➡ The article discusses the impact of the ongoing Iran war on the prices of gold and silver. Despite the war and the closure of the Strait of Hormuz, gold and silver prices have been fluctuating, causing frustration among investors. The author suggests that the uncertainty of the war’s duration and the influence of banks on the market could be contributing to the unstable prices. The article also points out that historically, gold prices have sometimes dropped during wars, indicating that other factors may also be at play.
➡ Gold prices fluctuated in 2022 due to various factors, including war and central banks buying gold. Despite a drop in prices, gold futures remain at $51.24. Silver prices also experienced a drop but are currently at $84.87. First Majestic Silver, a notable company, reported promising drill results from their Jarrett Canyon project, boosting their confidence in the area’s potential.

Now, we are seeing oil tankers get blown up in the Strait of Hormuz as the Iran war rages. Iran’s new supreme leader says the Strait of Hormuz must remain closed while we’re hearing reports of mines being placed in the strait, and yet meanwhile gold and silver investors are feeling increasingly frustrated where here’s where the war broke out and the price of gold is down since then. Same thing here with silver and if you’re wondering why, well that’s what we’re going to cover in today’s show. Well hello there my friends, Chris Marcus here with you for Arcadia Economics, and if you’ve been sitting there looking at the gold and silver pricing and wondering why, especially on a day like today, where many of you woke up to seeing this oil tanker on fire, and it’s really a stunning visual, obviously as you can see, followed today by the news that the Strait of Hormuz is going to remain closed as a tool to pressure the enemy.

I’ve been hearing reports about mines being laid in the Strait of Hormuz that even if the war ended would take a month or so to get them out, yet we look back here at the gold and silver pricing, which had been going a lot better earlier this morning. Here’s today’s gold chart, and you can see right about 915 a.m. Eastern gold was just under 5200 bucks, has dropped quite a bit since then. Here you can see a very similar picture in silver where we saw quite a rally since last night.

Here we are down at 1 a.m. Eastern, 84.50, got all the way up to 87.50, so looking like a great start to the day, and then the silver price has sold off $2. Perhaps when things seem to be going about as far opposite from a positive direction as you could imagine, which really raises the question if you go back to the one month chart here, and you see here’s when the war broke out, and here was that Sunday night open. We see gold at 5400, falls down, has been pretty choppy since then.

Similar pattern on the one month chart with silver. Here we see it got up over $96 on that Sunday night, took quite a dive as low as 78, and has been floating for the better part of the past two weeks in the $80 range, and with what we see going on, why haven’t they moved more? Well if that’s the question you have, well you’re in the right place because we are going to go through a couple of the reasons. Some you may or may not like, I can’t promise how you’ll feel about them, but I do think you’ll be glad that you heard them, and at least we’ll have some context.

Maybe some you’ll agree with, some not, although they’re gonna be based on data, so I do think these will be helpful, and that you’ll be glad you’ve watched this. So first off is the fact that I know we have this efficient market hypothesis that gets passed around in business school, where everybody gets the same information, processes it at the same time, and in the same way, and there’s no secrets. Well if you’re actually on planet Earth and see how things work on Wall Street today, you know that couldn’t be farther from the truth.

So on one hand, you have the world trying to figure out what’s going on, and then here we have in this Time Magazine report, which you could say is not accurate, or is AI, but just in terms of a known source that is sharing information. How long could the war last? Here they mentioned Trump has offered conflicting timelines on how long the conflict will take to resolve. Early on February 28th, after the initial strikes, he said he had the choice to go long, or ended in two to three days. Day after the first salvo, Trump said the campaign would take about four weeks.

A few nights ago, he said it was going to end very soon, and yet here today, at least based on what we’re hearing from CNBC, doesn’t seem like Iran is planning to back down anytime soon, and perhaps that is really the most clear evidence to support that thesis. So when you have the markets reacting, on one hand, nobody knows what’s going to happen. I know, especially with gold and silver, and I’m partly guilty for this, especially when in early days of this show, we focused on the things the banks did, which have been well documented at some point.

It’s like, alright, you know what happens. That’s why I don’t focus on it as much anymore. Although, as the years have passed by, do I think even the banks know exactly what’s going to happen to the price, or have a full control? No. Do I think they influence it? Do I think some of these sharp sell-offs are a little sketchy, and probably, if everything was in full view, might not pass a courtroom jury. I think that’s very well possible. I do think it happens less than it used to in the years from about 2011 until 2020, when JP Morgan did end up paying the $920 million fine for manipulating the markets.

Yet also, I think just that the idea that they know exactly what’s going to happen, or can it move it anywhere at any given time, I don’t think that’s fully accurate either. And here, nobody even knows how long this war is going to last by the day. It’s kind of similar to what we saw with the tariffs last year. Nobody knows. So you have a lot of people pricing things when information is changing by the hour, especially in the AI era. We don’t even know what’s real, what’s being put out there falsely, and when you factor that in, that at least somewhat explains some of the choppy trading that you see in both gold and silver, whereas the headlines change by the day, seeing big moves up and down, yet largely staying in place.

