Gold is locked-up and Silver is locked-in. The physical bullion bought and paid for by BRICS nations is not going anywhere. That collateral is locked up. Silver is locked in. It is now in the sites of Macro Discretionary fund managers who, after making a killing off being long Gold have now finally turned their gaze on Silver as evidenced by Friday’s rocket-ship rally.
Gold made new all time highs once again; its 34th of the year (but who is counting). Spot prices topped out at $2722.62 before settling $2721.55. Those prices translated to Comex December futures as $2737.80 and $2736.40 respectively on Globex last.
Silver’s rally was much more interesting. The perfect metal made new 12 year highs on a 6.4% rally closing out the week at $33.716 after touching a high of $33.759. In December futures those prices correspond to $33.925 and $33.970 on Globex. December Silver’s high of $33.97 eclipsed the high of $33.93 made in December of 2012.
One gets the sense a new era was born last Friday in both metals. For the past 10 months Silver made no significant new highs as its brother Gold kept putting up new numbers.
The truth is, Silver had still outperformed Gold for much of the year despite not making new all time highs. Friday itself was significant in that not only did Gold make a new high, Silver participated in the award ceremony. Hence it feels like a new era.1Provided of course JPMorgan doesn't decide to downgrade miners again, as it did in 2021.
One can only hope...
2- FRIDAY PRICE ACTION
Friday’s activity and price action was superb. The day started in Asia calmly. At 9pm ET Gold and Silver began to levitate without pronounced dollar weakness. This was accompanied by China stock strength. Futures topped out during that timeframe at $2729.30 and $32.365 respectively
Europe came online and selling dominated the first half of their day as has been customary of late. Gold retreated some $12 until the US (seasonal ETF) buying began. This was the start of US hours a day after BOA had called Gold2 “The Ultimate Asset” and stated $3,000 would not be a problem.
The selling continued all morning but was no match for the US buying. Gold made new all time highs (again) during the 10 am hour. Silver however did little between 9 and 11. This has become increasingly frequent as many western participants are buying Gold while Selling Silver or Copper for margin financing purposes on COMEX.
Then, at 11:30 with Europe closing for the week, something happened. When the EU selling subsided, Gold again made fresh All Time highs. Silver, however, was a sight to behold. Post Europe’s close Silver went on a controlled rampage eating every offer in its path to close out up 6.4% on the day eclipsing the high set in Dec 2012. As the day ended, we saw spot Gold up 1.06% at $2,721.50 and Silver up 6.4% at $33.716. Historic.
3- EVENTS ON DECK
SEASONALITY
Seasonally speaking, the American investor public is about to get recommendations for their 2025 asset allocations. This translates into a “buy-season” where allocators receive recommendations and start to deploy money for next years investments. Historically between November and January Gold and Silver both perform well from this phenomenon.
BRICS
The BRICS 2024 Summit is next week in Kazan Russia where there are hints of expansion into more dedollarization activities including making Gold (and soon Silver) a more democratized asset for public ownership and use as a digitized currency.
Consensus surrounding the BRICS event is ”sell the news” as a trading moment with which we concur. There are no doubt some (many) profitable speculative longs looking for this particular moment to book profits. These types have already been spotted selling this past month, but only when buying comes in.
Taken together, the selling will come, but at what price? If the BRICS surprise with some announcement at their summit, then Gold could easily have a $100 day higher next week. The selling may thus be absorbed by players seeking long Gold exposure as the US Elections near as well. Multiple events are in play. A market that is "violently unchanged" is on the table.
US ELECTIONS
The US Presidential election promises to be the most contentious one in the Nation’s history. US voters are violently divided, and one gets the sense that the losing side will not go so quietly into that night. There are already signs of looming problems on both sides as they gear up for legal battles post election.
The Dems will presumably attack on grounds of constitutionality if Trump wins. Trump’s side is already prepared to object to ballot countings nationwide in individual states. Both candidates have lawyered-up already.
Historically Gold will rally prior to a contended election and back-off in its aftermath. When Trump last won in 2016 the market spiked considerably higher overnight only to get slammed down as US trading opened. This year will no doubt have that same risk. Specifically: The US Presidential election is a showcase of our stability and must not be permitted to be perceived as a moment of concern. This market behavior is similar to the“debt ceiling” debates occurring annually. All hands are always on deck during events like this since Bill Clinton won in 1992
The calendar adds major fireworks this year for sure.
5- HOW HIGH CAN GOLD GO?
The last few months have see many banks overhaul how they look at Gold pricing which did not go unnoticed here. Goldman, along with several other Banks like, CITI, MUFG, GS, BOA, and UBS recently revealed a new way to model gold prices. The GS new model is better in that it is more specific and reveals the logic of their new analysis.
This forecast also relies on our rule of thumb that 100 tonnes of physical demand lifts gold prices by at least 2.4%, the lower bound of our regression estimate.
The bank admits this is conservative. The GS database covers the last 12 years of physical purchases, which does not factor in the recent growth of demand at all.
Starting in March of 2024, we estimate, prices appreciated by 14% on the ETFs adding 100 metric tons.3 This is aggressive, especially since it does not factor in what the CB buying was but not far-fetched. Provided CB buying does not stop while slowing somewhat as Goldman asserted, then ETF additions will factor more.
