Featuring top analysts. Updated regularly.
“The main drivers of past gold bull markets are extraordinary tail risks and a falling dollar. We are living in an age of tail risks as the world goes through sickness, war, social disorder and financial stress that most people thought were relegated to the past. The level of tail risks today are at least as significant as past bull markets.”
USAGOLD note: Foster and Casanova say that gold has been in a bull market since December 2015 – rising 87% over the period.
“[G]old has now fallen more than 5% from its recent peak in early May, when investors were more confident that the Fed had already finished its rate-hiking cycle. In our view, a further slide in gold to around USD 1,870 an ounce is possible (from USD 1,945 at present), as markets push back expectations for the start of rate cuts from the Fed. But we still see potential gains for gold over the coming year, and we view the precious metal as a valuable hedge in portfolios.”
USAGOLD note: UBS forecasts gold will be $2100 by year-end, and $2250 by mid-2024.
“According to Metals Focus’ latest estimate, global gold production in 2022 was 3,628t. This is 1% higher y/y.…The latest country-level data shows no change amongst the five largest gold producing nations compared to 2021. China remains the world’s largest gold producer, followed by Russia, Australia, the United States and Ghana.”
USAGOLD note: An anemic showing on the supply side of the gold fundamentals’ equation at a time of record global demand.
Gold mine production by country (2022)
Map courtesy of World Gold Council, Data source: Metals Focus • • • Click to enlarge
“Where sales of gold and silver jewelry rose rapidly in early 2023, they expanded only 24% year-on-year in May, the first sign of a slowdown this year.”
USAGOLD note: Expanded only 24%? Given the Chinese people’s historic attachment to gold, most analysts will see the slowing demand at present as a lull in the dominant trend.
“Despite gold’s proven effectiveness as a hedge against the erosion of purchasing power over the past 50 years, Nordic institutional investors have broadly refrained from including this precious metal in their portfolios. ‘It is very strange that institutional investors overlook gold when, based on return tables, the metal exhibits a very stable return profile. Since 2000, it has had only three negative years compared to eight for the broader equity market,’ wonders Strand. He emphasizes gold’s stability, attractive returns, low correlation, high liquidity, and absence of counterparty risk.”
USAGOLD note: Guzun adds that gold has returned 7.7% annually since 1971, the year the United States went off the gold standard.
“We have a distinctive philosophy around gold. We believe gold has unique risk/reward characteristics that enable it to help preserve real value over the long term. We use gold as a potential hedge and do not speculate on its price over the next six to 12 months. We believe it is not possible to forecast the price of gold or, for that matter, the price of other investment assets. This, in fact, is why we have a potential hedge …”
First Eagle Investment Management
Gold Hub interview
“When we think of gold, the first image that often comes to mind is that of exquisite jewelry or vast treasure troves. But gold is far more than a medium of adornment and a store of wealth. This precious metal has been utilized in a myriad of applications throughout history, some of which may surprise you.”
USAGOLD note: Gold is money, but through its long history it has been used in a wide variety of applications from the sacred to the practical.
“The Reserve Bank of India’s gold reserves have risen by over 40% since it resumed the purchase of the yellow metal over five years ago. This shows gold has emerged as a strong hedge against inflation and also helped reduce dependence on the dollar to an extent. India’s central bank, unlike others, never sells its gold.”
USAGOLD note: At 795 tonnes, India has the ninth-largest gold reserve in the world. The World Gold Council reports that Indian households may hold as much as 24,000 to 25,000 tonnes of the metal.
India Gold Reserves
“The PBoC is moving to widen gold and silver accessibility to millions of previously untapped Chinese citizens. This fresh new gold accumulation initiative follows a very similar push undertaken 13-years ago that had incentivized the wealthier middle-class section of the population to invest in physical gold bars and coins.… The option to buy gold and silver bullion from your banking app in China is the latest Chinese government attempt to incentivize citizens to buy gold bullion.”
USAGOLD note: Donohue uncovers a little-known Chinese initiative through its banking system that could bring millions of new investors into the market. We consider China’s latest gold-friendly policy a very important development. “Western bullion investors,” says Donohue, “should brace for a demand shock in the market which will see premiums on gold bullion bars and coins rise and decouple from the paper gold price. China is betting the prospects of its own citizens on gold and as of yet very few people in the west have noticed.”
