It was only a week ago that I was writing about the Higher for Longer Narrative Hurting Precious Metals. I knew it was likely a good Buy The Dip moment in time...but it turns out it might have been the last decent dip we’ll see for a while since a new war has just broken out between Israel and Palestine and the Safe Haven Precious Metals have surged this week.
Historically Gold and Silver have always caught a bid when major wars start so this latest market move is not particularly surprising. The Russia vs Ukraine War has been raging for some time now but this new war is a little different. For a start it’s in the Middle East and there is significant risk of the conflict escalating with several neighbors to Israel posturing like they will get involved, plus the US is positioning assets in the area too so this could become a much bigger conflict very quickly and very easily.
It’s also an important Oil producing area so the impact on global energy supply could be substantial and we’ve seen similar big rallies in the Oil price this week. Astute observers of the precious metals markets would know that Oil is often correlated with Gold and as the Global Financial Order is slowly breaking down we are increasingly seeing Oil actually PRICED in Gold. A broader war in the Middle East would have significant impact on the entire commodity market complex due to the linkages and dependency on Energy so the markets have been responding appropriately by revising the metals prices higher.
Just on Friday alone we saw Gold surge 3.29% and Silver 3.95%. Experienced traders would acknowledge that Silver can often be this volatile, but that size move in Gold in a single day is VERY rare. Quite likely this was a result of traders wanting to be Long Gold over an uncertain weekend and we might see some pullback on Monday if there is no escalation of the conflict over the weekend. However, what the market is signaling to me is that it could be about to take off if things really do go pear-shaped in the near future.
