Perspective By Rich Checkan
Information Line - November 2023
Last month, I started this column lamenting how bad September was for gold and silver prices.
October was the opposite of September. Gold found its way briefly above $2,000 per ounce, and silver found its way above $23 per ounce.
What happened? Is it sustainable?
As always, I have some thoughts, and I am in the Big Easy at Brien Lundin’s New Orleans Investment Conference to share those thoughts with the investors in attendance. And of course… with you here as well.
However, who is doing the buying is critical information.
As I’ve mentioned several times this year, central banks have been buyers of gold for the past 13 years. Last year, central banks bought more gold than at any time previously in history.
The start of this year saw that demand continue. Central banks bought more gold in the first quarter of 2023 than they did in the first quarter of 2022’s record year.
But, since then, central bank buying has tapered off. It is said to be down 27% from last year’s blistering pace, but the central bank buying has been significant all the same.
Surveys suggest the central banks are buying…
Since Hamas attacked Israel on October 7th, new buyers have emerged… crisis speculators. These speculators have moved the prices on gold up through $2,000 and silver above $23.
Fears of escalation of fighting in the region continue to drive this trade despite short-term reprieves for profit-taking or for Federal Reserve follies.
Is It Sustainable?
I remember clearly the price action of gold when the planes hit the World Trade Center on 911. Gold spiked… $50 per ounce in intraday trading. Given gold started that day at $270 per ounce, the spike was significant.
Within a month, the price was back down where it began that fateful day.
Crisis investing, in my humble opinion, is not sustainable.
Central bank buying can be. At least, it can give the market some much needed downside support. In fact, it has been doing just that for some time now. It is the reason gold has held up so well despite treasury yields rising from 0.11% to over 5% in the blink of an eye.
However, central bank buying and crisis speculation cannot take to the lofty levels that many hard money investors expect to see in this current bull market.
To get there, investors need to get into the act.
The Missing Piece
Sure, they flooded into the market in the first quarter. Fears of the extent of the banking crisis drove them to gold.
But in the second quarter, they believed the banking crisis was over. I personally believe the crisis is just pausing, but investors felt safe and secure… and they stopped piling into gold.
All along, we’ve seen well-healed investors buying. They aren’t typically choosing between buying gold or buying necessities like food, shelter, and gas.
Main street investors are making those judgements right now. They’ll put those necessities on a credit card (and boy have they been), but they won’t make an investment into gold on a credit card at these high interest rates.
Since they can’t just refinance and take cash out of their home equity, gold purchases are on hold. With home finance rates at 8%, that simply is not an option for them.
Americans are struggling. What the Fed interprets as higher consumer spending and a resilient economy is really consumers buying necessities, on credit, at higher prices… thanks to the inflation of the past couple years.
The Federal Reserve’s interest rate increases are breaking the banks and breaking the backs of the middle class. Until things change, I don’t see the move to the next plateau for gold and silver prices.
What Will It Take, And What Should You Do?
For gold prices to catch fire sustainably, I believe we need to see a sustained pause in interest rate increases and the eventual reduction in rates.
Make no mistake. It is coming.
The Federal Reserve is at the end of its rope. They cannot go meaningfully higher with rates, because the $33.5 trillion debt cannot be serviced as is. And we are already seeing the appetite for U.S. debt drying up. It’s simply getting too risky with no signs of Congress cutting spending and becoming fiscally responsible.
Right now, Federal Reserve Chairman Jerome Powell is hoping strong words will buy some time. That’s all he really has. He is out of ammunition.
Knowing that, take this time, as you are able, to shore up your allocations to gold and silver.
Don’t chase the gold price higher. But don’t shy away from gold at these levels either. Work your plan. Fill your allocation.
“If you are buying gold for the right reason, there is no such thing as the wrong price or the wrong time.”
Let us help you Keep What’s Yours… now.
Send me an email today. Give me a call (800-831-0007). Come see me at Joel Nagel’s 27th President’s Week Annual Conference.
Make a plan. Work your plan. Own gold now.
Over time, measured in mismanaged fiat U.S. dollars (or in yen, euro, or pounds for that matter), the price is going higher. If that is something you doubt, simply zoom out.
Look at gold’s body of work over the past century… then, give me a call.
Editor's Note: Bill Bonner is the Founder of Bonner Private Research and owner of the Agora Companies. This article was originally published by Bonner Private Research on October 26, 2023. You can subscribe to Bonner Private Research here.
"Geopolitical tensions are highly elevated and pose important risks to global economic activity."
We have no reason to abandon our hypothesis. The financial world shifted in the summer of 2020. Thenceforth, the last shall be first...
The Spiral Effect
Treasury bond supply could soon hit record levels as unsustainable deficits and high rates create spiral effect, Bank of America says
Which brings us to our theme. It’s the ‘more to the story’ we’ve been hinting at. Several intriguing and dangerous trends are afoot; other ‘primary trends.’
Bombs Bursting in (their) Air
The mistake is so obvious, it must be no mistake at all. In WWI, by 1916, England, France and Germany were already worn out from two years of war. Left alone, they would have had no alternative but to work out a peace settlement. Enter the US with an almost inexhaustible supply of new money, soldiers and delusions…and the war continued for another two years – with perhaps 10 million more deaths, leading to the Bolshevik Revolution in Russia and the rise of Nazism in Germany.
Editor's Note: Nomi Prins is a best-selling author, financial journalist, and former global investment banker. At Rogue Economics, Nomi shines a light on the collusion that happens between Wall Street and Big Government behind closed doors, and she provides actionable steps for readers to protect and grow their wealth. This article was originally published on October 17, 2023. Click here to discover more of Nomi's insights.
As you read this, the U.S. debt smashed through a record level of $33.5 trillion. And it’s rising by the minute.
The De-Dollarization Wave Is Sweeping the World
The Other Contenders
Sidestepping the Dollar Is a Megatrend