New gold highs: silver to follow! (reposting!)

Gold closing on Tuesday at $2772 and silver at $34.42 is the opportunity for a mid-week update: are they overbought, is a correction due, or do you buy into rising markets?

This is a reposting of my earlier post, with gold price corrected and charts updated!

The first thing to note is that western capital markets are horribly underweight in both metals. Fear of missing out has yet to happen, but if gold goes higher, it is likely to kick in. There is some early evidence of big funds buying into large ETFs, but so far it has been very little.

In the market, it seems clear that much of the world’s gold mine output and scrap recycling is bypassing western bullion markets entirely. The most likely buyers are central banks and other government agencies, predominantly in Asia. To these can be added some ultra-high net worth individuals and family offices, again predominantly in Asia.

The continuing and steady rise in the gold price appears to have attracted momentum funds, no longer just switching from the dollar to gold and vice-versa, because the dollar has been strong against other currencies, while gold has been strong against the dollar. This has led to some spectacular gains measured in other currencies, notably for Japanese yen. Even Chinese buyers have seen extra gains over October, with the yuan falling 2.4% against the dollar.

These moves, with the dollar strong and gold even stronger suggests that markets are beginning to reflect risk in the entire fiat currency setup relative to gold, because in troubled times the least risky fiat is the dollar. But far from the dollar being king, it is also now seen as increasingly risky.

This move has coincided with Trump overtaking Harris in the opinion polls, and for foreign holders of dollars, there is increasing uncertainty over US economic policies.