I am always a little wary when someone rolls out a historical comparator, adds a few anecdotal observations that appear to mirror the present, and concludes: there you go — outlook solved. As a sceptic, I wonder whether they are working from first principles upwards, or from a top-down desire to corroborate an already-held view.
At 6:17 pm today, London will be treated to a 91% solar eclipse... ... so you might wonder whether there are any parallels with the gold market. After all, the alchemical symbol for gold is the Sun, while silver is represented by the Moon. Yes, gold may be partially obscured today, but it is not silver that is masking it.
Forget the price chart for a moment. Look instead at what the world was typing into Google — because it tells you far more about human nature than it does about bullion.
The word I’m looking for is “contronym” — a term that can mean its own opposite — and it may be an apt description of gold right now. News that India has raised import duties on gold and silver from 6% to 15% is simultaneously bullish and bearish.
Precious metals have followed the classic pattern: "taking the stairs up, but the escalator down." - slowly up... rapidly down. January delivered dramatic rallies and record highs across the complex, while February has brought sharp corrections, partial recoveries, momentum loss and then renewed volatility, leaving the market in an ambiguous consolidation phase.
A chum and I have this long running joke that when we go into our respective village pubs, as veteran gold dealers we are frequently confronted by friends/locals/strangers with a barage of questions about the gold price, even before we have taken a first sip of the golden nectar. The point being, we would argue that anecdotally, when they start to tell us where the market is going, then that surely that has to be prima facie evidence that the market has topped out. The barometer has not yet fallen, we are not there yet …
What an extraordinary day for financial markets: Spot Gold has just breached the $4,000 level at 03:00 BST. This move is far more than speculative froth; it is a rational repricing of global trust and a warning about the precarious state of financial markets.
As I see it, you have two options: either to believe the laws of gravity have been suspended, or to accept that gold and other precious metals exist within an entirely new paradigm. Simply claiming that the markets are massively overpriced and will return to “normal” marks you as a dinosaur who has yet to understand that fundamental changes have occurred.
Back in 2000, Chinese and Indian gold demand was regarded as a bellwether of underlying market sentiment, but collectively they only accounted for less than 20% of total offtake. Interesting … but not essential stuff. Today, they are north of 50%. They matter.
After a 38% year to date increase in the gold price, let's address the question whether price fatigue is setting in for retail gold investors (… yes, the question that no one asked).
