Gold and Silver - What's Driving Their Prices?

By: Ian Campbell | Thu, Apr 21, 2011
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Gold and Silver continued making headline news yesterday and this morning, with everyone reading this likely being well aware that both breached, and so far have held above U.S.$1,500 and U.S.$45 respectively. At 11:30 a.m. ET this morning they trading at U.S.$1,504.14 and U.S.$46.02. To put these two prices in context, on January 1, only 80 calendar days ago:

So what are today's gold and silver prices telling us?

The first question I ask is "what macro-economic events have occurred since January 31 that reasonably can be said to not have been predicable on that date, but are now 'in the market'"? My thoughts:

The second thing I continue to think about is how much froth currently may be in the silver market in particular, resulting from 'lemming like' activity on the part of investors and speculators. I have to believe there is currently some 'exuberance influence' currently in the silver market, and to some degree perhaps in the gold market as well. When I read articles and listen to interviews or presentations I look for balanced positive and negative commentary (on any subject, not just on gold and silver). I don't see much negative commentary these days.

All that said, gold and silver are priced in U.S.$. Can the rising gold and silver prices simply be the result of the gold and silver markets telling us they are becoming each day more convinced that in the face of America's debt load, ongoing monthly net trade deficits, lost manufacturing jobs and unemployment levels, and broad-based world uncertainties, the U.S. Federal Government and Mr. Bernanke will be unable to 'economically right the good ship America' in a way that will get the U.S. even close to where it was on the world economic stage ten years ago?

Only last Friday (April 15), when the physical silver price was about U.S.$42.50, in a commentary titled 'Silver - Too Fast?' I said that "having regard for my own circumstances, I am prepared to hold my physical silver position for the time being, but plan to watch things very closely every day, and make a new decision on my sell/hold/buy view each day. Six days later, having read numerous further articles speaking to the run-ups in both the gold and silver price, I am still of that same mind - but particularly in the case of silver, I am becoming ever more wary of its rapid price increase (about 8% since last Friday).

 


Disclosure: I am long both physical gold and physical silver

 


 

Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Economic Straight Talk

Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at icampbell@srddi.com.
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** through The Ian R. Campbell Research Initiative

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