Many investors are getting increasingly frustrated by the way the prices of gold and silver are struggling. Precious metals have been battered as benchmark lending rates rise around the world and increase the opportunity cost of owning these metals. However, Bawden Capital’s founder Jen Bawden says this market correction offers a unique opportunity that only appears once in a very long time.
She says that while many investors and analysts are calling the price collapse of silver and gold a major wipeout, experts see this situation as a perfect setup for them to add onto their holdings. What some are seeing as a massacre is exactly what others have been waiting to take advantage of.
Bawden explains that the current correction has been caused by several factors, including the liquidity crunch caused by soaring crude oil prices, a selloff in stock markets, and rising interest rates. Under such conditions, gold and silver are easy to sell to address liquidity needs, which is what is happening.
She draws parallels between what is happening now and what happened in 2020 when the Covid-19 pandemic started, and in 2008 during the global financial crisis. In both cases, precious metal prices fell sharply as investors and central banks scrambled to mobilize cash to meet their needs during those crises.
Once the crises were over, precious metals rallied rapidly on each of those occasions. Bawden says that is the exact setup that is happening right now and savvy investors are positioning themselves to benefit from the inevitable upleg in precious metal prices once monetary policy is eased and energy markets return to normalcy.
She cautions that while gold and silver have experienced major price retreats, it may be premature to say that a bottom has been reached. Prices could retreat further before a firm support level is reached and the climb begins.
The current situation bucks the expectation that precious metals should be having a good time given that there is active conflict in the Middle East and inflation is sticky. In reality, gold and silver are struggling because those geopolitical conditions have created a massive need for dollars as central banks race to keep crucial imports like oil flowing into their countries.
Given that markets are concerned about macroeconomic conditions like growing fiscal deficits and the high cost of servicing national debt, precious metals are primed to soar as investors look to protect their portfolios from currency depreciation and other risks.
These conditions give savvy investors and companies like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) a measure of confidence that the current correction will sooner or later reverse in a significant way.
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