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Closing the Books on 2023

This Sunday evening, we will welcome 2024 in with open arms. Many will watch the ball drop in Times Square. Others will be dancing into the wee hours of the morning. Some will go to bed early and wake up in a new year.

With any luck, my wife Helen and I will watch When Harry Met Sally… again.

But before all that happens, let us take a quick look back at what gold and silver did this past year.

Given the Circumstances
If you looked at gold and silver prices compared to equities markets, you would be thoroughly unimpressed with their 2023 price action.

Gold was admirable by the end of the year… reaching for $2,100 per ounce and up nearly 15% after reaching (briefly) a new all-time high at $2,152 per ounce. But most of gold’s year was spent in a range… reaching for, and failing to hold, $2,000 per ounce.

Silver lagged gold all year. We started the year at $24.08 per ounce. And we will finish the year only slightly above that figure in a couple of business days.

That being said, I believe both metals did well given the circumstances.

All year long, gold and silver prices faced significant headwinds from the U.S. dollar, from Treasury yields, and from the Federal Reserve (Fed). Yet, both gold and silver held in range through October.

The U.S. dollar showed signs this year of strengthening. Although it did hit a low below 100 in July, most of the year was spent north of 100 and reaching higher. The dollar touched near 106 in March and near 107 in October, before falling back around 101 in the last quarter.

Most of the year, the talk was of U.S. dollar strength.

Treasury yields were another deterrent for higher gold prices. We saw Treasury yields soar from 0.11% to over 5% in virtually no time at all. If investors are offered the “safe” return of Treasuries at 5%, they tend to migrate away from gold and silver.

And of course, Chairman Jerome Powell and the Fed maintained their hawkish tone all throughout the year. They threatened to hold interest rates “higher for longer” to defeat the sticky and persistent foe, inflation… until nobody believed them anymore.

None of this was positive for higher gold and silver prices. Yet, gold and silver held their ground. Then, they started moving higher in the fourth quarter.

Support Then Sparks
All throughout the past year, gold tested upside resistance at $2,000 per ounce. All throughout the past year, gold tested downside support at $1600, $1,800, and $1,900. For nine months, gold failed to hold above $2,000. For twelve months, gold failed to crash downward through support… despite the fact that investors have largely not participated in this market yet.

You see, gold’s price support for the past two years has largely come from central banks. The world’s central banks have been reducing U.S. dollar positions in their reserves in favor of gold.

In 2022, central banks bought more gold than at any other time going back 60 years. In 2023, central banks are poised to buy even more than they did last year.

The banks favor gold’s proven ability to preserve purchasing power as well as gold’s proven performance during periods of geopolitical or economic instability. The buying by central banks stabilized the gold price for over a year and a half.

Then, after the October 7th surprise attack on Israel by Hamas, gold and silver moved higher.

Gold cleared the $2,000 hurdle and touched a new all-time high at $2,152 per ounce… before settling back down comfortably above $2,000 per ounce.

Silver is higher as well in the fourth quarter, but only to this year’s starting price. Silver is lagging well behind gold in terms of percentage appreciation.

What’s Next?
I am going to leave that part for January. Look for the next Information Line newsletter for our 2024 forecast.

However, I fully expect the Fed’s continued pause and hints of rate cuts in 2024 will have a positive impact on the prices of both gold and silver. In fact, the end of year surge we are seeing in gold is directly attributable to the fact that investors are now nearly 90% sure that the Fed is done raising rates.

If a pause has this kind of price impact, imagine what effect the cuts will have when they appear.

Until next week, best wishes to you and to your families and friends for a Happy, Healthy, and Prosperous New Year!

New Year’s Resolution #1… Keep What’s Yours!

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