Loading ...Learn how “paper” gold and silver are behind the recent volatility, and why that’s also a reason for optimism.
It’s been a wild ride for precious metals lately. After a sharp rebound earlier this week, gold sold off by 2.09% and silver by 3.24% today (Friday). The selloff wasn’t limited to precious metals as it also impacted the broader financial markets, including stocks, crypto, and other commodities. In today’s update, I’ll show you what’s happening and explain why I’m not worried at all. In fact, this is unfolding exactly as I’ve been expecting.
Let’s start by looking at the intraday chart below, which shows how the Friday morning sell-off affected gold, silver, stocks (represented by the S&P 500), and cryptocurrencies (represented by Bitcoin):
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It’s unusual to see such unrelated and disparate asset classes as precious metals, stocks, and crypto selling off at the same time, but there is a reason for it: rapidly declining odds of a Fed funds rate cut at the upcoming December meeting. It started when the probability dropped from 90% just before the October 29th Fed meeting to 65% on November 1st.
Today, it fell even further to just 48% after several Fed policymakers tempered expectations for a cut in December. In this era, where markets and the economy are heavily dependent on low rates and central bank stimulus, prices tend to rise and fall primarily based on expectations of monetary policy—often more than actual economic data.
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Of course, Friday’s pullback in gold and silver has precious metals investors, a typically risk-averse and jittery group, panicking once again and sending me worried messages asking if prices are about to crash. My response is simple: no, it’s fine, and everything is unfolding just as I expected in the short term. I’m already counting down to more unsubscribes, which always happens during pullbacks, as if I’m somehow the one behind the curtain controlling precious metals prices!
Now let’s revisit the projection for gold that I’ve been repeating over the past month, ever since it hit my $4,400 price target on the nose. I said that once gold reached that level, it wouldn’t crash, but it would need to trade sideways for a while to work off the froth and catch its breath after such a strong surge. That sideways movement involves a lot of bouncing up and down (just like today) until things settle and enough energy builds for the next breakout, which I expect will take gold to $5,000 in 2026.
I’m not alone in expecting $5,000 gold next year, as Goldman Sachs, Bank of America, HSBC, and Société Générale are as well. In addition, JPMorgan CEO Jamie Dimon, who is not much of a precious metals fan, recently said that gold “could easily go to $5,000 or $10,000 in environments like this.”
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I have a similar short-term outlook for silver as I do for gold, which isn’t surprising given how closely the two are correlated:
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What I find notable, fascinating, and strange all at once is how, after silver’s recent rebound, I’ve been flooded with messages from retail investors warning that silver has now formed a double top pattern, supposedly signaling the end of its bull market and a major crash ahead.
I strongly disagree with that view for many reasons, one of which is that when the crowd all sees and believes the same thing at the same time, they are almost always wrong. That’s how I see the so-called double top pattern. As I pointed out earlier, what appears to be a bearish double top is far more likely just a sideways consolidation that sets the stage for another move higher.
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