Gold and silver have had a nice run this week and the price of gold reached a five month high today. There are many factors contributing to the recent sustained strength.
Geopolitical tensions remain on edge with the United States and Russia at odds over recent developments in Syria. Gold is generally seen as geopolitical insurance and there is enough going on in the world to warrant buying a policy.
Additionally, President Trump today said that the US dollar was “too high,” causing a reaction in the currency. At times, gold is inversely correlated to the dollar. However, that correlation had recently broken as geopolitical tensions rose while the dollar continued to strengthen. With the dollar falling, gold’s inverse relationship re-engaged giving it another reason to make a nice run this week.
The question now becomes, is the recent surge sustainable over the short term?
In the recent past, nasty geopolitical incidents involving the United States have calmed down after the initial heated rhetoric becomes more reasoned. Furthermore, capital flows will override any President’s opinion on the strength of the dollar.
Therefore, it is quite possible that soon, strong capital flows to the United States will give renewed support for the dollar and geopolitical tensions will fade somewhat. That will be a catalyst for the price of gold to relax a bit.
However, each surge in the price of gold creates more distance from the December 2016 low of $1,130. Recent price action continues to make the case that a long term bull market has begun and last year’s low is not likely to be penetrated, even on a major pullback.
This is all the more reason to steadily accumulate your gold and silver. The daily and weekly ups and downs do not matter if you have a long term horizon, and helping you realize your long term goals is what the OWNx platform was built for.