Transcription
Depending on your perspective, you might say gold and silver have been in a little bit of a slump, performing poorly. But we have to ask ourselves, what are we comparing that to? Let's start by defining good and bad for metals prices. If you're buying gold or silver and price is consolidating, it's pulling back through some kind of healthy correction, that is poor performance resulting in a discount. So, it's good for your cost average. It's good for your accumulation. But if you're looking at price performance and you're extrapolating the current price movement into some kind of wider expectation of where things are going, it simply looks bad. Especially if you compare that to how things looked in January when everything looked good. It looked really good. Maybe even the second best that gold and silver have ever looked again in terms of price.
Now, what flipped this? Well, we have two major factors that we need to pay attention to right now. But really, one event could flip the performance of gold and silver from bad, where we're at right now, back to good. And I think it could happen a lot faster than most people would like. And we're going to get into all of that in a minute, but first a quick shout out to channel sponsor Summit Metals. If you're looking for gold and silver, they've got you covered. If you're looking to sell gold and silver, they can help you there, too. summit metals.com.
So, the first factor that we need to pay attention to is oil. I know oil is not very sexy, but right now, oil is controlling the market. We've seen very clearly that when oil moves higher, the market starts pricing in higher inflation. Higher inflation pushes bond yields higher. Higher yields strengthen the dollar and gold and silver prices move lower. Well, right now the price of oil is above $100. In January, it was around 60.
Now, the second factor that we need to pay attention to is the bond market. And this is a weird one because there's a point where higher bond yields actually stop looking strong and start looking dangerous. And we might be close to that point. Now, right now, the market's still interpreting higher yields as being bad for gold and silver. But here's where that gets weird. Now, if you think about the United States being more than $40 trillion in debt and counting, higher yields mean more interest expense. Now, servicing that debt becomes a bigger and bigger problem. So buying into the bond market because of the higher yield means buying into US debt based on the very thing that's actually stressing the entire system. So you're literally buying on a warning signal. Why am I showing Canadian gold talking about US debt? I don't know.
But the event is a ceasefire with Iran. Not because war is good or bad for gold and silver in this case. We're actually seeing the opposite of what most expected. But because right now high oil prices have just steamrolled the entire interpretation of the market. Forget that there's a war and there's instability. High oil prices are keeping inflation expectations high. They're keeping yields high. They're keeping rate cut hopes low and that keeps pressure on gold and silver. So a ceasefire or some kind of deescalation doesn't just impact oil. It actually changes the entire environment for gold and silver.
So let's put some numbers to this. So, this has real-world meaning. We're at the point where 2026 price forecasts are really out the window in my opinion. $6,000. That might have seemed like a pretty easy prediction coming off Gold's run in 2025. And really, January didn't flash any signs of slowing down. The early days of the conflict with Iran didn't really change that idea. And if you were paying attention to analysts, they were still seeing that conflict as a short-term campaign, and they were sticking to their big year-end price predictions. But as the conflict has rolled on, the high price of oil has had time to filter out to all parts of the economy, and the market is now less focused on the war itself and more on the damage it's done to the economy. Well, now we're seeing higher inflation numbers showing up in recent reports. So, even with a potential regime change at the Fed, with Kevin Worsh vowing to rely less on headline inflation numbers, hopes for rate cuts have been pushed out. And that's really important because the bullish forecasts for gold were all built around those cuts. And on top of the basic inflationary effect, there are other factors in play we haven't even talked about, like central banks selling gold reserves to offset high energy costs. Jeff Curry, the former head of commodities research at Goldman Sachs, recently brought this up, pointing to big gold buyers like Turkey flipping to sell their gold to pay for fuel. Now, these aren't reactions to the initial conflict. They're reactions to the drawn-out impact of higher prices.
So, this has the potential to spiral. We know how this works. High oil prices create higher inflation expectations. Higher inflation expectations push out rate cuts. That pushes yields higher. And the longer that continues, the greater the chance that the bond market starts becoming part of the problem, too. Now, this is why the short-term outlook for gold and silver has gotten a little shaky. And it's why the bigger run has been pushed out. $5,400 an ounce has become a lot more practical as a prediction for end-of-year gold price than 6,000. Not because the long-term case broke down, but because the bullish wave that we rode into 2026 just changed. And it changed fast. The unexpected cost from $100 oil didn't just slow the gold rally down, it completely changed the entire outlook. And really, silver got hit even harder because it was already trying to recover from a 40% drop.
Now, I wouldn't be surprised if we start seeing analyst forecasts moving lower, too, because a lot of the big $6,000 plus forecasts for gold were made when the market still expected a much easier rate environment for the second half of 2026. Now, banks like JP Morgan, UBS, Goldman Sachs, they were all building those bullish cases around lower rates, and we just haven't seen that. Like I said, silver is having an even bigger issue getting going again because silver doesn't just need rate cuts. It also needs a stronger economic environment. And all of that is kind of working against it. What we've seen is oil going from $60 to over 100 and rate cut expectations have now been pushed into 2027.
So I've said a few things. I've said gold and silver are a little bit shaky because the thing that they're looking for, lower rates, isn't happening. And to get there, we need one thing to happen first. That's obviously a ceasefire. But because of how long the conflict has gone on, it's more than just the ceasefire itself. It's also how quickly we get it. If it happens soon, there's a good chance that oil comes back down, inflation expectations cool off, rate cut expectations move forward again. And really, at that point, gold and silver turn around, and they could even turn around fast. But if this drags out and the economic damage starts compounding, then this stops being a short-term oil shock, stops being a quick pullback in price for gold and silver, and it turns into a much bigger problem.
Now, I was buying on the pullback pretty early on. I've made a few purchases since, including a one-tenth ounce American gold eagle because I agree this wallet really should be full. Now, I think it's safe to say that if you think gold and silver are acting strange right now, it could get a lot stranger. If this conflict continues, there's going to be a point where the market isn't focused on the war at all because it's too focused on its cost. And like I said, I don't think the long-term case for gold and silver has really changed. But short-term, both of the metals are still waiting for a win.
So, let's call it good there. Let us know if you're buying on the pullback, if you've already bought, maybe you're waiting for a bigger pullback, or you're just hoping for a little bit more time. Let us know. And then, while you're in the comments, be sure to hit that like button if you found any of this interesting. Be sure you're subscribed with notifications turned on if you want to hear more on the topic. And if you're still here, thanks again for watching. I always appreciate your time. Take care.