Riding the Storm: How Gold and Silver Became the Go-To Lifeboats in this Wild Market Ride

Institutional investors have been aggressively buying into gold and silver lately, while wholesalers and producers, relaxed by years of mediocre demand, suddenly found themselves in the FOMO mode. The sudden upheaval created sharp swings — something that can be described as panic-driven exits and last-resort selling.

Gold’s Identity Crisis: From Hedged Asset to Standalone Store of Value

On the one hand, this is not a new idea to buy into safe havens, because for most of human history and most of the history of the global economy, the gold standard existed. On the other hand, gold clearly lost its investment appeal in the early 2000s, and this memory is still very strong. In other words, the reasons for such strong volatility lie in the fact that the paradigm regarding gold is fundamentally changing. The very fact that many people often bundle gold and silver together points to the existence of this bias, in fact. But it turns out that we now have two groups of investors. One group of investors believes that, in general, gold is primarily a precious metal, and from this point of view, given the weak demand for precious metals due to the weakness of the global economy, it has grown, so it can be hedged. The other group of investors, which is growing in number, takes a completely different approach, saying that you don’t invest in gold only to take profit at some point and get back more dollars later. Imagine: you invest in gold simply because you invest in gold.

That said, it is important to clearly distinguish between investing in gold ve Gümüş. In fact, gold should be separated from all other commodities. It seems that the reasons for the growth of gold and silver, even though they overlap in many ways, are still profoundly different. As we have already mentioned, we would perceive silver as a kind of anti-inflationary bet, but it is still a bet on some growth in the global economy and global GDP. Gold actually doesn’t care much about growth, but it is very reactive to the episodic spikes in inflation expectations.

From Dollars to Gold: A Portfolio Paradigm Shift Amid Global Uncertainty

There are paradigms according to which you prefer to keep dollars as the most convenient and liquid currency in the world. In ten years from now, your goal is to get more dollars, inflation deducted. “Safe haven” essentially means that you want your dollars to be invested in something capable to weather the storm, any kind of storms going forward, so to speak — such as economic war, turmoil, political unrest, or something else big and unexpected. But the story about gold is not about your self-protection, i.e. how you are going to invest it, waiting to get a kind of return rewarding your patience. It’s about the fact that you can keep your money in dollars, or you can keep it in euros. That’s understandable logic. You can keep it in other currencies for your spending convenience. But imagine that there is a logic where you can park your money in gold. Where do you park your car — on the dark street or in a garage? You prefer your garage, right? It’s as simple as that. Period.

Inflation is not the only risk facing investors at present. In the case of silver, this risk is quite obvious and, as I have already said, it is recession and stagnation in the global economy — pretty much the same reason we invest in gold. Most importantly, sharp declines do not occur without a rebound, and, in general, it is quite logical that they happen time by time. But at the same time, if we are talking about gold in distinction to silver, we see that a new paradigm is emerging, with a number of large investors saying that gold is a timeless must-have in a portfolio. Some of them say even more — namely, that gold, in general, is just another form of currency. This is why, by the way, gold is the only commodity tradable in FX markets as a substitute for a currency unit.

You may have multiple currencies in your portfolio — euros, dollars, or Swiss francs. Imagine that part of your portfolio could simply be denominated in gold. Because everything related to the trade war is like Pandora’s box. You can open it, but you can’t easily close it back. And as with other similar exercises, so to speak, sooner or later it may implode. So the main takeaway of this ongoing rally is the fact that the market understands this, so I won’t use the word “bubble.” There is a mild cold that, if left untreated, can develop into lung inflammation and end up very badly. And now there are many signs that the Global economy is at the point of inflection where such an innocent ‘cold’ in the form of rapidly accelerating U.S. public debt could turn into a chronic ‘incurable illness’.

Not Just a Precious Metal: Why Silver’s Industrial Role Is Driving a Global Scramble

Now, let’s discuss a bit about the recent events in silver. I believe silver volatility is largely caused by the uncertainty that such spectacular growth will be sustainable. Many traders are understandably afraid of the scenario that this upheaval may end with an unexpected sharp correction, where no one will have enough time to react. That is, the main risk for silver is that the forecast for sustained economic growth, which was essentially triggered by the era of QE, is unlikely to stay put. I tend to see this idea being particularly relevant to gold. The situation with gold is not the same because many investors are beginning to perceive gold as a new irreplaceable part of their portfolios.

All in all, global industry and hedging demands are eating into the production, and within the next few weeks, the uptick in pricing looks like it has a good chance to continue. You are likely not going to be able to find much supply to purchase if you are trying to get into this race to the top. A rapid rise like this in a commodity that has been actively suppressed in price for decades shows a loss of reality check. Some big banks held enormous naked short positions of both gold and silver, thinking that what’s happening is a pure speculation. This means they’ve put bets on, at least, silver (may be not gold, okay) prices being low, staying low, but didn’t have the silver in their books to back it up if the price continuously goes up.

One important consideration here. Once forced selling ended — approximately around the beginning of November — the physical scarcity started to dominate the agenda, so now silver sustained its higher prices of ~$50 plus, even though currently it’s a bit lower than that. If confidence in the “paper silver” (everything other than silver bars) collapses — I’m quoting this as an assumption, not my base case scenario — a structural repricing of silver will begin.

To make the picture complete, I would mention here an unusual spike in demand from India in recent weeks, which has challenged the supply of available bars to trade in London. Demand from silver-backed ETFs further amplified the effect. These synchronized imbalances created an urgency to ship silver bars — to New York earlier this year, and then — to London, since traders increased bets that the metal supply could be dented by the U.S. tariffs. That idea sparked large dislocations between the two trading hubs and pressurized silver producers.

In any case, silver is a sound investment. If you want to invest in metals and industrial growth in general, our advice is very simple — go ahead and do it. The common mistake is to think of silver as a substitute for gold, though. It is more accurate to think of silver primarily as an industrial metal. Then everything will take its place.

Final Takeaway. A Few Words about Religion

The gold “reinvention” is certainly caused by a shift in the investment paradigm. And this investment paradigm has a religious foundation. That is, are you ready to change your mindset? That is, whether you need gold in your portfolio depends on how you look at it. There is no right answer here, no uniformly correct decision. Well, there are certain economic laws, like when interest rates fall, the bond prices rise. So, if we believe that interest rates will gradually decline, it’s a good idea to support some investment narrative.

What is happening now is a question of how you see the world around you. And that’s why I think that buying gold from hype is not my idea. But buying gold based on the increasingly popular assumption that the world is really changing — can be in itself a valid investment idea.