In our last market update, we discussed the current state of the gold and silver markets, and how they’ve experienced a slight uptick since both the metals’ lows.
For months, gold seemed to languish in the $1600 range, while silver hovered around $28 per ounce.
Many wondered what in the world was going on, while others questioned the metals’ resilience as an investment.
Was the bull market finally over?
Over the last two weeks, the bulls have come roaring back.
Since our last market update on 8/23, gold has continued its run, adding another $95/oz!
As of today (9/19), gold has run to over $1765/oz. While we’ve seen some profit-taking by institutional investors – which typically follow a run like this – gold has held strong at $1730 for the last few days.
Silver has also been on the move.
In our last market update, silver was slightly off the $28 mark, but still under $30. It has since continued to rise, surpassing the $30/oz mark to about $34.50 (as of 09/19).
We also questioned whether we were seeing an end to the cyclical bear market, heading toward new highs for silver and gold.
With the information available at the time, it was too early to tell. One analyst speculated that gold would cross the $1700/oz mark in three months.
While that price forecast was certainly correct, the analyst was off on his timing.
So what’s driving this Gold-and-Silver Running of the Bulls?
In reality, there wasn’t one, singular event that spurred the sudden rally.
Several factors – each with its own significance – have combined, determining what markets will do at any given time.
Here are a few of the factors we believe – along with many analysts – are responsible for the growth of gold and silver prices:
1. New Steps Taken by the Fed to Invigorate the Economy
Ah yes, the old fable, “quantitative easing.”
Fed chairman Bernanke, along with other officials, has been quietly discussing just that.
While they may announce a new round of bond purchasing this week, aimed at lowering long-term interest rates (once again), and hoping to spur borrowing and spending, many don’t expect this to happen until later in the year.
Yet the mere rumor of a third round of monetary stimulus is enough to fuel a gold and silver rally.
One analysis forecasts that gold will soon re–test its all-time high of $1920/oz if the Fed pumps the markets with added cash.
2. Weak U.S. Jobs Report
Last Friday, the Bureau of Labor Statistics released its monthly jobs report for August, and the news was not good.
Last month, the economy added a dismal 96,000 private sector jobs, down from 141,000 new jobs in July.
The unemployment rate did drop from 8.3% to 8.1%, but mainly because nearly 370,000 people stopped looking for work altogether. Bleak employment growth is a bad omen for the economy, which fuels speculation about further monetary stimulus.
3. U.S. Presidential Election
Last but (certainly) not least, this year’s presidential election is part of the equation.
With the race at a dead-heat, many investors feel uncertain about the upcoming year, especially in terms of political leadership in Washington, DC.
While the election’s outcome is unlikely to have a major impact on the long-term price of gold or silver, uncertainty surrounding the race has been a short-term catalyst for growth in the metals’ prices.
After all, investors turn to goldcoins and silverbullion in times of grave uncertainty.
There are countless explanations for the recent rally – and current outlook – of gold and silver prices, and we have named but a few. Indeed, some are less obvious, even to the trained eye. (For instance, central banks in China and India have increased their gold-purchasing in the last couple of years.)
What do you think is spurring the latest rally?
Anything we’ve missed?
Tell us what you think in our comments section below. Or find us on Facebook!
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