It appears as though we are entering a season of heightened market volatility. The financial system and geopolitical instability are realities that the broader markets are loath to accept. Few want to consider the challenging future they pose, and most want to return to the “good ole’ days” of the bull market that began in early 2009. That was evident on November 30th when the DOW roared ahead by 4% on the back of the Federal Reserve indicating that they will soften the pace of rate hikes because of the slowing economy.
Meanwhile, capital flows to the United States pushed the US dollar recently to twenty-year highs, which generally puts downward pressure on the price of gold. The economy is weakening in the face of persistent inflation, which historically supports gold prices. Then there is the war in Ukraine, which seems ready to expand or conclude. Nobody knows for sure which way it will go. China is seeing political unrest unlike anything since Tiananmen Square in 1989. Europe is just now heading into winter with depleted energy stockpiles and access to natural gas via the Nordstream pipelines. Finally, the elections in the United States insured continued division and now, political stagnation for the next two years.
The world has not been in this state of turmoil since World War II. As volatility increases in the coming year, we believe this will put a floor under the price of gold and by association, silver. Why? Gold has been slowly but steadily removed as the center of the monetary world since the collapse of the Bretton Woods agreement. It has since increasingly become insurance against fiat monetary systems and government instability.
We have both of those in large measure. Our only conclusion is that we have entered a period where while price swings up and down will increase. Yet, gold will once again assert itself as a primary tangible asset of choice just as it has for thousands of years. Now more than at any time in recent history it seems as though it’s time to own this critical asset.
The OWNx Team
