By Mike Gleason
As speculative fervor fuels price spikes in technology stocks and cryptocurrencies, gold continues to quietly hold its major support level.
The monetary metal tested the critical $2,000 level again this week. After dipping early in the week, prices bounced modestly on Thursday.
The metals space remains unloved and under-owned by the investing public. And the mainstream financial media is wholly uninterested in it.
Hardly anyone is paying attention to the sector at all. But some of the few who are paying attention are spotting compelling opportunities.
Even though retail investors are shunning anything related to precious metals, physical demand from industry, central banks, and consumers in the Far East is growing.
The physical silver market is especially at risk of becoming stressed. The Silver Institute’s latest forecast is for total silver demand to reach 1.2 billion ounces in 2024. That would be the second highest on record. The industry-backed nonprofit expects a structural supply deficit to persist in the silver market for the fourth consecutive year.
Silver Institute executive director Michael DiRienzo sees the silver price soaring to $30 per ounce later this year. A move above $30 per ounce would represent a massive technical breakout. The metal hasn’t been able to climb above $30 since prices broke down in 2013.
Of course, gold is much closer than silver to making new highs. The yellow metal is in what could be described as a stealth bull market. Prices are holding firm just below all-time highs despite the fact that gold isn’t even on the radar of the investing public.
Disinterest among the public is evidenced by the fact that exchange-traded products linked to gold prices have seen massive outflows. Meanwhile, gold mining companies have been trashed, sending valuations toward historic lows.
Sentiment in the precious metals space is at the polar opposite of the hyped up high-tech sector.
Artificial intelligence stocks and the so-called “magnificent 7” big tech behemoths are all the rage. Microsoft (NASDAQ:MSFT) alone recently attained a market capitalization of $3 trillion. Bitcoin has come roaring back over $50,000. Day trading of high-volatility options has exploded.
Investors have become speculators, and speculators have become gamblers. They don’t know or care whether their holdings represent good long-term value anymore. All they care about is whether they might go up the next day or the next hour or even the next minute.
Financial recklessness is showing up throughout the economy. Consumers are burning through savings and running up credit card debt. Americans lost record amounts at Las Vegas casinos last month and wagered record amounts on the Super Bowl this month.
Congress and the Biden administration, meanwhile, are gambling with America’s finances and the standing of its currency by running up record budget deficits.
Unsound fiscal policy, unsound financial markets, and unsound personal finances are all related to the absence of sound money. When the supply of fiat currency is unlimited and its value is perpetually declining, people feel incentivized to borrow, spend, and speculate -- often to excess.
It’s fun while the good times are rolling. But there is no free lunch.
Artificial booms eventually go bust. And prudent investors who buy assets that have real value and solid fundamental prospects eventually do get rewarded.