“China increased its gold reserves for a seventh straight month, signaling ongoing strong demand for the precious metal from the world’s central banks. China raised its gold holdings by about 16 tons in May, according to data from the People’s Bank of China…”
USAGOLD note: China has led the global central bank gold buying spree. Central bank gold buying was at a record pace in 2023 and it has remained strong in 2023. The chart below is quarterly and does not include China’s most recent purchases which have taken its total holdings to 2092 metric tonnes.
“The biggest risk remains the tensions between China and the US. The confrontation between the world’s largest and second-largest powers is expected to last at least for the next decade. Both the US and Taiwan will have presidential elections in 2024, bringing uncertainties. Consequently, the demand for safe-haven assets, especially gold, is expected to intensify..”
USAGOLD note: A practical overview new investors will find informative. Guangzhi is head of research at KGI Securities Singapore. His analysis includes an enlightening table of gold’s performance during recessions.
“Following a historical high level of central bank gold buying, gold continues to be viewed favourably by central banks. Our 2023 survey revealed that 24% of central banks intend to increase their holding reserves in the next 12 months. Furthermore, central banks’ views towards the future role of the US dollar were more pessimistic than in previous surveys. By contrast, their views towards gold’s future role grew more optimistic, with 62% saying that gold will have a greater share of total reserves compared to 46% last year.”
USAGOLD note: Many believe that central bank purchases are the chief reason for gold’s rise over the past year to central banks purchases. That being the case, World Gold Council’s finding in the survey bode well for the future.
Chart courtesy of World Gold Council • • • Click to enlarge
“Even the central bank of Singapore, which is friendly to the US, bought 70 tons in the first three months. This buying activity from eastern countries has lifted gold to the current level close to $2000 per ounce. And that’s even without the participation of western institutions who have very low positions right now. But it’s those western institutions that will propel gold to new record highs once they come into the market.”
USAGOLD note: Hickey says “gold does best when stocks are going down.” He adds that stocks are being held up by “this FOMO move” in tech stocks but it will eventually end.
“The revival in gold’s fortunes has central bank officials, fund managers and retail investors wondering whether the world is on the precipice of a new gilded period. Some forecasters reckon gold could escalate towards its real record high of nearly $3,300 per troy ounce in today’s dollars, set in 1980…”
USAGOLD note: Financial Times takes a deep dive into what is driving gold demand at present and comes away with conclusions that might come as a surprise to many of our readers……
“The full year 2022 was clearly positive for gold in all currencies, with the one exception of the US dollar. Gold in US dollars suffered from the marked appreciation of the dollar. On average, the price gain in other currencies was 7.2%. In the (former) safe-haven currency, the Japanese yen, the gold price rose by 13.7%. In euro terms, it was up 6%, for the 5th annual gain in a row, which ruthlessly reveals the glaring weakness of the European single currency. In the current year, 2023, gold is clearly in the plus in all listed currencies, on average by 8.7%.”
USAGOLD note: The quote above covers only one small aspect of the comprehensive (416 page) In Gold We Trust report. In its conclusion, the authors quote lyrics from the Electric Light Orchestra song “Showdown”: Bad dreamer, what’s your name? Looks like were ridin’ on the same train. Looks as though there’ll be more pain. There’s gonna be a showdown.” And that is what they title this year’s report. The firm ends with a prediction of multiple crises and multiple showdowns, i.e., challenges that will take the price to $2300 to $2400 over the next twelve months with an ultimate target of $4800 at some point during the next decade.
“Gold has your back when central bankers don’t.“
Cambridge House International
“The demand for bullion saw a sudden jump on Saturday, which dealers in various parts of the country said was expected to continue till people offloaded a bulk of their ₹2,000 banknotes for gold and silver, even as a rush to exchange the high-value currency notes is expected at banks from Monday.”
USAGOLD note: In a separate article, Bloomberg mentioned that the 2000 rupee note withdrawal was “reminiscent of a shock demonetization exercise in 2016.”
Image attribution: Reserve Bank of India, GODL-India <https://data.gov.in/sites/default/files/Gazette_Notification_OGDL.pdf>, via Wikimedia Commons
“A team of JPMorgan strategists led by [Marko] Kolanovic trimmed its allocation to stocks and corporate bonds while boosting its stake in cash by 2%. Within the commodities portfolio, the firm also rotated out of energy and into gold on haven demand and as a debt-ceiling hedge — another move intended to strengthen the JPMorgan’s defensive posture.”
