The panic for the permabulls in precious metals was palpable.
While some of us old farts were contemplating the sudden parabolic move was reflective of the start of World War III, living like a caveman, and losing access to streaming of our favorite hockey team, the reality turned out to be somewhat short of expectations or fears.
So my friends if my readers are wondering just what the heck is going on, let’s all participate in a quick review of the charts, reality, and why the correction may or may not be over in precious metals and what that means for the short, intermediate, and long term.
I. The Correction
This author will not deny that there’s a permabull behind this keyboard. I have long stated the case for a substantial and prolonged bull market in gold and silver and that the stage was set way back in 2020 with insane behavior of the Federal Reserve and Trump administration in response to very bad cold.
The embedded inflation went from cyclical to systemic, aka, “sticky” and has yet to decline below the 3% annualized rate according to the Atlanta Federal Reserve’s Sticky Inflation Price Index:
The “success” against the war on inflation being declared by this administration and some members of the Federal Reserve is a myth because the new price levels are at a higher plateau. They know the American public and Wall Street algorithms believe in headlines, not reality. Thus a declining rate of change is considered a success whereas as real deflationary action to reduce prices to 2020 levels is the real victory the American middle and lower class needs.
This brings us to the idea of why gold and silver needed a substantial price correction and the excuse provided as a headline trigger to give cover for those traders already punished by the parabolic move to get out and recover some of their losses.
The headlines this past Friday provided the excuse for the selloff as highlighted by this screamer from the NY Post:
Gold and silver plunge after news Trump will nominate Kevin Warsh as Fed chair
Perfect. An alleged rate freezing, balance sheet slashing, anti-inflationista has been nominated to become the next Fed Chair and that’s all it took to scare commodity markets into a correction.
Convenient?
You betcha.
The real reason?
Markets were overextended by 15% to 25% and needed a breather. In extreme bull markets once a short squeeze starts activity like what we witnessed last week was and is to be expected.
II. Gold
The chart below of gold sums up what happened and provides clues as to the future what might happen next:
Unfortunately for goldbugs, the correction barely kissed 20% on an intraday basis and basically was only around 17% overall. What was needed was a nice round number around 23% or so to validate this portion of the correction is over. However, the bounce tonight indicates that the countertrend bounce has some legs and could retrace back close to the $5000 level before all is said and done.
Once the equity correction begins, I expect the US dollar, stocks, bonds, and precious metals to trade in unison with the correlation resulting in at least a 20-25% decline in gold prices.
III. Silver
Silver has behaved much more logically and technically sound with an almost perfect 38% and change Fibonacci Retracement:
The ultimate and way overdue silver squeeze that started at the end of 2025 and got legs after January 8th took off and scorched the shorts, LBMA, and other exchanges attempting to manipulate price levels. It’s not just a physical demand by industry, but retail finally took an interest in buying, just like 1979, near the short term top.
The bounce tonight, like gold prices, has been impressive but it probably is not over. I would expect one more test of the $100 price level to the upside then in concert with gold a retest of the lows, then a prolonged consolidation throughout the summer until a rally begins with the start of the American silly season, aka, elections, in September of this year.
If this consolidation occurs, that base will propel Silver to a substantially higher closing price in December far exceeding $125 per ounce.
IV. Conclusion
These pages predicted the following way, way, way back in December of 2025:
1. Gold finally pauses it’s relentless multiyear advance around $5100 per ounce. Meanwhile, after a 20%+ correction in precious metals, the anti-silver crowd crows as silver briefly breaks down within technical tolerances before skyrocketing north of $100 before the year is over as physical shortages and industrial demand finally begin to impact availability. Other manufacturers follow Samsung’s lead and start bypassing traditional suppliers to buy silver direct from miners or sponsoring re-opening of idled mines.
The correction I predicted happened quicker than the $5100 price level in gold and $100 price level in silver than this author anticipated. With that being said, the concept is essentially correct. I do believe that the price action will remain wild and loose into the next two to three months before a consolidation period begins.
The potential for a historic breakout remains if a major international war or collapse of the US financial system occurs but with the pump monkey Fed and Trump administration, an outright collapse is highly unlikely.
Unfortunately for the MMT theorists in charge now, a deflationary outcome in the second half of this year is potentially in the offing as demand and credit availability for the masses collapses. Pay attention to US Treasury yields as your signpost for that outcome, which is extremely bullish for the precious metals if history is any guide.
