Gold bugs started 2023 with high hopes after the precious metals sector showed impressive relative strength versus paper assets in 2022.
So far, no good.
Gold and silver futures prices got clobbered again last week. The U.S. dollar is back on the rise against other major currencies, interest rates jumped and rattled investors were in the mood to sell paper assets including stocks and metals futures contracts.
The selling was, in part, driven by data which showed higher, and more persistent, price inflation than economists expected.
Gold and silver futures prices aren't exploding higher in response to this inflation. That is one of the primary frustrations for metals investors over the past couple of years.
What matters, at least when it comes to the paper price of gold and silver, is how well the U.S. dollar is faring in the foreign exchange markets and the direction of interest rates.
Why aren't gold and silver working optimally as hedges against all of the price inflation we have seen? Why isn't the prospect of World War III against nuclear armed Russia driving more safe-haven buying? When will metals investors finally be rewarded for being right about debt, deficits and reckless central bank policy?
Behind these questions is one even more basic. Should I add, or even hold, physical bullion if it isn't serving the purpose I bought it for?