USAGOLD note: At one time, Kolanovic was considered Wall Street’s most vocal bull.
“The direction of a weakening dollar is clear, with the US Fed having signaled a pause in its current tightening cycle after 500 basis points of rate hikes over the past 14 months. Other major central banks, meanwhile, remain on track to do more to fight inflation.”
USAGOLD note: UBS sees gold at $2100 by year end and $2200 by March 2024.
“Gold was present in the dust which formed the solar system billions and billions of years ago and gradually that dust accreted to form the planets.”
USAGOLD note: In this video, Frisby makes an engaging presentation on the yellow metal saying “We have a primal instinct for gold.”
“While Perry affirmed the federal government’s burden to repay its debts, the case isn’t as ringing a vindication of the 14th as the Sun, back then, had hoped. The thing to remember about the 14th is that those who enacted it intended it to be about gold — meaning, honest money defined in law and certain contracts in terms of gold. Its authors meant to protect the right of such debt holders to be repaid in gold, or the equivalent in paper money.”
USAGOLD note: We note with interest that President Ulysses S. Grant (photo insert) declared at the time that the US should pay its debts in gold as a matter of national honor. If that were to occur today, it would wipe out the US gold reserve of 8133 metric tonnes. The Sun delves into what the Fourteenth Amendment is really all about.
“[T]he current lull in inflation offers the perfect opportunity to take advantage of cheap inflation hedges before price growth starts to accelerate again.” He goes on to say that “the stage is thus set for a renewal in inflation’s upward trend. This will shake confidence that inflation is a ‘one-shot’ problem and instead is likely to be with us for some time. This is likely to prompt a root-and-branch rethink about how to invest in an environment of persistent and entrenched inflation. Inflation hedges that look cheap today thus won’t be cheap for very long.”
USAGOLD note: Simon White is a Bloomberg macro strategist. He likens the current inflation situation to the 1970s in which we had periods of decelerating inflation that were calms before the inflationary storms to come. Inflation, as we have said many times, is a process rather than an event.
Gold and headline inflation
(1970-1979, log scale)
Chart courtesy of TradingView.com • • • Click to enlarge
“How can an investor protect themselves against a US government default? Once, that was a crazy question to ask. But today the bizarre has become almost normal in American politics.”
USAGOLD note: Though Tett focuses on gold’s safety in the context of the debt ceiling wrangle (which she sees as still unsettled), she also sees major changes underway in the way both private and professional investors view the metal in the context of longer term economic and financial trends.
“It is interesting to note that silver and gold prices appear to have increasingly trended in similar patterns to those of the industrial metals, particularly since President Nixon eliminated the backing of the US dollar with gold in 1971. Closing the gold window thus removed a very large non-industrial buyer of gold. Under the gold standard system, government could be counted upon to purchase mine production en masse at set prices, regardless of industrial growth or decline in any particular moment. Silver, with its broadening industrial demand, has been ~75% correlated with the Industrial Metals Index.”
USAGOLD note: Brady and Schieven believe we are headed for the boom phase of a new commodity supercycle that could last 10 to 20 years. Gold and silver, they show, have tracked supercycle booms in the past [Please see chart], and, as a result, they are “very bullish” on both metals over the long run.
Gold, silver, and producer price index industrial metals
(1925 to present, log scale)
Chart courtesy of TradingView.com • • • Click to enlarge
“Over the next few years, the gold reserves literally exploded. By 1959, when the European Payments Union was replaced by the European Monetary Agreement, Germany had already received 1,584 tons of gold from its European partner countries. As a result of further inﬂows from the Bretton Woods system, among others, the Bundesbank’s total holdings reached 2,344 tons by the end of 1959, and the inﬂows continued steadily.”
USAGOLD note: Germany owns the second-largest stockpile of gold in the world at 3,355 tonnes. “T]he knowledge of the existence of this treasure,” says Wrzesniok-Rossbach, “clearly allows many Germans to sleep better in light of the many ﬁnancial and economic policy imponderables in the
“Q1 saw diverging trends in gold investment demand: a small decline in gold ETF holdings versus hearty bar and coin buying.”
