The market flight to quality?

A strange phenomenon happened this week in the market

If you’ve traded for any length of time, then you know that there are certain sectors that the market likes to pick out when it’s concerned about a recession.

One is the bond market.

But another?

Precious metals. Gold and silver.

Yet, here we are, on a Saturday after the S&P 500 hit a new all-time high ... and gold hit an all-time high ... and silver hit an all-time high.

What’s going on here?

There are some theories, but nothing concrete:

First, people are concerned about global tensions with the U.S. making attacks in Venezuela and, recently, Nigeria. (My point isn’t to get political but it’s important to mention the things that people are thinking about when it affects the market.)

That’s a kind of traditional, flight to quality thought.

People like to invest in precious metals when global tensions are higher.

But we also have the added wrinkle of this year’s new tariffs. Most of the experts feared that this would lead to trade wars and inflation.

And if something like that is on the horizon, again a flight to quality is expected.

But the tariffs have not seemed to cause runaway inflation or the dreaded trade wars.

Which makes me think that we’ve got a strange situation where many are buying up gold & silver while at the same time investors are profiting from a pretty normal bull market.

🤷

There’s also another wrinkle to iron out:

The growing demand for data centers because of AI means that the physical components necessary (a lot of copper and some gold) are in high demand.

And demand drives up price.

(Just ask your old economics professor.)

So, when you take all this into account, we can see this really weird phenomenon happening.

When I look at the charts, I see the makings of a parabolic move (that is, a short squeeze) on the gold and silver markets. That may or may not happen, but I am hesitant to jump on the momentum in gold & silver and hoping for higher highs.

In fact, that’s not how I trade at all.

I much prefer a recent pullback and the chance for a new move higher.

I’m not a bandwagon trader, I’m much more patient in my trading plan.

We’ll see how the final days of 2025 shake out, but for my Roth IRA so far, my trading plan has led to a doubling of my account from P/L in the markets alone.

Of course, I teach my approach to anyone who joins my paid community. More on that in the footer of this email. And if you’re not getting this as an email, it’s free to subscribe.

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— Ricky Ketchum