January 2024 - Week 1 Edition

A Strong Year for Gold – and A Stronger 2024 to Come?

Gold rose from $1,812 to $2,062 in 2023, up $250 (nearly 14%). What’s next? Along with financial guru Steve Forbes, I expect gold will perform even better in 2024, rising to $2,400 in the election year to come. In fact, gold might even reach $2,500 by election day, depending on the candidates and who wins the election. 

That’s how Steve Forbes put it in our interview, saying that gold’s top price target depends in part on who wins. In the past four election years – what I call “the Obama/Trump/Biden era” – gold has performed very well, especially in the 10 months from the start of the year until election day. There were usually some external events pushing gold up in those election years. There was a global financial crisis in 2008 and COVID in 2020. This year presents us with two active global wars and the potential for two or more future wars, far more than in any of those previous election years, plus budget deficits in the trillions.

In summary, stocks and gold both did well in 2023, especially after a big rally in the past two months. The Dow Jones Industrials rose 13.7%, matching the 13.8% rise in gold. The broader S&P 500 index rose 24% but it’s important to remember the stock market indexes constantly swap one stock for another, while gold remains the same, always. Also, these stock market indexes are weighted so that the biggest and best-performing stocks, like the biggest tech stocks, dominate the index and lift the index higher. While the majority of the 500 stocks in the S&P were fairly flat during 2023, tech stocks soared.

Gold’s Two Big Price Surges in 2023 Came After Two Specific Crisis Events

Most of gold’s gains in 2023 came during two surges following surprise crises in mid-March and mid-October, which only goes to show that gold acts like an “insurance policy” against global uncertainty.

#1: The first 2023 gold surge came from March 9 to 16.  On Thursday, March 8, gold closed at $1,812, which was the same price where gold began the year but on Friday, March 9, a banking crisis suddenly erupted when two major banks failed, the first was Silicon Valley Bank of Santa Clara, California, with assets of $209 billion, and then Signature Bank of New York on Sunday, March 11, with $110 billion in assets.  Later, on May 1, an even larger bank failed, First Republic Bank of San Francisco, with $229 billion in assets.  By the end of July, four of the top 30 banks (by asset size) in the U.S. had to be bailed out.

During the first week after that banking crisis began, gold shot up almost 10% from $1,812 to $1,985. On the following Monday, gold touched $2,000 for the first time in 2023 before settling back to close at $1,979. Then gold surged to a second peak in that cycle after the failure of First Republic Bank on May 1, 2023, to set a first-half high at $2,048 per ounce on May 3, for a 13% gain in less than two months. 

#2: The second major gold surge of 2023 came October 4-19, following Hamas’ invasion of Israel on their Sabbath morning of October 7.  Earlier that week, gold had dipped close to its year-starting level, at $1,816 per ounce on October 4. After the invasion, gold once again soared nearly 10% in a little over a week to close at $1,982 on October 19, touching $2,004 by the end of October, for a 10% gain in 25 days.

In a final year-end surge, mostly fueled by the Federal Reserve’s sudden and surprise pivot from holding interest rates “higher for longer” to anticipating three rate cuts in 2024 and three or four more rate cuts in 2025, gold began December with a short (one-hour) surge over $2,100 on Monday, December 4. It then quickly retreated before closing the year with another surge to $2,080 before closing around $2,070.

This short summary provides us with a template of what we might expect in 2024. We can’t know where the next “surprises” will come from but if history can teach us any lessons, big bank failures and attacks on Israel should not be all that surprising. They have happened before and something similar will likely happen in the future, only this time we may see a new war breaking out (perhaps Venezuela attacking Guyana or China attacking Taiwan and involving America or Iran escalating the war in Israel). Also, the 2024 election year could push gold higher if it devolves into a repeat contest between the controversial Republican Donald Trump (perhaps denied access on some state ballots) vs. the and increasingly stumbling incumbent Joe Biden – if no credible contenders can emerge from the sidelines.

This is the best time to contact your account representative about acquiring a free viewing of my interview with Steve Forbes and his co-authors of the great 2022 book on “Inflation.” During that recent interview, Steve thought there was nothing keeping gold from reaching $2,400 or $2,500 in 2024, and I agree. Forbes noted a weak dollar significantly contributes to rising gold prices and the U.S. dollar did weaken, falling 3% for the full year and is even faster, at 5.2% over the past two months, which has fueled gold’s price increase. By the same token, gold’s bull market should give silver a strong tailwind, taking it to $30. 

When precious metals rise in price, there is usually a huge increase in precious metals advertising, creating new gold and silver buyers and a resulting boost to the price of metals. Then, as history shows, within 6-9 months, many precious metals buyers become aware of rare coins and start to buy rare coins. I encourage you to contact your professional account representative today so that you can take advantage of gold before it goes on its predicted 20 percent rise by the end of 2024.

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