USAGOLD note: There are no real surprises in the World Gold Council’s first quarter Demand Trends report just a continuation of the positive trends that have been in place since last year. That includes strong central bank and private investor demand. One standout statistic – first quarter central bank demand was 34% higher than the previous Q1 record in 2013.
Chart courtesy of World Gold Council • • • Click to enlarge
“These and other factors have drawn increased attention to the gold market, where options on gold futures have reached record trading volume in 2023. Gold is believed to perform well in times of economic stress. But does it? Let’s look at history to tell us how gold performs under three scenarios – inflation, recession, and stagflation.”
USAGOLD note: As it turns out, gold can perform well under all three of the scenarios, though the reaction to past inflations has been mixed…… Iurio offers a detailed review of the metal’s performance and the rationale for owning under each scenario.
“Gold prices broke through the $2,000 per ounce barrier this week and are flirting with record highs as global economic uncertainty, a possible pause in Federal Reserve interest rate hikes and potential further trouble in the U.S. banking sector drive investors toward the precious metal.”
USAGOLD note: This article summarizes the World Gold Council’s Demand trends for the first quarter of 2023. Of interest, gold ETFs experienced “significant” inflows. Bar and coins demand was up 5% with the US posting its best quarter since 2010.
“Gold is an attractive means of helping investors diversify their portfolios. Its relative scarcity supports its long-term investment appeal. But its market size is large enough to make it relevant for a wide variety of investors, from individuals to institutions and central banks. This Primer gives an overview of the available above-ground stock of gold, the relative size of the financial gold market, and the composition of demand and supply that supports gold’s investment credentials.”
USAGOLD note: The World Gold Council offers an informative look at gold market dynamics for beginners and a refresher course for long-time investors.
“[Central banks] see what’s happening on the economic and geopolitical fronts and they want to play it safe by accumulating real money. Private investors are starting to do the same. And once gold takes off, we believe it’s going to skyrocket.”
USAGOLD note: The Aden sisters (Aden Forecast) have been a mainstay in financial circles for decades. Known for their straightforward market analysis, they now believe that a “big financial shift” is in the cards and that central banks and private investors are stockpiling gold to prepare for it.
“What do the Singaporean, Turkish, and Chinese central banks have in common with jittery investors? Answer, they’ve been buying gold as a haven and diversifier from fears of a recession, a crisis of confidence in banking, and a weakening US dollar. We see this as an indication that economic factors are taking over from financial speculation as the main driver of demand for gold.”
USAGOLD note: Mornier makes an important observation about changing gold market psychology we thought worth passing along. If real, or physical, demand is going to play a greater role in the pricing of gold – if indeed we are at the cusp of a new standard in the marketplace – then we will be that much closer to the dog regaining control of the tail.
“According to historian Ed Allen of the Marshall Gold Discovery State Park in Coloma, only about 10 to 15 percent of California’s gold has been discovered. Now, nearly 175 years after the first gold rush, groups of eager amateur miners are headed back to ‘Gold Country’ – an area on the western slope of the Sierra Nevada – in search of the remaining 85 percent.”
USAGOLD note: The barbarous relic strikes back……Gold Fever in California.
“The prime example right now is gold, up 20 percent in six months. Surging demand is not led by the usual suspects — investors large and small, seeking a hedge against inflation and low real interest rates. Instead, the heavy buyers are central banks, which are sharply reducing their dollar holdings and seeking a safe alternative.”
USAGOLD note: Sharma explains why central banks are moving out of the dollar and into gold. “[T]he oldest and most traditional of assets, gold,” he says, “is now a vehicle of central bank revolt against the dollar.” He sees the strong central bank demand as “something new” in the gold market. The World Gold Council, we will add, reports the strongest start to a year in 2023 since “at least 2010.”
Chart by USAGOLD [All rights reserved], Data source: World Gold Council
“This year is expected to be another of solid silver demand. Industrial fabrication should reach an all-time high, boosted by continued gains in the P.V. market and healthy offtake from other industrial segments. Although bar & coin demand and jewelry fabrication are expected to fall short of last year’s exceptional levels, both are forecast to remain historically high. Supply, by contrast, is expected to achieve only low single-digit gains. As a result, this year will also see another large deficit for silver, amounting to a projected 142.1 Moz, which would be the second-largest deficit in more than 20 years.”
