The recent spike in volatility of both gold and silver markets has raised the level of debate over bubbles for these two key commodity markets.
By definition, a bubble forms when the market loses touch with its intrinsic value.
Don’t Miss a Day: From crude oil to coffee, sign up free for Barchart’s best-in-class commodity analysis.Looking at the Cash Indexes for both gold and silver, I do not see existing or forming market bubbles, though we need to keep an eye out as trends continue to change.
Gold and silver have been the focal point of much discussion of late, not just because of the medals being awarded at the latest Winter Olympic Games in Milano/Cortino, Italy (a shoutout to Michele, my friend from Italy), but due to the ongoing debate of possible market bubbles. (There is an interesting side discussion we could have about the Olympic medals that are reported breaking, even if handled with a great deal of care, and market metals that have been breaking of late for other reasons.) Early Friday (the 13th, for good measure) morning we both markets posting solid gains as another (needless) US 3-day holiday weekend grows larger on the horizon.
What is a market bubble? By definition, mind by the way, a bubble forms when a market loses touch with its intrinsic value. In a market sector like equites, this is harder to gauge due to the fact there is not a good read on what “intrinsic value” is. It’s easier in the commodity complex, for the most part, because we usually have some sort of cash or spot price to use as an intrinsic value baseline. Some recent bubbles you might recall occurred in WTI crude oil back in 2008 and soft red winter (SRW) wheat, also from 2008, interestingly enough. In crude oil, we saw the spot-month contract fall from a July high near $150 per barrel to a January 2009 low of $33. The SRW wheat market rallied to a high near $23 per bushel (yes, that is correct) in February while the National SRW Cash Index reached a peak just short of $12, putting national average basis at roughly $11 under, a number screaming the market was broken. At this Thursday’s close (February 12, 2026, or about 18 years later) the nearby March issue was priced at $5.53 with the Index coming in near $4.97.
What about gold? There are a number of cash and/or spot markets one can use – London, Singapore, New York, etc. – but for this discussion I’ll use the Cash Index (GCY00) quoted on the Barchart cmdtyView system. Friday morning finds the Index priced at roughly $4,965 with the spot February futures contract near $4,968. This puts basis – the price difference between cash and futures – theoretically at about $3.00 under (though this price changes quickly given the February futures contract is moving toward expiration and the March issue is thinly traded). If we look at the Cash-April calculation we see the price differential at about (-$20), still a strong number. The trend (price direction over time) of either spread (spot or more active) is up, meaning the Index continues to gain on futures. This tells us the market is not losing touch with its intrinsic value but instead could be considered fundamentally bullish. And while there has been some short-term long liquidation in the futures market, Rule #6 tells us fundamentals win in the end, so we would expect to see money moving back into gold over time.
It’s a similar story in silver where the price differential between the Cash Index (SIY00) and the March 2026 futures contract has been in a strong uptrend since early 2020. As with gold, this tells us silver continues to be driven by bullish fundamentals – a combination of characteristics of both a short supply and demand driven markets – meaning long-term investors should continue to buy. Yes, the differential has seen a reaction to its recent spike high to $6.76, falling back to near even Friday morning, but if we look at the big picture we see it is still strong. Could it change? Certainly. That’s the nature of the industry. Speaking of nature, if we once again apply Newton’s First Law of Motion to market analysis we know, “A trending market will stay in that trend until acted upon by an outside force”, so we need to keep a close eye on these trends.
For now, though, the conclusion is neither gold nor silver are bubble markets.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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