(Kitco News) - Last week, we saw some early signs of slowing momentum in silver and warned investors that prices could be peaking; however, being early can be just as painful for your portfolio as being wrong—a lesson the market enjoys teaching repeatedly.
Heading into the weekend, silver hit a major milestone target, surpassing $100 an ounce. Gold hasn’t quite reached the $5,000 level yet, but the market is less than $20 away—and in this environment, that could happen before a trader’s morning coffee has time to cool.
Silver prices are up 44% so far this month and more than 180% since the breakout rally began in the second half of last year. Last week, we warned investors that this rally was starting to look irrational, and that may still be the case. But as the old cliché goes: “Markets can remain irrational longer than you can remain solvent.” Unfortunately, the market has an excellent memory, and your margin account does not.
What is interesting, however, is that some analysts actually see a rationale behind gold’s and silver’s parabolic move. The precious metals saw renewed momentum at the start of the week after President Donald Trump threatened to impose tariffs on European nations that did not support his bid to annex Greenland. He also didn’t rule out using military force to get what he wanted. In a traditional TACO (Trump Always Chickens Out) move, Trump later pulled back from his threat to take Greenland by force—but the damage had already been done.
Over the past week, we have seen renewed momentum in the “Sell American” trade, with some European firms reportedly looking to offload U.S. Treasuries. This debasement trade is providing solid fundamental support for gold and silver, even at elevated prices. In this environment, analysts are suggesting that gold could easily surpass $5,000, while silver prices may push close to $150 an ounce.
That said, we would not be doing our due diligence if we didn’t also present the other side of the argument. While silver may still have some upside, several analysts have noted that higher prices could eventually weigh on industrial demand. As the saying goes, the cure for high prices has always been higher prices.
$100 silver is exciting, and there is clearly strong momentum behind the move, but at these levels it is prudent for investors to be patient and resist the urge to chase prices higher. In this environment, silver can swing 10% in a single day with alarming ease, and that kind of volatility is not for the faint of heart—or the weak of stomach.
At some point, both silver and gold will see a correction. Based on recent price action, any pullbacks are likely to be shallow and short-lived, but those moments—not the euphoric headlines—are the opportunities investors should be waiting for.
Have a great weekend.
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW
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