Gold’s next stop $5,000 in the short-term. Silver challenged the $60 mark this week while a new battle erupted over who truly owns national gold reserves. Here’s what’s driving precious metals higher – and why governments are watching closely…
By Peter Reagan
Your News to Know rounds up the most important developments in precious metals and the broader economy. This week, we’ll look into:
- Gold back to $4,200, State Street eyes $5,000
- Silver did what? At nearly $60/oz silver is still below fair value
- Another week, another battle over sovereign gold reserves
Gold is ramping up even before interest rates get cut again
State Street released a tempered-intent outlook on gold in 2026 that is sounding like one big advertisement for gold ownership…
But I’m getting ahead of myself. The news of last week in the gold market, likely playing a part in the above analysis, was gold passing $4,200 once again. “On what news?” is what investors have been asking for two and a half years, and, once again, financial media outlets have struggled to provide a coherent answer.
An upcoming Federal Reserve rate cut in that’s weighing on the U.S. dollar? Well, interest rate cuts have been expected since 2023, and the dollar has been beaten into dust all year, so that’s not much of a moment driver.
State Street gives us better insights on why gold is gaining, and why the case for it reaching $5,000 in 2026 stands on solid ground. If you’ve been paying attention to some of the notable forecasts I’ve been covering, you’ll know that’s a very moderate price target.
State Street says that supporting $5,000 gold in 2026 is a historic rate cutting cycle, strong central bank and retail demand, fund inflows, sensitivity to underperforming assets AND concerns over global debt.
…well, when you put it that way, is there anything standing in the way of $5,000 gold next year?
Since I’ve covered a lot of the points over the prior weeks, institutional investors and Fed cuts is what I’d like to focus on here.
Institutional investors are known to always run counter to what is going on in the gold market. They have mostly sold during bull runs of the previous decade, making these pro-gold statements from major investment houses all the more remarkable.
Any mention that institutional investors will join retail buyers during a bull run must be given special attention, for two primary reasons:
One is that they buy gold in the billions of dollars. Lately, they’ve been buying almost as much as central banks. That’s a huge source of gold demand from an unexpected source!
Second is their focus on physical gold. In large part due to the Basel III agreement (but also other factors), institutional “gold buying” now doesn’t mean what it did a decade ago. Mostly, they insist on the real stuff, that being physical gold bullion. (It’s nice to see the pros are finally catching on to what I’ve been pounding the table about since 2011.)
Just to drive the point across, State Street says the Fed easing will be a dual tailwind for gold, when in singular form it was already expected to be the dominant driver for its duration.
We’re not only getting rate cuts that will absolutely hammer the dollar, as they are extremely inflationary in nature.
State Street reminds us that the Fed tends to “inject reserves” and “increase liquidity” when it is viewed as needed without wanting to use the term Quantitative Easing.
In other words, money will probably be printed without the knowledge of most.
How much can the dollar take? As many have been forecasting for more than two years, this so-called easing cycle might place weight on that question.
Easing, but for whom, one wonders.
State Street gives only a 20% likelihood of a bearish scenario unfolding in the gold market, if you consider $3,500-$4,000 gold bearish.
The reason in this scenario? Weak retail sales due to high gold prices. Fun times in gold, to be sure.
Silver conspicuously stops just short of $60 in a nonetheless remarkable move
As seen on Yahoo Finance, silver ran off to as high as $59.33 last week before pulling back to $58. [Update: Spot silver finally broke through $60 on December 9.]
It’s becoming my responsibility of sorts to dedicate a part of this weekly coverage to silver, given what we might be seeing transpire in the silver market.
That is, as I have been saying for quite some time, a possible correction of the gold to silver ratio in the form of a level reimagining to $60-$70, if not higher.
But, as before, I am not too thrilled with either the level captured or Yahoo Finance’s coverage of it. What some call “psychological resistance levels” are starting to seem like artificial resistance levels, as far as silver’s price goes. True when silver inexplicably bounced off $50, and so it is true again when it did the same from $60. [Update: As of late on Dec. 10, silver’s price is well over that “psychological resistance level” at $62.44. What changed?]
This brings us to the article, which says that the run happened due to increased demand and the bounce happened due to profit-taking.
I have just recently addressed the profit-taking idea as ridiculous, wondering who is profit-taking in a market that is in a deficit of 200 million ounces a year, especially to the tune of a few dollars an ounce.
The idea that silver’s price relies on demand when the market is, again, in a 200 million ounce a year deficit is also something to be dismissed immediately.
As I have been saying for quite some time, $60 and $70 silver is natural relative to gold price, historic silver price, silver price relative to other commodities, currency debasement, silver demand and much more.
So silver doesn’t “need” anything besides what it already has to run to $60, $70 or even $100. The factors are all there.
We should note that silver doesn’t benefit from the same Basel III regulations. Silver is more thinly traded, as well, and is therefore more volatile than gold (both price increases and decreases). Nonetheless, it’s nice to see silver doing what I think it should be doing. But as has been the case for months, we are left wondering if it can round up the $10 gain.
We were in the exact same scenario as it stopped just short of $50, and we are there now. The good news is that if it continues these moves, by the time we are in the exact same scenario just short of $70, it will have doubled in price and certain things will have to be admitted.
Are gold reserves “property of the people,” or property of the government?
Financial Times is among the many outlets to report that Italy’s government wants to declare its gold reserves “the property of the people.”
Truly, it feels as if every week there is a story involving sovereign gold reserves playing a key role in some kind of control struggle.
We have all the gold reserve repatriations around the world. We have Venezuela’s gold reserve basically deciding which government is in charge. And, of course, the Fort Knox allegations.
Now, Italy wants to move its gold reserves off-the central bank’s balance sheet and say that the Banca d’Italia is merely the custodian of the people’s gold, rather than its owner.
Think “we the people”.
Now, this goes back to 2019, but is gaining traction recently with apparently some new and aggressive moves by the country’s top political parties.
The European Central Bank is opposing it, as are mainstream economists, with some pretty bizarre arguments against it.
Apparently, economists are worrying that the Italian government might sell off some gold to pay off its crushing debt or even raise resources for underfunded social services like health and education. Wouldn’t want that, would we?
There are many other notable points to this interesting story.
Italy’s sovereign gold hoard amounts to 2,452 tons, the third largest official central bank gold reserve in the world. Especially unusual given the nation’s rank as #8 largest global economy. Officially, China has an economy eight times larger than Italy’s, but a smaller gold reserve. Half of the Italian gold reserve is held in the U.S. and is currently being repatriated. (Let’s hope it hasn’t been leased out, hmm?)
The ECB is apparently worried that this could destabilize the eurozone, both on its own and if other nations decide to take similar steps with their gold reserves.
It’s weird to criticize Italy for presumably wanting to liquidate some of its gold reserves for citizen relief when it has been the sick man of the European Union for over a decade. Low productivity, a declining population and massive sovereign debt make Italy an economic basket case, one that could conceivably drag the entire EU down with it.
But the real takeaway to me here is that neither the ECB nor the mainstream economists it employs wants nations to think too much about their gold reserves, or the financial sovereignty they offer.
Wherever you look in the world, central banks are either buying gold, bringing their gold reserves home or claiming their prosperity depends on their gold reserve (most notably Poland).
It’s certainly no coincidence, what with gold hitting consecutive all-time high prices and nearly tripling in just two years. And the higher the price of gold goes, the more important those national gold reserves will become.