Gold & Silver Soar Again To Finish Out The Week As Political Turmoil Continues...

Friday was another big day in the precious metals market, with both gold and silver logging substantial gains to close out the week.

The gold futures were up $41 to cross back over the $3,700 level to $3,719.

Silver had an even bigger day on a percentage basis, rising $1.24 (2.95%) to $43.36.

In terms of why this is happening, there are plenty of reasons to discuss.

First, on the silver side, it's worth noting how Bob Coleman points out here that for the past few days, there haven’t been any SLV shares available to borrow.

That's the kind of thing that starts to occur more often when you're talking about a market Bloomberg refers to as experiencing a silver scarcity, while one of the banks is putting out reports talking about how we could be 4-7 months away from a depletion of the available silver inventory.

Of course, it's not just silver that's rallying though, and there are plenty of reasons we're seeing this move in the gold market too. And I do think we're also to the point where some of the gold momentum is now bringing new investors into silver as well.

But think about what National Bank of Poland Governor Adam Glapiński said here:

When he announced plans to further expand Poland’s gold reserves last week, Glapiński called gold “the only safe investment for state reserves,” in these “difficult times of global turmoil and the search for a new financial order.”

Those are the words of one of the decision makers of one of the largest gold market buyers in recent years. And if he's concerned about difficult times and global turmoil, how do you think he and other large investment managers are feeling given some of the following recent events?

I mentioned yesterday that it's been an active stretch for U.S. Treasury Secretary Scott Bessent, which began two weeks ago when he threatened to punch Federal Housing Finance Agency Director Bill Pulte in the face at a cocktail party.

But amid the cocktail-hour din, Bessent lashed out at Pulte in an expletive-laden diatribe. The Treasury secretary had heard from several people that the Federal Housing Finance Agency director had been badmouthing him to Trump, a person close to him said. He wasn’t about to engage in chit-chat as if nothing was amiss.

“Why the fuck are you talking to the president about me? Fuck you,” Bessent told Pulte. “I’m gonna punch you in your fucking face.”

Of course I can only imagine what the inner dynamics are like behind the scenes in some of the higher levels of government. But obviously this isn't the best indication of how things are going behind closed doors. And it probably wasn't the best look that Bessent followed that up by referencing the Aaron Burr-Alexander Hamilton duel from 1804 that left Hamilton dead.

“Treasury secretaries dating back to Alexander Hamilton have a history of dueling,” Bessent joked Tuesday to CNBC’s “Squawk Box.” “I think with the President’s team, it turned out a little better for the Treasury’s side this time.”

I suppose we can all just hope that this current feud works out slightly better.

Although in perhaps far more serious news, the situation between Russia and the West continues to churn out headlines that one can only hope are just noise, but carry serious ramifications if they are not.

Treasury Secretary Scott Bessent signaled Sunday that the U.S. is open to partnering with European countries to impose more sanctions on countries that buy Russian oil in an attempt to “collapse” the Russian economy and brushed aside concerns that the U.S. was entering a recession.

“We are prepared to increase pressure on Russia, but we need our European partners to follow us,” Bessent said on NBC News’ “Meet the Press.”

“We are in a race now between how long can the Ukrainian military hold up versus how long can the Russian economy hold up,” Bessent added. “And if the U.S. and the [European Union] can come in, do more sanctions, secondary tariffs on the countries that buy Russian oil, the Russian economy will be in total collapse, and that will bring [Russian] President [Vladimir] Putin to the table.”

Remember, this is with Trump in office, who seemed to have a somewhat better relationship with Putin, and who talked about how if he were elected president, he would end the war within a day.

He later said he was just joking about that, but in the end, things have not progressed in a good direction. And even if you're of the school of thought to say that Trump will be out of office in a few years, and maybe the next president will have a better relationship, keep in mind that things haven't been any less hostile in previous administrations either.

I also mentioned yesterday how Adam Glapiński of the National Bank of Poland said:

"Gold will retain its value even when someone cuts off the power to the global financial system, destroying traditional assets based on electronic accounting records.

Of course, we do not assume that this will happen. But as the saying goes – forewarned is always insured.

This means that in addition to the fact that if we reach the point where the tension between Russia and the West escalates even further, that it would be the opposite of ideal from a perspective of human life on the planet, it's probably not going to make Glapiński change his mind and start buying less gold. And I’m confident that he would not be alone, which highlights how further sanctions would only accelerate the move into gold.

But our last note for this week is that in addition to everything else Bessent had going on, he also recently published an op-ed in the Wall Street Journal. And let's just say he didn't have the kindest view of the Federal Reserve and the monetary ideology that lies at the heart of the decisions that it has made.

Consider the following quotes from Bessent's op-ed:

• The Fed’s failure to anticipate the inflation surge stemmed from flawed models.

• The Fed’s erroneous models of the economy also relied on a fundamentally false and self-reinforcing assumption: that inflation is primarily determined by inflation expectations.

• The FOMC has consistently overestimated its own power in stimulating real growth and in controlling inflation.

• In addition to its misguided reliance on flawed models, the Fed’s unconventional monetary tools disrupted an essential source of feedback: the financial markets.

Heck, Bessent even managed to compare the Fed to Covid.

• As we saw during the Covid pandemic, when lab-created experiments escape their confines, they can wreak havoc in the real world. Once released, they cannot easily be put back into the containment zone. The “extraordinary” monetary policy tools unleashed after the 2008 financial crisis have similarly transformed the U.S. Federal Reserve’s policy regime, with unpredictable consequences.

Now I'm sure if you asked some of the Federal Reserve officials, they would have a different opinion, and would probably not be fond of Bessent's actions as Treasury Secretary. But wherever you want to place the accountability for what's led us to this situation, where the government is bankrupt, and even up to now the only plan seems to be further monetization, either the Treasury Secretary has no idea what he's talking about, or we're following a Federal Reserve, that according to him, is a complete disaster. And when you add all of that together, you get the gold futures finishing above $3,700 to end the week, while the silver futures finish above $43.

Are there things going on in the world that seem less than ideal in many ways? Perhaps. But maybe part of the purpose of our journey here is to figure out how to navigate what we can, and adjust as life continues on.

The fact that you are studying the gold and silver markets is somewhat of a testament to how that that's exactly what you're doing. And I just hope this latest portion of this historic precious metals rally leaves you with a smile on your face that you can enjoy all weekend.


Sincerely,
Chris Marcus