In today’s turbulent precious metals market, it’s oftentimes difficult to keep up with the performance of gold and silver on a daily basis. For those individuals that don’t regularly follow the market, you might be pleasantly surprised to hear that gold and silver are rapidly approaching $1,300 and $20 an ounce, respectively.
While still a good bit off from the 2013 highs set earlier in the year, gold and silver have seen a nice bounce in price over the past few weeks. The price of gold dropped as low as $1,180 an ounce, with some “experts” calling for gold to hit bottom at $1,000 an ounce, while the price of silver fell as low as $18.50 an ounce. A 10% bounce in the price of gold and an 8% rebound in the price of silver in the span of three weeks is nothing to sneeze at.
A substantial amount of the rebound is likely due to gold and silver being oversold. Shorts, margin calls and other proprietary trading programs automatically triggered selling a few weeks back without regard to fundamentals. Once individuals had an opportunity to let the dust settle, they realized that the respective prices, which were rapidly approaching mining costs, were below what fundamentals would justify, resulting in a re-entry into the market.
At the moment, there are a few potential catalysts that could affect the price of gold and silver. These include instability in the Middle East, which could draw the U.S. into war, inconsistent economic data, a still shaky jobs market, and a tightening of the Fed’s monetary policy. On the other hand, a continued economic recovery, positive monthly job gains, a strong stock market, and low inflation rates could keep gold and silver in check.
Regardless of where the price of gold and silver go in the short run, the fact of the matter is that many of the fundamental reasons for buying gold and silver as an investment and hedge still remain in place. Summer historically has been a slow time for the precious metals market, so it should be interesting to see how demand, and subsequently prices adjust as we move towards fall.