The other thing I would suggest is that a couple nights ago, we had Trump say the war is going to end really soon, and then that was before I think it was Tuesday when we saw the big rally, and then we saw an escalation from Iran the following day, and the medals sold off. So it’s almost like in the past few days, we’ve seen anything that heads towards resolution of the war, medals have rallied, and the inverse medals have sold off, which intuitively would be the opposite of what you would think given that war introduces more geopolitical uncertainty, more government spending, more money printing, and my guess is that over a longer term, if this war does continue to drag out, that will be factored in.

Although also at the same time, I think it’s only fair to note that, at least in my opinion, gold’s gonna do what gold is gonna do regardless of whether this war ends today or five years from now. That could accelerate the path of it, and we already see China and Russia siding with Iran here, so should it impact the price? I think you could make a case that it should, yet what we’re seeing is that also on days where it appears as if perhaps more towards the side of a resolution, it’s been going up.

Obviously we did have that big dip down, so we’re lower than that Sunday night open from two weeks ago, but we are seeing trading in both directions. Although also it’s worth pointing out, this isn’t a new phenomenon, and I point back to the New Market Wizards book by Jack Schwager. Fantastic book, which I might add was the template for the big silver short book I put out a couple of years ago, and I think the second edition is almost ready. I love this one because in addition, here’s Jeff Yass, who was the founder of Susquehanna, where it was an option trader, so certainly found that one interesting.

Although more important to today’s topic is this comment from Randy McKay, where he says, on the eve of the US air war against Iraq, gold was trading near the crucial $400 level. The night our plane started the attack, gold went from $397 to $410 in the Far East markets, and closed the evenings at about $390, so already lower than the $397 it had started at. Thus gold had broken through the critical $400 level, starting the rally that everyone expected, but it finished the evening significantly lower, despite the fact that the US had just entered the war.

Next morning the markets opened very sharply lower, and it continued to move down in the following months. So we see that happening there, and we can also go back to 2022, which you can see here, and February 24th is when Russia goes into Ukraine. There was a spike up, but then you can see the gold price selling off throughout the summer as the Federal Reserve was raising interest rates 75 basis points at a time, which points out two things. A, that even when large wars break out, whether it intuitively makes sense or not, sometimes the gold price does sell off.

And B, that sometimes there are other factors. So maybe gold was about to sell off $400 from the Sunday night open, but it sold off less than that because the war had occurred. So there are always a lot of different factors at play. You never know who was moving in order, and what we saw in 2022, that was also at the same time that the central banks started setting records for the amount of gold purchased. I mean here you can see that big jump up there to 2022, yet what was happening with the price, it pretty much got clobbered for the rest of the year, although there was a rebound late in the year.

And look at that, back in the days below $2,000 an ounce, seems like another lifetime at this point. And then here’s perhaps the perfect example of that, because the Polish Central Bank, that had been one of the biggest gold buyers recently, they’re weighing whether to sell gold to fund their defense. So you have a lot of different factors that go into this, yet at the end of the day, where are we right now? We still have the gold futures at $51.24, even though they’re down $55 on the day, while the silver price, even though it’s lost its gains, down about 70 cents now at $84.87.

And just to put that in context, if we go down to the one-year chart here, and look where we were this time last year, low of $32.21, so factor that in and realize things do not go in a straight line, and the correlation between war and gold and silver prices is not going to be 100%. You could say that maybe it should be, or you’d like it to be, I would just suggest don’t necessarily expect it to be. They’re going to be volatile markets, although again, I think if you think, man, where do I see this 10 years from now and start there, then it makes even the near-term decisions a little bit easier.

And perhaps the last thing that I will mention is that one company that I know a lot of people keep an eye on, First Majestic Silver, they did have news out yesterday regarding their Jarrett Canyon project, where they had drill results that Keith Neumeier says reaffirms their confidence in the potential of the district, and with the improved metal price environment, their team has expanded its focus to test both underground targets, as well as open pit, and that’s yielded encouraging results. Program was designed to explore for new gold mineralized zones, and assess the continuity of the known mineralization, and in terms of the key highlights, which include drill results at javelin of 8.76 grams per ton over 15.2 meters, 7.44 grams per ton over 15.7 meters, and at Mahala they intersected broad disseminated mineralization of 2.75 grams per ton over 47.2 meters, 3.44 grams per ton over 24.4 meters, and 3.17 grams per ton over 10.7 meters.

And I actually have someone from First Majestic, who I think will be joining me to talk about how they had realized silver price in their fourth quarter earnings that was significantly higher than the average silver price, and we will certainly dig into more about Jarrett Canyon and where this leaves them on that one. Here is where the fourth quarter begins. So you had a silver price beginning of October, under 50 bucks, and then makes it up to 71 by the end of the fourth quarter. That whole 120 spike and everything we’ve seen since then, that’s all in the first quarter.

So First Majestic, they had blowout earnings last quarter. It will be fun to see what they come back with. And even though First Majestic has sold off a little bit on the pullback over the past two weeks, quite a chart. There you can see last year it was $6.70, currently up to $24.58. And just in case you missed it, even while we’ve seen the silver price come down a bit, there’s been a lot of silver on the move. And to find out more about what’s going on there, just click on the video that’s coming your way now!
[tr:trw].

See more of Arcadia Economics on their Public Channel and the MPN Arcadia Economics channel.