Podcast: Play in new window
Metals markets took another step downwards this week, with gold momentarily dropping towards its 200-day moving average before recovering. Despite the decline in prices, precious metals remain in line with long-term bullish tendencies.
Let’s take a look at where prices stand as of Wednesday, March 25:
The price of gold is down 6.5%, currently sitting at $4,532.
The price of silver is down 5.5%, sitting at $71.80.
Platinum is down 5% sitting at $1,912.
Palladium is down 5%, sitting at $1,397.
Taking a look over at the paper markets…
The S&P 500 is down 0.7% to 6,591.
The US Dollar Index is flat, though trending upward, sitting at 99.65 from a week earlier.
Gold and Silver Shakeout, but Trend Still Bullish
Gold dropped about 10% intraday on Monday, briefly tagging its 200‑day moving average near $4,100 in Asian/London trading, then rebounded roughly 9.5% off the low before the U.S. day was underway. Silver saw an even more extreme move, falling about 30% in just a few days to just under $62, then snapping back about 16% into the low‑$70s. Both metals remain well above their 200‑day moving averages, in stark contrast to equities, where the S&P is now using its 200‑day as overhead resistance instead of support.
Much of this “air pocket” looks like pre‑positioned, algorithmic and institutional trading—sell‑offs driven down to major technical levels (Fibonacci retracements and the 200‑day), where large standing buy orders were waiting. That is exactly what you want to see in a bull market correction: aggressive buyers stepping in at known support, not a vacuum of demand.
Dow/Gold Ratio Sends a Stark Warning
While metals are correcting from all‑time highs, U.S. equities are quietly shifting from uptrend to potential topping pattern. The S&P recently broke below its 200‑day moving average and is now “bumping its head” on that line from underneath, suggesting the long‑running uptrend is losing momentum.
More telling for precious metals investors is the Dow/Gold ratio: it has already fallen to about 9:1 even though equities are still near their highs, not in a classic bear‑market bottom. Historically, major stock market lows—The Great Depression, 1980, dot‑com bust, 2008, COVID—occurred with the ratio in single digits, and full secular reversals have often driven it toward 3:1. That implies we are much closer to the beginning than the end of this cycle in favor of gold versus stocks; for those running ratio trades, this argues strongly for holding or adding to metals rather than rotating into equities.
Credit Stress and Liquidity Risk
Credit markets are flashing warning lights. Investors have doubled their use of vehicles that profit when credit weakens over the past year; credit spreads and credit default swaps are now at their widest since April of last year, when tariff worries and risk aversion last drove a strong gold run. Some large credit and private‑equity funds—including big household names—are already limiting or freezing redemptions, in some cases to as little as 5% of assets or none at all, echoing the gating seen in money market funds during the 2008 crisis.
This matters because when liquidity crises hit, investors first sell what is most liquid: gold, silver, and the U.S. dollar. That’s why sharp equity breaks can drag metals down initially, even in a gold bull market. But the longer the stress lasts, the more likely we see bond yields rise, the Fed steps in as a buyer of last resort via yield‑curve control, and aggressive balance‑sheet expansion.
Oil Shock and Why “War Spending” is Gold‑Positive
The Iranian conflict and the associated spike in oil prices are a classic stagflation setup: rising input and transport costs into a slowing economy and over‑stretched consumers. Oil has moved roughly 50% above its mean—historically, every such move has coincided with or preceded recession. Natural gas prices in Asia and the Middle East have surged over 100%, versus a low‑single‑digit rise in the U.S., pointing to a deeper global demand shock abroad that will inevitably feed back into U.S. growth.
The Fed has inched up its GDP outlook on paper (from 2.3% to 2.4%) and calls the economy “on solid pace.” But rising oil, sticky inflation re‑accelerating from February, an already weak labor backdrop, and $39 trillion of U.S. federal debt (roughly equal to the combined GDP of China, Germany, Japan, India, and the U.K.) paint a different picture. As fundamentals deteriorate, prolonged conflict becomes politically “useful” both as stimulus and distraction—yet historically, war plus large deficits plus aggressive central bank support have been a powerful cocktail for much higher gold prices.
Stair‑Step Buys and Patience
Many forecasters who once called for $6,000 gold by 2026 have quietly revised to $5,000, even though spot prices have already spiked through $5,000 this year. We still see $6,000 per ounce gold as plausible given the alignment of deficits, central bank buying, monetary policy, and geopolitical risk.
Our suggested playbook in this environment is:
- Use stair‑step entries: place layered buy levels at key Fibonacci and moving‑average supports (like the 200‑day and major retracement bands).
- Be willing, tactically, to “sell spikes and buy dips” during this volatility phase while the longer‑term uptrend remains intact.
- Expect that if equities roll over hard, gold and silver may be pulled lower temporarily; that’s exactly when the Dow/Gold ratio can compress dramatically (potentially towards 3:1) and when ratio swaps from gold into silver or from equities into metals can be most rewarding.
Plan Your Next Move
How will you take advantage of this precious metals correction? The team at McAlvany Precious Metals has a collective 75 years experience investing in the precious metals market. We are happy to speak with you about your goals on a no-obligation, complimentary consultation. Reach out to us at 800-525-9556.
