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Historic Shift in Gold’s Fortunes Ahead?
The new year has burst onto the scene with remarkable strength in precious metals. According to 53-year market veteran James Turk, gold now has a jaw-dropping price target of $10,902.
While this figure alone might command attention, the deeper story is the historic and unprecedented squeeze, a phenomenon never seen before, unfolding behind the scenes in the gold market.
Why Shorts Are Struggling to Deliver
Tariffs may be grabbing headlines, but they do not fully explain the relentless delay in the physical delivery of gold and silver.
In normal market conditions, shorts swiftly deliver metal once First Notice Day arrives, removing the burden of storage costs and freeing up cash to deploy elsewhere. However, these deliveries are being postponed by weeks, an anomaly that signals a deeper problem and should raise concerns about the market conditions.
The Fractional Reserve Reality
There are more promises to deliver gold than the available metal at current prices. Some analysts argue there may be more claims on gold than the total amount of existing physical supply, and silver is the same. This mismatch is forcing shorts to scramble for metal in an environment where borrowing physical gold has become more expensive and fraught with counterparty risk.
Shallow Pullbacks and Soaring Prices
Despite gold’s dramatic climb from $1,800 to $2,900, the pullbacks, or temporary price declines, have been unusually shallow. The shortage of available metal, due to the unprecedented squeeze in the gold market, is propping up the price, and a brief shakeout late last year did little to slow gold’s ascent. Many shorts were caught off guard by the lack of willing sellers and the steadfast holders of physical metal who anticipate significantly higher prices.
Silver’s Potential for a Bigger Blast-Off
With a much smaller and tighter physical market, silver may see an even steeper rise than gold. Its launchpad appears nearly complete, and a decisive close above $32 could ignite a powerful move higher.
James Turk notes that silver has been building momentum and is poised for an explosive breakout that not only mirrors but possibly exceeds, gold’s ongoing surge, giving investors a reason to be excited about their silver investments.
The Strategy for Accumulating Metal
Those who have steadily acquired physical gold and silver through dollar-cost averaging, a strategy of buying a fixed dollar amount of a particular investment on a regular schedule, may want to keep following that same approach.
Both metals remain undervalued, especially considering the possibility that central banks have overstated their bullion holdings. According to Turk’s calculations, gold would need to rise to $10,902 to match historical valuations tied to central bank currency reserves.
A Final Word on Undervaluation
Gold was deemed overvalued in previous eras, such as 1974 and 1980, but it is currently in the opposite position. In fact, it might be even more undervalued than it appears if central banks hold less gold than they claim.
As confidence in paper currencies and other promises falters, the flight to physical gold continues to gather momentum, setting the stage for prices that could surpass even the most bullish targets.
