A brewing storm of market and geopolitical volatility continues to cause unusually high levels of price volatility for gold and silver. A stock market crash on Monday has for now stabilised but could be a sign of things to come.
Gold has seen very large prices swings in recent weeks as the metal continues to set new records. Last week gold passed $2,500 per ounce in futures markets and set yet another new intra-day high spot price of $2,486.33 just last Friday, before sharply pulling back.
US payroll figures on Friday disappointed and have raised fears of a potential recession in the US. Markets have once again called for further rate cuts from the Fed who will meet again in September, with the CME FedWatch tool still showing a 100% chance of a cut (potentially a large one) at that meeting.
The biggest driver of volatility however came from the Bank of Japan, who shocked markets with a rate hike. The surprise rate increase triggered significant market turmoil that has begun to stabilise mid-week. Decades of low-interest easy money in Japan, saw people borrowing Yen to turn into other currencies and assets. With the rate hike however, the Yen surged in value and triggered a stock market crash.
Monday’s market crash saw huge losses around the world and triggered margin calls. Similar to the beginning of Covid in 2020, this collapse in stock value and rise in margin calls resulted in the selling of gold and silver, and prices fell to lows of $2,364.83 and $26.54 per ounce respectively. Gold has recovered somewhat, regaining $2,400 as safe haven buying took over, but is still seeing some volatility and is currently trading at $2,392.40.
Silver continues to suffer however and is still at $26.91 currently. Both Monday’s flash crash, and general weakness in the industrial metals sector of which silver relies on more heavily than gold, is keeping the silver price lower. The Gold – Silver ratio has jumped above 88 after falling as low as 72 in May, and suggesting silver could once again be a good buy.
Middle East tensions also continue to rise, with Hezbollah and Israel trading missile strikes in Lebanon. Iran have vowed revenge for the killing of military leaders, and countries have urged citizens to leave Lebanon for fear of a full-blown war breaking out.
The volatility in pricing makes timing look more important than ever, with buying and selling opportunities with each trough and peak. Those viewing the longer-term charts however, will see that even the unusually large price swings of recent weeks are still a small part of the huge rise for gold (and silver to a lesser extent) this year. Given the current outlook, further gains look likely and with that in mind, there is never a bad time to buy gold.
