Is the gold rally just getting started?

(Kitco News) - We get to close the book on another week and another nearly 5% gain for gold as this rally in record territory appears to be unstoppable.

To be honest, I have been dreading writing this week’s note because of the volatility in the gold market. It feels like anything I write becomes obsolete the minute it is published. Just look at my headline from this morning: Gold price testing support at $2,300 after U.S. economy created 303K jobs in March.

That article was accurate for about 30 minutes, and then the price started taking off, with June gold futures eventually touching $2350 an ounce.

Trying to anticipate gold’s short-term price action has always been a mug’s game. So, looking beyond the near-term volatility, we can clearly see that gold is no longer a U.S. dollar-centric asset; it has once again established itself as a global monetary asset.

Bank of America, one of the most bullish banks on gold at the start of the year, reiterated its target of $2,400 an ounce. The analysts noted that the precious metal is less dependent on U.S. interest rates and monetary policy.

In this environment, it doesn’t matter if U.S. bond yields go higher or the U.S. dollar strengthens; central banks will continue to buy gold to diversify their foreign reserves into an asset with no third-party geopolitical risks.

This week, the World Gold Council reported that central banks bought 19 tonnes of gold in February. Although the pace of purchases slowed, central banks continued accumulating, providing long-term support for prices.

At the same time, consumers, particularly in Asia, will continue to buy physical gold to protect their wealth as economic uncertainty continues to grow.

Famed investor Frank Giustra has been pretty succinct in his view on what is driving gold.

“Gold spikes because there are problems, whether they are economic, financial or geopolitical,” he told Kitco News’ Chief Michelle Makori. “We have a humongous debt problem in this world, unprecedented in human history, and that debt will unravel at some point. Gold is the canary in the coal mine that something is wrong with the system.”

Giustra isn’t the only investor who sees a growing problem within the global and U.S. economies. This week, famed billionaire David Einhorn, president and founder of Greenlight Capital, said during the annual Sohn Conference that he sees gold as a hedge against economic uncertainty.

“We own a lot more gold than just the GLD. We own physical bars as well, so gold is a very large position for us,” Einhorn said. “There’s a problem with the overall monetary and fiscal policies of the country, and if both policies are systemically too loose, I think the deficits are ultimately a real problem. And I think that this is a way to hedge the risk of something not-so-good happening.”

Greenlight Capital owns about $74 million worth of GLD, the world’s biggest gold-backed ETF. It represents about 3.6% of its portfolio.

Another exciting element to this rally is that gold is not in it alone. While gold gets a lot of attention, there is renewed focus on silver as it is now making its move, with prices ending the week above $27 an ounce.

Silver has rallied more than 10% this week, seeing its best performance since November. At the same time, the gold-silver ratio has fallen below 85 points, its lowest level so far this year.

According to some analysts, anyone who has missed the gold rally should be paying attention to silver right now.

Analysts at TD Securities said that they see silver in a long-term uptrend as above-ground stocks will be depleted within two years.

On one final note, for everyone who can, don’t forget to look up on Monday to watch the eclipse. Have a great weekend.