After a massive, record-setting bull run, gold and silver prices finally collapsed last Friday, with losses bleeding further into Monday.
A lot of investors seem shocked by this, but honestly, I was relieved.
Gold and silver prices had simply gone too far, too fast.
Both metals had just set astronomical new records — with gold going over $5,500 per ounce and silver topping $120.
It only makes sense that they'd come back to Earth, and again, I'm relieved.
That's because for the past few months, I've been watching my precious metals holdings shoot higher. The gains I was seeing made me want to add to my positions, but their valuations gave me sticker shock.
Now I have a chance to scoop up more gold and silver in preparation for the next leg up.
And there will be another run.
How do I know?
Because nothing has changed.
All of the factors that contributed to wild outburst in precious metals valuations are still in place.
First, the dollar is still weak and getting weaker.
Just last week, the dollar index — which tracks the value against a basket of currencies — hit a four-year low.
This after the index dropped almost 10% last year — its worst performance since 2017.
Meanwhile, competing currencies like the British pound and euro are on the way up. Furthermore, 11 of the 19 emerging-market currencies tracked by Oxford Economics also gained more than 1% last month.
It's no secret why.
President Trump's aggressive and unpredictable interventions in economic and political affairs have shaken investor confidence.
His tariffs have undermined free trade and alienated key economic partners.
His threats to invade Greenland, make Canada the 51st state, and abandon NATO have unnerved allies.
His military actions against Venezuela and Iran have fomented further chaos.
His market manipulations — investing billions of dollars in taxpayer money in some companies while demanding others put an end to share buybacks and dividend payouts — have clouded the outlook for investors.
And his dogged harassment of Federal Reserve Chairman Jerome Powell has raised serious doubts about the independence of the central bank going forward.
Surprisingly, one of the explanations for Friday's crash was news that Trump had settled on Kevin Warsh as Powell's successor.
Warsh has a reputation as an inflation hawk, but I wouldn't take that for granted.
After all, he was hired by President Trump. And Trump has spent the past year pressuring the Fed to drastically cut interest rates. He even got so frustrated with Powell's resistance that he saddled the Fed chair with a federal investigation over building renovations.
Meanwhile, Warsh campaigned for his new title by praising Trump's vision and pledging to enforce it.
He even wrote an op-ed for The Wall Street Journal last November praising the "pro-growth policies championed by President Trump."
And he's suggested the Fed's balance sheet ought to be reduced, he also said he'd compensate for that reduction with "lower interest rates to support households and small and medium-size businesses."
So I wouldn't just assume that Warsh will take up his position at the head of the central bank and immediately break with the president who just handed him his job (and who's also demonstrated a penchant for revenge and harassment.)
In any case, I wouldn't count on the dollar suddenly regaining strength anytime soon.
To the contrary, I believe we're in the middle stages of a tectonic shift in currencies and metals — one that will persist for the next few years.
And that's why I love buying these dips.
In fact, it's already been forgotten, but gold and silver tumbled back in October, too.
The fall wasn't as steep or dramatic, but it was notable.
Gold had been trading at record highs above $4,380 per ounce, but then plunged roughly 6% before stabilizing around the $4,125 mark.
That actually made it the fifth-biggest gold price crash in U.S. history at the time.
And yet today, even after this latest plunge, gold is still trading north of $4,700.
So how do you think I feel about having bought that dip?
Pretty good. Because like I said, things are going to turn back around.
And when they do they'll send shares of companies like these shooting sky high.
Fight on,
Jason Simpkins
Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more... He also serves as editor of The Crow's Nest where he analyzes investments beyond the scope of the defense sector.
For more on Jason, check out his editor's page.
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