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Posted October 21, 2025 at 1:05 pm
(Two theme songs today: Rolling Stones and Shirley Bassey)
We haven’t written much about gold and silver recently, and that’s on me. I’ve been meaning to write pieces about precious metals on various days, but then something came up on each of them. Many investors and active traders clearly have been participating in the huge run-ups that each of those metals have experienced recently and today can’t be a pleasant one for those who have been chasing the rapid moves higher. As the chart below shows, gold futures have been on quite a tear over the past three months (and more), while silver futures went parabolic recently.
Source: Interactive Brokers
Today’s significant declines in gold and silver (-5% and -7%, respectively, as I type this) do not necessarily puncture the bull market narratives behind those commodities, but they once again heir out the risks of chasing sharp upward moves, particularly those that become parabolic. We have written before about how unpredictable those moves can become, particularly because parabolic moves often indicate that some market participants are in real pain. The problem is that when their malady is cured, at least temporarily, the main impetus for the parabola is removed, and those who chased it are left long without a natural buyer. That means that the supply/demand calculus changes abruptly and with no warnings.
There were numerous news reports about a global short squeeze in silver, but when it became clear that the supply now met the demand, the market dynamics reversed. Actually, we saw a bit of a sell-off in metals on Friday, but dip buyers stepped in yesterday as if on cue. This is where trading dynamics fall victim to larger considerations of supply and demand. This is where our admonition from last week comes into play:
It is very difficult to know if a wave of selling is part of the normal flow, a rogue wave, or a shift in the tides.
If you’ve been chasing the rapid rise in metals recently, ask yourself now if you can reasonably assess the relative probabilities of normal flow, rogue wave, or tidal shift in those markets. If you’re new to trading those markets, please recognize the difficulty of an accurate assessment.
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The peace enjoyed since WWII is over. We have entered an era of regime changes. America is stepping away from the World Policeman role and China is doing all it can not to accept the role. China has its own problems. In the world of instability will gold loose its value simply because someone acquired enough for their purpose??? I do not think so. What investment area or commodity will be worth investing? Military complex? AI? Genetics? Fiat currencies does not seem like a valuable area. Soon enough Corporations may calculate that they want to buy countries, and considering miserable budgets that most countries are in, a lot of countries may volunteer to be bought out by Microsoft, or Tesla, or Apple, or whatever. The future is coming and gold has survived long enough that it will outlive my lifetime.
Having navigated the markets actively as a CIO for the last 45 years, I submit that the World economy truly is in uncharted territory. As noted by your other readers, the US has abdicated its position as the governor of World economic order that the US established with Bretton Woods during a period of distress and generally nurtured the World through subsequent periods of economic crisis. Now we find ourselves with a government intent only on enriching themselves at the expense of the American people. The inflationary implications of policies destined to create unsustainable budget deficits at the same time as removing the guard rails of Federal Reserve oversight are clearly being digested by World investors. While it’s hard to conclude that investing in gold is the best path for economic survival, it is not surprising that the World Central Banks and individual investors have flocked to gold as a safe haven.
I suspect yesterday was profit taking rather than an idiosyncratic change in sentiment for gold. If there is a big outflow from gold where will the inflow be? MM funds, equities, bonds. The reality is, yes gold has become overbought but when you think about it a correction doesn’t mean gold isn’t investable. I never thought gold would hit $4000 when I bought the asset two years ago and quite frankly if it pulls back to $4000from here I would still consider it a great investment. Just don’t buy anymore at elevated levels wait for the correction to end.
Underlying key momentum structures for both gold and silver remain strongly bullish. Look at the previous three PM bull markets, and you will see the same episodes of alleged ‘correction’ that turned out to be but a brief overbought condition followed by a pause for breath before the next surge higher. Thus is a moment when weak stomached longs are shaken out, and then miss the rest of the party or are forced to rejoin at a significantly higher level. Momentum tell us that this sort of pullback is a gift, and not a trend reversal.
Hola cuál es el símbolo de oro o plata para cotizar en la bolsa de valores
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I keep gold at between 4% and 6% of my portfolio, buying when it is below and selling when it is above. This forces me to sell when others are buying and buy when they are selling, but mostly I do nothing. Gold is a commodity with no intrinsic value unlike silver which has some uses. But it’s appeal has lasted over millenia and I don’t doubt it will survive me. But I think other commodities, however, are a much better hedge for the current idiocies. I am partical to Cu and Ni but otherwise mostly invest through multiple funds which each have their own way of navigating these very long cycles.