March 2024 - Week 4 Edition

Gold Reached Another New All-Time High of $2,200+

After the Federal Reserve’s Open Market Committee (FOMC) meeting last Wednesday, gold shot up $50 per ounce in a matter of minutes, rising from $2,160 to $2,210 on the futures market. In the same few minutes, silver shot up from $25.10 to $25.70. Both settled down by the opening on Thursday morning, but that was a new closing high for gold and a 10-month high for silver.

Gold, silver (and the stock market) rose because the Fed Chairman, Jerome Powell, did not seem dismayed by the series of higher-than-expected inflation reports for January and February 2024. He and his Fed board members were still intent on cutting interest rates three times this year, most likely starting in June, according to their published voting intentions in a “dot plot.”   Also, many other major central banks seem ready to cut key interest rates in June, or before. This past Thursday, the Swiss National Bank reduced its key interest rate to 1.5%, while the Bank of England, European Central Bank (ECB) and our own Fed have signaled intentions to cut rates in June. For instance, the European bank president Christine Lagarde said the ECB will lower rates in June if their inflation figures and wage data remain within guidelines before then.

Even though inflation has ticked up lately, the Consumer Price Index (CPI) may severely under-report the real inflationary impact of Bidenomics. A paper released last month by a leading Democratic Party economist (Lawrence Summers) calculated the impact of rising debt service, not included in the CPI, and found the CPI peaked at 18% (not 9%, as advertised) and its actual level at the end of 2023 was 7% (not 3%, as reported). The paper, published in February 2024 by the National Bureau of Economic Research (NBER) was titled “The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly.”

The authors pointed out that from 2022 to 2023, we saw the most rapid rise in interest rates in history (over 5% in 15 months), resulting in huge debt increases and rising loan service costs. This study calculated that this rise in rates pushed mortgage rates over 140% higher and car loans about 80% higher, while credit card rates rose from an average 15% APR to 23% APR. This pushed the “real” Consumer Price Index to a peak of 18% (annual rate) in April 2022 and a recent real reading of 7% (rather than 3%) as of the end of 2023. This rise in debt costs hurts the poor the most but it hits most Americans as well, and that’s a reason why the President’s poll numbers are so low.

Central Banks Bought Over 1,000 Tons of Gold for the Second Year in a Row

Before 2022, central banks had never bought more than 650 metric tons of gold in any single year but that changed in 2022. Central banks responded to the start of the war in Ukraine in February 2022 and soaring inflation, combined with weaker currency values around the world, to add a record-high 1,082 metric tons to their coffers, a huge 66% increase over the previous record.  In 2023, central banks did not quite break that record high but they added a second straight 1,000+ ton year with 1,029 metric tons of gold buying, according to World Gold Council data.  Central banks now hold an estimated 36,700 tons or 1.18 billion Troy ounces of gold, worth $2.57 trillion.

Central banks have been net buyers of gold every year since 2010, with the amount growing over the past four tumultuous post-COVID years. The World Gold Council reports the majority of purchases during the fourth quarter of 2023 came from emerging markets, as they diversify from the U.S. dollar. The People’s Bank of China was the largest buyer in the fourth quarter, adding 225 tons. Poland was the second largest, buying 130 tons, followed by Singapore at 77 tons, the sole “developed” or rich nation-buyer, with those buyers offset by gold sales by some other nations.

The World Gold Council also reported that outflows from gold ETFs continued in February, for the ninth consecutive month of net ETF outflows. But, they stated, “Nonetheless, the two recent rounds of sustained outflows had little negative impact on the gold price performance, which was supported by resilient consumer demand and central bank purchases.” They said U.S. ETFs lost the most in outflows. “In contrast, Asia has now seen net inflows for 12 consecutive months,” the report states.

Gold Reached $2,200 Per Ounce, Again

Gold reached $2,200 per ounce last Wednesday, March 20, and touched $2,200 again on Tuesday morning, March 26, before retreating.  At $2,175, gold is up 5.5% in 2024, despite a 3% rise in the U.S. Dollar Index so far in 2024, which means gold is up an average 8.5% in terms of other global currencies.  Silver also rallied back to $25 per ounce in early trading on Tuesday before retreating to its opening levels. So far in March, gold is up 6.5% and silver is up 8.7%, vs. less than +1% in the Dow and +2.5% in the S&P 500.

Updates From The National Money Show

In March, I went to Colorado Springs to attend the National Money Show.  I go to numerous conventions each year to network with leading experts, media members and heads of organizations.  This allows me to inform our clients about the most current information affecting the precious metals and rare coin market. The show was located in beautiful Colorado Springs, which is also the headquarters of the American Numismatic Association, founded in 1891 and chartered by Congress.  I have been honored to receive that organization’s highest honors as Dealer of the Year in 2021 and the Krause Lifetime Achievement Award in 2022.  While there, I had photos taken of me with some of the educational and whimsical exhibits both at the show and at ANA headquarters. I also met with U.S. Mint Director, Ventris Gibson and had a delightful conversation with her about Dr. Booker T. Washington, the state of the coin industry and some ideas I had for Mint programs. I plan to follow up with her later this year in Washington, D.C. I hope you enjoy some of the pictures I’ve included in this week’s metals market report.

Good Sales Tax News  

As many of our readers know, I serve on the executive board of the National Coin and Bullion Association (NCBA) and we work to get state sales tax exemptions on precious metal coins and bullion products. We just received word that Wisconsin is now another state that has approved sales tax exemptions on precious metal coins and other precious metal products. We are always working to help our customers in many ways and after working for decades, we now have 43 states with complete or partial sales tax exemptions on precious metal coins and other precious metal products.

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