Will History Repeat?

Gold and silver prices have plunged over the past two weeks. Virtually all of the price suppression occurred through trading in the paper derivatives markets, not by the purchases and sales of physical metals. While several people are wondering what has happened, perhaps the more important question is will last year’s pattern repeat?

In March 2020, when it became clear that the first of the COVID-19 coronavirus bailout bills would become law, the U.S. Dollar Index soared. It reached its highest level since August 2003 on March 19, 2020, when it settled at 103.605. That day, the price of gold reached its lowest COMEX close of the year at $1,470.75. Silver had its lowest COMEX close of 2020 on March 18 at $11.74.

Thereafter, the U.S. Dollar Index gradually fell, while gold and silver prices rose. By the time the U.S. Dollar Index had fallen by 5 percent on May 28, 2020, the price of gold had jumped 16.5 percent from its March 19 low. Silver was up 57.1 percent from its March 18 low.

By the time the U.S. Dollar Index had fallen by 10 percent on July 30, 2020, the price of gold had climbed 32.1 percent from its March 19 low. The price of silver that day closed up 98.8 percent from its March 18 low.

As I write this column on March 8, 2021, we are on the brink of another multi-trillion-dollar COVID-19 coronavirus bailout bill becoming law. As I type this, the U.S. Dollar Index is at 92.388 (not yet the close for today). While that is still down 10.8 percent from where it was on March 19, 2020, it is at its highest level since November 23, 2020.

At the COMEX closes on March 8, gold settled at $1,677.75, its lowest level since it closed at $1,665.50 on May 6, 2020. Silver was at $25.24, which is just a few cents above its COMEX close late last week, and otherwise at its lowest point since the COMEX close on Dec. 16, 2020 at $24.91.

In my judgment, there is a strong possibility that once the euphoria of the new bailout bill becoming law settles down, the U.S. Dollar Index will again resume gradually sinking. At the same time, look for gold and silver prices to once again rise by significant percentages.

Could the percentage increases in gold and silver prices match what happened last year? It would be difficult to do so as the price of gold at the March 8 close was 14.1 percent higher than it closed on March 19, 2020. Similarly, the March 8 silver close was still 115.0 percent higher than it closed on March 18, 2020.

Perhaps a safer question to ask is whether gold and silver prices might top their highest COMEX closes of 2020 by the end of 2021? The peak for gold was $2,051.50 on Aug. 6, 2020, and for silver was $29.25 of Aug. 10, 2020. For gold, I consider that more likely to occur than to not occur. For silver, I fully expect the COMEX price to easily top $30 before the end of this year.

If you were looking for a signal of the "right time" to buy physical gold and silver, current prices certainly look tempting.

Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award, 2012 Harry Forman National Dealer of the Year Award and 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), Professional Numismatists Guild, Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).