So much for the idea of a psychological barrier to the price of gold. In the early hours of Friday March 14th, spot gold breached a so-called 'psychological barrier' of $3,000 an ounce.
Briefly, it traded at an all-time high of $3,000.87. It closed today at $2,984.50, but in the futures market, it had traded as high as $3,013.60.
Clearly, if there was a barrier, it was just demolished.
I felt a little glad for gold bugs, those folks with their charts and their graphs and their investment seminars, where they hear that if they can just hang on, it'll be worth it. They have endured their fair share of condescension from market investment princes. And for 25 years, they didn't have much of an answer. Today however, their faith was justified, at last...
So what just happened here? Whatever happened, it has in fact been happening for a long time and the pace has been picking up, says Kris Holthe, a broker at Calgary's New World Precious Metals.
Now, full disclosure here; New World Precious Metals is a Western Standard advertiser.
However, Holthe's analysis: "The rise in price is due to the ever-increasing debt-based money supply. Since gold is the only counter balance to debt-based financial products, its price acts as a ballast."
And as the dollar in your hand has been losing its value faster and faster, the rise in the gold price has been going faster and faster. It's almost exponential, in fact, with barriers collapsing ever more frequently.
Gold first topped the 'psychological barrier' of $1,000 in 2008, at the time of that year's recession. It surpassed $2,000 at the time of the COVID-19 crisis and this week, just five years later, it reached $3,000. (All figures, US dollars.)
Holthe: "In 2000 the price was US$274.50, it is now US$3,000. That makes for a 10X gain over 25 years."
Gold also does well in troubled time. In Holthe's view the present rally is certainly related to safe-haven demand arising from the geopolitical and economic risk related to continued unrest in Ukraine, and Trump’s tariff trade policies.
On the other hand, it's not just market anxiety generated by the US president that's lifting the price. Increased demand from the US government itself, which has imported more than $300 billion worth since Donald Trump became president, plays its part as well.
So, is Is there such a thing as a psychological barrier? "Yes," says Holthe. "Humans naturally have psychological barriers. So, so do the markets."
But then, barriers are there to be broken. A lot of people have expressed outrage at paying $12 a dozen for eggs, and $8-plus for a pound of butter. At one time they had a barrier at about $7.99 and $4.99 respectively.
Today, they still whine. But as they want eggs and butter, they pay the going price. In the end, they'll stop whining and accept the new reality.
That's why the price of gold breaking through the $3,000 barrier is significant. The world now knows it is possible. Now that it has been done, the $3,000 level is no longer a barrier; there is, in fact, a new reality.
Says Holthe, "The next barrier will have to be defended by the bears."
But when it comes down to it, there really is no barrier to anything, is there?