For investors hunting for the final bottom in the gold and silver markets take a look at this…
Have Gold & Silver Bottomed?
April 11 (King World News) – Alasdair Macleod: The controversy is now about escalating risk and how to hedge it.
Let’s make something clear before addressing this question: regulators train and legislate investment managers into believing that gold is not the way to hedge investment risk. Gold is not a regulated investment and therefore not an investment at all. An investment manager can hold a small amount of unregulated investments if his compliance officer signs it off. But the compliance officer is there to discourage or prevent an investment manager from even considering investing in unregulated investments.
Consequently, investment managers see the risk-free position to be cash in their accounting currency, even to the extent of not buying physical gold or silver ETFs. It amounts to a cop-out. This meddling with markets by the authorities is at the root of the current period of confusion in western capital markets over how to respond to black swan events such as the war against Iran.
For perspective, after considerable volatility gold and silver spot are back in moderately positive territory this year so far. In European trade this morning, gold was $4750, up $70 over the Easter break and silver at $75.20 is up 20 cents. Turnover on Comex remains subdued, and open interest is still at the lowest levels for the last 20 years in both metals. Here it is for gold compared with the spot price:
The underlying tone feels firm, with minimal speculative positions in both gold and silver contracts.
There’s some controversy about central bank policies with some reported selling. This is not new, but it should be noted that central banks deal with each other instead of selling into the market as critics imply.
Turkey is a different story, which I covered in a MacleodFinance Substack article (Are central banks selling gold? — 5th April). Turkey’s central bank uses its gold holdings to regulate its money supply, a point picked up in a UBS research note:
“We would strongly advise caution against taking headlines at face value, not least because of Turkey’s unique position in how the central bank uses gold as a policy tool.”
Macroeconomists’ favourite safe haven, the dollar, lost some ground against the other major currencies this week, reflected in its trade-weighted index which fell from over 100 to 98.5, testing support at the moving averages. It might have helped steady precious metals:
It’s not just gold and silver frozen into relative inaction: the rise in bond yields is on pause and equities are too. But being headline driven, there is considerable volatility in oil and related energy prices. First, there was Trump’s threat to bomb Iran out of existence, driving WTI over $116 before his deadline on Tuesday. Then in a last-minute agreement to a two-week window, it fell to $92. And when Israel continued bombing Southern Lebanon yesterday, Iran closed down Hormuz almost completely and WTI rallied to $101.67. At $98.50 this morning, this volatility is not over.
Futures prices don’t truly reflect oil prices anyway, with shortages in Asia driving prices higher than financial markets’ spot rates, and significant backwardations between spot and futures exist as the following post on X illustrates:
For now, in their inaction investors seem to be ignoring the certain consequences. Either higher energy prices and shortages of fertilisers and other critical goods will drive the world into a global slump, or governments will intervene expanding subsidies and price controls in time-honoured fashion. Politically, they are bound to take the latter course, debauching their currencies in the process.
As soon as the frozen-into-inaction-brigade of investors wake up to this certainty and discard their regulatory constraints, the rush into the protection of gold and its handmaiden silver should be spectacular.
We leave you with a suggestion of how this will accelerate the demise of fiat currencies by illustrating the impact driving the fiat dollar towards its inevitable extinction:
Since January 2000, the fiat dollar has lost 94.1 cents of its value measured in real money, and its rate of descent to extinction was already accelerating. We can never say with certainty that gold and silver prices have finally corrected, but current levels offer an excellent opportunity for investment managers to hedge the mounting risks on behalf of their managed portfolios — even defying their bureaucratic compliance officers. To listen to Alasdair Macleod discuss everything from gold, silver, oil, mining stocks and much more CLICK HERE OR ON THE IMAGE BELOW.
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