Gold, Silver and the T.I.N.A. Effect
During last week’s trade, the precious metals complex continued its impressive start to 2025.
Despite mixed economic data points and increasing threats of tariffs from the US administration, physical Gold prices extended their winning streak to eight weeks, while Silver prices have rallied during five of the last six weeks.
The US data reports this week are unlikely to alter expectations for central bank policy and may pale in significance compared to the US tariffs that may be implemented as soon as next month.
It’s now well appreciated that the stronger than expected rise in the US CPI and PPI will not be echoed in the PCE deflator; the measure of price inflation that the US FED explicitly targets.
Gold priced in USD reached a new all-time high of $2954.00 and settled at $2935 for a 1.9% gain for the week. The price of $2935.00 represents the highest weekly closing price in history.
Gold denominated in AUD traded with a firmer bias beneath the all-time high of $4691.00 to finish the week 1.8% higher at $4614.00.
Physical Silver prices underperformed Gold last week, but only fractionally.
USD-based Silver saw wide intraday price swings around the technically significant $32.75 area and closed the week 1.0% higher and above the 30-day moving average at $32.44.
After tagging the all-time high of $52.60 on February 14th, Silver priced in AUD traded in a broad consolidation pattern with an upward bias to settle the week just shy of 1.0% higher at $51.00.
The Gold versus Silver ratio closed the week slightly higher at 90.26, which is unchanged for the year, so far.
And while the daily chart pattern for the Gold vs Silver ratio looks directionally neutral, it’s our opinion that the fundamental demand dynamic will see physical Silver outperform Gold as the year progresses.
We have noticed that some of the long-held correlations which have driven Gold and Silver prices in the past have not had as much impact this year.
We have seen weeks when the USD firmed against G-10 currency pairs and Gold and Silver have still traded higher. There have been periods when interest rates drifted higher, and the precious metals also traded higher.
Last week, Wall Street and other major stocks indexes were under pressure prompting a nascent “risk off” pattern and Gold and Silver still carved out gains.
The fact that the precious metals complex has rallied against the backdrop of a stronger USD, higher interest rates and falling stock indexes could be described as the T.I.N.A. effect.
Within the financial industry lexicon, T.I.N.A. is an acronym for There Is No Alternative.
As illustrated on Chart 1, during 2024 Gold and Silver were up 33.7% and 42.4%, respectively.
There’s a growing number of investors and market commentators who think that Wall Street is overvalued.
This isn’t too surprising, given that several indicators have suggested the market is either overvalued or the economy could soon tip into a tariff-driven recession.
One of those indicators is the CAPE ratio, which is an acronym for Cyclically Adjusted Price Earnings ratio.
The CAPE ratio compares the price of the S&P 500 to its 10-year average inflation-adjusted earnings to smooth out irregularities.
As you can see on Chart 2, the CAPE ratio is trading above its five-year average and near highs seen right before the S&P 500 sold off intensely in 2022.
In all fairness, it’s rare to see the cause of a recession or market meltdown repeat itself identically.
That doesn’t mean there won’t be similarities, but they’re often triggered differently and hard to detect before they happen. History can offer clues that help investors prepare for the future, but history doesn’t usually repeat itself exactly.
Global equity markets are in a very different place today.
Along with many other developed nations, the US Congress flooded the economy with cash following the onset of the pandemic in 2020, and the result now is that a handful of technology companies currently consume about a 40% of the S&P 500 total capitalization.
This lack of breadth in a market environment that could be upended by a tariff-driven trade war, or a systemic banking crisis seems like a lot of risk for investors looking to protect and growth their wealth.
That said, physical Gold and Silver have been the benchmark for monetary soundness and security for centuries.
Considering that Gold and Silver are both more than 12% higher year to date, now is an excellent time to review your portfolio and consider making Gold and Silver the cornerstone assets of your long-term wealth creation strategy.
Chart 3 Gold AUD
Chart 4 Silver AUD
This publication has been prepared for the GBA Group Companies. It is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. Any prices, quotes or statistics included have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness.