An investor’s guide to the boom (and bust) in gold and silver

Subscribe to enjoy similar stories. What if, and bear with me here, the wild gyrations in gold and silver prices are actually telling us something? There are three plausible messages from the rise in gold prices. I’m not convinced that any of them provide a full explanation for what’s going on.

But all have a grain of truth, and tell us something about how investors in stocks, bonds and currencies are navigating a very uncertain time in the world. Countries that fear falling afoul of Western sanctions have been buying gold rather than dollars for their foreign-exchange reserves for several years. But last year, central banks reduced their buying as prices jumped, according to the World Gold Council.

Instead, buying lately has been dominated by private investors, especially via exchange-traded funds. They might simply be scooping up gold expecting that worried central banks will intensify their buying at a still-higher price, but at best that’s a hope. If they’re right, gold should be rising as the dollar falls against other currencies.

In fact, gold has moved independently of the dollar day to day in the past year, although overall the dollar is down a lot while gold has gone wild. Treasury yields should also rise relative to other countries as money leaves America. But U.S.

10-year Treasury yields have fallen a little since the start of last year, while those of Japan, France, Germany and the U.K. are all up, in some cases by a lot. An idea that appeals to a lot of those scarred by the last bout of inflation is that another is on the way, caused by hefty government stimulus and a deliberate policy of weakening the dollar.