May 2024 - Week 2 Edition

Central Banks Continue Their Record Gold Buying Spree

After two straight years of record gold buying – over 1,000 metric tons in both 2022 and 2023 – the world’s central banks opened 2024 with the most gold buying in any opening quarter in history: 290 metric tons, according to a World Gold Council report released on April 30. This demand likely rose in April as well, since gold rose strongly this past month, although official numbers from central banks are not yet available.  

The central bank of Turkey bought the most gold (30 tons), with China closely behind, at 27 tons. The month of March marked China’s 17^th consecutive monthly increase. China increased its total gold holdings to 2,262 tons, or 16% more than the amount of gold the People’s Bank of China held at the end of October 2022, when it resumed reporting its monthly gold purchases.  Next in line was India, which bought 19 tons, an amount, exceeding its entire annual purchases of 16 tons in 2023. Kazakhstan was fourth with 16 tons.

Gold Rose as the U.S. Dollar Strengthened on the Fed’s Delayed Rate Cut

One outcome of the Fed’s delayed interest rate cuts is that that the U.S. dollar has become more attractive to foreign investors seeking the highest possible safe return for their money. While the U.S. is delaying any rate cuts, the European Central Bank and the Bank of England have each indicated they will cut their key short-term rates in June. If the Fed funds rate remains at a lofty level of 5.25% to 5.50% until at least July and probably until September, that means the U.S. will continue to offer the highest long-term and short-term interest rates among the major rich economies around the world. This will likely drive investors into the U.S. dollar.

In 2024, the U.S. Dollar Index (DXY) is up 4%, from 101 to 105, meaning the price of gold is up even more in terms of other currencies than it is up in terms of the U.S. dollar (about 12%). So, gold in other currencies is up about 16% to 17% this year and up over 25% in terms of the Japanese yen.

Here are the comparative interest rates available last week on the 10-year sovereign Treasury rates, globally, along with comparative GDP growth (end-2023), inflation and current deficit-to-GDP ratios.

Some conclusions to take from this table: The U.S. interest rate is tops among rich nations but so is its debt-to-GDP ratio, at 6.1%, with out-of-control federal spending. America’s inflation rate is also at the top. America also leads rich nations in GDP growth, at 3.4%, with most of the other nations under 2% or at negative growth in three Euro-zone nations. The Euro-zone also has a shared currency that is down 3.2% to the U.S. dollar in the past year, so gold is up 3.2% more in their currency than for U.S. dollar holders.  

It will be interesting to see the new inflation figures when they come out next week. America’s GDP growth is slower so far in 2024 but the strong dollar is still attracting global savers and investors, keeping our debt-ridden dollar afloat. After the election (if the wrong team wins), the chickens may come home to roost and my prediction, shared by Steve Forbes, of gold soaring to over $2,500 an ounce could come to pass, with debt soaring out of control.

Selling Your Gold Is EASY!

Last week, I helped a local doctor attain a larger profit on gold that he purchased years ago. He called and asked about selling 100 American Gold Eagle coins that he purchased in 2009. I explained to him that we would be happy to help and it is a service our professional representatives handle almost daily. He was able to realize his gain on the increase in the price of gold from his purchase price and made a 160% profit in 15 years. He noted that his investment in gold coins was better than any other investment he’d made over the same timeframe and was glad he diversified his investment portfolio with gold. If you are looking to sell your gold or silver bullion coins and bars, give our professional representatives a call and we will make that process quick and easy.

Gold and Silver Moving Up and Regaining Ground

Gold recovered strongly in the first week of May, from $2,291 on April 30 to $2,315 on May 7 (+1.0%).  Silver, as usual, rises or falls faster than gold, being a narrower market in terms of capitalization. Silver rose more on a percentage basis, up 3.4%, from $26.39 on April 30 to $27.30 on May 7. Silver also has new industrial uses in 5G technology, which surpassed 4G in 2022 and grew in market share in 2023. Fast-growing emerging economies, like in China and India are now seeing an increase in 5G development, which could impact Silver’s price based on availability and demand.

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