Signals From The Gold And Silver Markets?

One of the sign posts we keep an eye on here is the precious metals markets. These markets historically can provide signals that something unusual is going on in the financial system. There are a couple of things that come to mind in this regard. 

One is that sharp rises in gold (and sometimes silver prices) often indicate sagging public confidence in the status quo of either the present financial system or at times anxiety that the some kind of disturbance in the normal social order is a concern. For example. a feeling that some kind of major geo- political event may rattle the existing status quo. Gold is often viewed as a kind of refuge of last resort insurance policy in times like that.

Secondly, whenever public confidence in an existing national currency diminishes, people often move into gold (and also silver in some cases) as a kind of currency hedge. Again, as an example, if there is a public perception that all the massive liquidity creation by the government and the central banks in response to the virus related financial crisis might weaken their national currency, some will move at least a portion of their savings into gold (and silver). This is true for the US dollar as well as any national currency. The more public confidence falters, the more demand for gold (and silver) resulting in strong bull markets for those metals. (GLD)

This year, we have already seen gold perform very well in response to the unfolding crisis and lately silver (SLV) is starting to show signs of life as well. Since these markets can offer important signals as discussed above, we should watch them closely in the coming months. Below is a bullet point list for some of the things we can observe going on right now in these markets that may be worth your time to review.

- in 2020, gold is at or near all time highs in many currencies and may be targeting an all time high is the US dollar price of gold later this year. If gold makes a new all time high in the US dollar price in 2020, we need to pay attention to that signal

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