It seems like the Gold and Silver markets have been asleep for quite a while now. We have had rampant inflation and money printing across the developed world so I have been surprised that Precious Metals haven’t been getting a strong bid as an inflation hedge. More recently we’ve had the Federal Reserve threatening to raise interest rates – which is usually bad for the metals. Yet today the metals are catching a strong bid. The question is “Why now?”, and in trying to figure it out I recall an article I wrote about 4 years ago about 3 Traditional Gold Price Drivers & How Crypto Disrupts Them
As an Inflation Hedge the metals have not really been shining of late. I read back through my old post and the reason why could be right there in my face, in my own words. (Aside - I really should listen to myself more) Quite possibly the Crypto market has been acting as the Inflation Hedge and soaking up all that demand that might have ordinarily been put into the Precious Metals markets.
I think the reason why the market is moving today is instead because of the Safe Haven demand. There are two things going on right now that I think would be spiking Safe Haven demand. The first is the concern over war breaking out with Russia over Ukraine. While I personally think it’s a bit of a storm in a teacup and the White House is trying to deflect away from other issues with another fear agenda, there is a possibility that a major conflict could start and that would spike demand for Precious Metals. The second reason is even bigger though….
In Canada there has been a major trucker protest going on with street blockades and civil disobedience really resisting the governments recent overreach. This week we have seen the Canadian government actually starting to freeze bank accounts of the truckers and those who support them. Personally I find this shocking and wrong for a number of reasons, but the reality is that it is an ominous warning and example to the people of the world exactly WHY you need to get out of the legacy financial system – so that your wealth can not be frozen or stolen by an out-of-control government. The Canadians are also trying to criminalise Crypto so Precious Metals is an obvious Safe Haven choice.
Whatever the reason though, a decent rally in the metals is overdue and while Safe Haven demand can sometimes be short-lived, this recent spike might be just the catalyst these markets need to break the recent slumber.