Investor Studios | Eric Strand on volatile gold & silver prices

After a sharp bout of volatility in gold and silver, the question is who's selling, who's buying, and what comes next. AuAg Funds portfolio manager Eric Strand joined Investor Studios’ Market Update to unpack the recent moves, the role of central bank buying, and how a new Fed chair could reshape the inflation and interest-rate outlook.

Valuable insights

• Volatility in metals is often about trader positioning, not the long-term case. There’s a difference between short-term trader (who chased the swings in oil and rotated out of metals, for example) and long-term investors. Sharp moves in precious metals can reflect where the fast money is positioned, rather than any real change in the underlying case.
• Central banks hold gold because it carries no counterparty risk. Gold's enduring appeal to central banks comes down to one feature: unlike bonds or currencies, it has no counterparty. When trust in the financial system or in other nations is strained, an asset that can't be frozen or confiscated may become uniquely valuable as a reserve.
• Higher interest rates haven't always meant a lower gold price. The assumption that rising rates are negative for gold isn’t always the case – as it has risen through recent major rate-hiking cycles. It’s important to note that ‘cost-push inflation’ (rising prices from higher production costs, such as energy) and ‘demand-driven inflation’ (rising prices that come from demand outpacing supply in an overheating economy) may call for very different policy responses.

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