The extraordinary run up in precious metals markets continues as silver makes some truly epic percentage gains while gold pushes further into record territory.

As of Friday morning, gold prices had pulled back but are still up 3.1% for the week to trade at $2,044 per ounce. Gold is advancing now for the ninth consecutive week, with the biggest pops occurring over the past three.

Silver, meanwhile, is going nearly vertical, today’s pullback to $28 notwithstanding. This week alone, the white-hot metal shot up a staggering 18% through Thursday’s trading to close at over $29 an ounce.

So, what’s behind the big moves in precious metals? A number of factors are combining to create a sort of perfect storm.

First and perhaps foremost, the Federal Reserve is embarking on an unprecedented campaign of currency creation with the explicit goal of raising the inflation rate. Jerome Powell and company at the Fed now want to see consumer price levels rise at a rate of greater than 2% for an indefinite period.

At the same time, they are holding their benchmark short-term rate at zero and pursuing yield curve control to suppress longer-term rates. Earlier this week the 10-year Treasury yield fell to a record low of 0.52%.

U.S. dollar assets are simply becoming less and less attractive. The U.S. Dollar Index has been sliding as both international and domestic investors seek alternatives.

The dramatic ascent of precious metals markets reflects what could be just the start of a longer-term decline and fall in the Federal Reserve Note’s value and status.

The gold and silver markets are tiny compared to global currency and bond markets. It only takes a small proportion of investors and institutional asset managers allocating some new capital to metals to drive prices significantly higher.

There just isn’t that much gold and silver to go around. On the COMEX futures exchange, there has been something of a run on the bank as large numbers of paper contract holders have been demanding physical delivery. Sellers dread having to fulfill that obligation to buyers, especially in an environment of extreme price pressure to the upside and abnormally high premiums on large, investment-grade bars.

The speculative short sellers have been squeezed and want out at any price. As a result – especially in the silver market – the run up has exceeded the near-term expectations of even the biggest bulls. Silver sliced right through the $21 and $26 levels along with other potential overhead resistance levels like they didn’t even exist. 

This pace of uninterrupted gains will finally reach a level where it can no longer sustain itself.  A smash down precipitated by commercial traders getting aggressively short again is almost certain to follow. 

The risk for investors who are trying to enter this volatile market now is that it could reverse sharply to the downside any day.

The opportunity is that silver’s major bull market likely has much further to go.  The possibility of a major top shouldn’t even be considered until after silver has joined gold in hitting all-time highs.

The pullback that is coming – and there will inevitably be one of some magnitude – could allow investors to obtain more bullion at relatively more attractive prices. Unfortunately, we don’t have a crystal ball so we can’t advise anyone on timing their purchases -- other than to say if you don’t yet have ANY precious metals of your own, you are highly exposed.

And we can encourage investors to never let go of a core long-term physical position based on near-term market action. When markets do get extended to the upside, it’s useful to keep some powder dry for future bullion purchases in case better buying opportunities present.

Now isn’t the time for euphoria, but it is a time for bullion holders who have been through a lot of tough times in these markets to take some satisfaction in their decision.

You may have even been derided or laughed at for owning gold. But now that gold prices are in uncharted territory, the naysayers aren’t laughing anymore.

You may have at some point scratched your head and wondered if silver would ever come around. Up until this summer, the silver market left many longtime investors feeling frustrated, even defeated.

But those who threw in the towel because they believed silver prices would continue to be suppressed at every turn missed out on silver’s biggest surge since 2011.

And it the massive surge occurred within a matter of weeks – the type of violent move over a very short period of time that we have been forecasting right here for quite some time now. Well, it appears to be upon us, and we likely haven’t seen the end of it yet.

Where silver prices may ultimately head in a bull market that could last for years to come, we can only guess.  But the prospect of seeing a spot price of $50 and then triple-digit silver at some point after that isn’t far-fetched.