USAGOLD note: The structural deficits are the result of solid global demand and declining mine production. Of special note, TSI reports that the current supply shortfall amounts to “more than half more than half of this year’s forecasted annual mine production, and more than half of the inventories presently held in London vaults offering custodian services.” In general, TSI paints a bullish scenario for the metal going forward.
“It is ironic that the demon of illiquidity should have located a pocket of weakness in the banking citadels of the financial world, when it is the asset managers who are the weaklings of the herd, not the banks as a class. The mischief will be centred on investment portfolios. To survive, one will have to be careful in the sorts of assets one owns.”
USAGOLD note: Ruffer believes that investors need to keep their powder dry in order to take advantage of the next bottom in financial markets. As a result, he recommends a strong cash position even though inflation erodes its value. Though he does not mention gold in this essay (except in a historical context), his firm has recommended holding it in the past. [Please see: Gold Matters, September 2020.]
“Sales of American Eagle and Buffalo gold bullion coins from the U.S. Mint experienced an incredible rally in March, rocketing from the prior month, and far beyond last year’s sales figures from the same month.”
USAGOLD note: Demand for gold and silver bullion coins is running strong, driven by safe-haven investors looking for an alternative to bank savings. The US Mint reports a 277% gain in sales of the American Eagle gold bullion coin over last month and a 38% gain over the same month last year, according to CoinNews. Demand for the American Eagle silver bullion coin in March was at par with last month, but ultra-high premiums have channeled strong global demand to lower premium alternatives like the Canadian Maple Leaf and the Austrian Philharmonics. Combined sales of American Gold Eagle and Buffalo gold bullion coins posted their best month in five years at just over 280,000 ounces.
Chart courtesy of GoldChartsRUs
“Clearly, real yields look to be in the process of peaking for this cycle, meaning we are likely in the early innings of a renewed bull market in precious metals. But, it may be a little too early to suggest they will roll over just yet, particularly if the Fed has one or two surprise hikes left in them as economic and inflation resilience remains for now. However, as growth is likely to slow materially in the second half of the year, there will be a time where nominal yields fall faster than inflation expectations, and thus, real yields roll over hard and fast. One would expect such an environment to be accompanied by a more accommodative Federal Reserve, thus ultimately setting the stage for a fundamentals-backed move higher in precious metals.”
USAGOLD note: A well-constructed argument calling for a bull market in gold based on an erosion in the real rate of return……
“According to the most recent ‘The Flow Show’ from Hartnett, markets are entering a new period of conflict, geopolitical isolationism, populism, fiscal excess, state intervention, regulation and redistribution. These factors will result in a world with 3%-4% inflation and 3%-4% interest rates.”
USAGOLD note: Hartnett is highly respected on Wall Street, so this forecast will not be taken lightly……He sees the dollar entering its fourth bear market in the last 50 years. The chart below shows the relationship between the US Dollar Index (DXY) and gold. A 20% decline would take the DXY back to the 80 level, implying the potential for an upside move in the gold price.
US Dollar Index and Gold
(1970 to present)
Chart courtesy of TradingEconomics.com • • • Click to enlarge
“Imagine, says [Orbis’ Alec] Cutler, that a divine ruler had written a white paper for gold, just as the inventor of bitcoin apparently did for his new currency. Humanity will, he might have thought, need ‘a convenient and reliable vehicle for the preservation of wealth and universally trusted medium of exchange, for both government-issued and peer-to- peer transactions’, one that ‘will maintain its value for all eternity.'”
USAGOLD note: A thoughtful and thought-provoking comparison between bitcoin and gold. In Somerset-Webb’s mind, “Gold has been used as a medium of exchange for millennia – and it works just as said divine being might have wished it would.”
Hedge-fund billionaire Paul Singer still sees dangerous ‘bubble securities, bubble asset classes’ in markets
“Credit collapse, although terrible, is not as terrible as hyperinflation in terms of destruction wrought upon societies.” – Paul Singer, Elliott Management
USAGOLD note: In the original Wall Street Journal this article summarizes, Singer reminds us that the Fed never “normalized” policy after the last crisis. That failure sent “money printing, prices and growth of debt into an “upward spiral.” “Many believe their portfolio should have some gold,” he says, “as it is the only real’ money and has occupied that status for literally thousands of years.”
Photo attribution: World Economic Forum, CC BY-SA 2.0 <https://creativecommons.org/licenses/by-sa/2.0>, via Wikimedia Commons
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