and economic crises. The storming of the Capital last week was significant. It has given many a pause for concern. It does not appear to be over, by any means. Unrest will continue to cause extreme volatility in the markets, including gold. It has created nervousness in the market, which is creating more volatility. Even so, stocks continue to rise. Political concerns have overtaken pandemic concerns. Even so, the pandemic continues to damage the economy.

Gold and silver this morning have been rising as worries about the pandemic hurt stocks and help safe-haven demand for precious metals. Tuesday the US reported a new record for COVID-19 deaths and the Fed made dovish comments, which increased demand for gold.

Global economic data was bearish for gold with the Eurozone November industrial production rising 2.5% month-to-month, which was stronger than expected and the largest increase in four months. In Japan, the December machine tool orders number increased 8.7% year to year, which was the biggest increase in 2-1/4 years.

St. Louis Fed President Bullard said the Fed must "regain credibility" that it will hit its 2% inflation target and "we are going to be less pre-emptive than we would have been" in previous decades and "we are going to let inflation go over target." His statements helped boost gold prices.

ECB Governing Council member Villeroy de Galhau further supported precious metals prices when he said, "the ECB remains clearly committed to its 2% inflation target and to achieve this we will maintain favorable monetary conditions for as long as necessary."

Today's U.S. consumer price data showed weak price pressures, which will depress gold demand as a hedge against inflation. The U.S. December CPI ex-food & energy rose 0.1% month to month, and 1.6% year to year, which met expectations.

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Disclosure: I am/we are long GDX.

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