Gold and Silver Prices Under Scrutiny Amid Volatility
As gold and silver prices continue to fall, many are questioning their status as safe havens. Rob Isbitts, a semi-retired CIO and former fiduciary investment advisor, argues that these precious metals are not as reliable as they seem. In fact, he believes that owning funds or call options in gold and silver can be risky.
According to Barchart data, the long-term charts for GLD and SLV look 'troublesome'. The 20-month moving average has not collapsed yet, but the trend is downward. Isbitts notes that this is a result of industrial demand collapsing when economic growth slows or manufacturing contracts.
Silver's price volatility rivals that of speculative tech stocks, with drawdowns reaching up to 35% during market pullbacks. Meanwhile, gold bugs promote silver as 'gold on steroids', but the market treats it more like an industrial base metal, with over 50% of global demand coming from electronics, solar panels, and manufacturing.
Isbitts also warns that precious metals do not automatically surge when stock markets crash. In fact, they often plunge in tandem with equities during a liquidity panic, as institutional investors face margin calls on their leveraged positions. To raise cash quickly, they sell whatever is liquid and easily mark-to-market, including GLD and SLV.