The era of modern day monetary omniscience is coming to an end.
Look no further than the near 30-percent year-to-date rally in gold that has it sitting at 28-month highs and the almost 50-percent rise in silver this year to near two-year highs.
Look at gold as the anti-fiat currency. The one that can't be manipulated, debased, and conjured up electronically at one's whim. One has to actually dig it out from the ground. Thus, it is referred to as "precious" as there is a limited supply.
While all the gold that has ever been mined still exists, you can fit it all in two Olympic-size swimming pools. It is a rare commodity – actually, I'd rather refer to it as a currency. And rare is not something that can be said for the world's paper currencies that have been and continue to be printed in the trillions.
What changed and why now?
After rallying for 12 straight years and peaking in September 2011 at around $1,900 per troy ounce, gold fell into a very lengthy bear market that I believe ended in December 2015 at $1,050. The trigger for the end of the bear and the onset of the bull I attribute to a few things.
First, we saw the slap in the face that some markets (particularly foreign exchange) gave the European Central Bank and the Bank of Japan in December and January when they seemed to have crossed the line in their monetary experiments. Second, slowing global economic growth and fear of everything has put off for possibly years the likelihood of another Federal Reserve rate hike.
On Dec. 3, the ECB cut its deposit rate by another 10 basis points to -0.3 percent but instead of falling further, the euro actually rallied and European stocks fell, led by bank stocks that suffer from negative interest rates. Not one to learn a lesson, the ECB cut this rate again by another 10 basis points in March and the euro continued to rally. This is important because a weaker currency is a desired transmission mechanism for easing monetary policy.