from Birch Gold Group:
This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Gold hits 5-month high, Middle Eastern gold trends, and there’s a rate hike cycle going on, remember?
Gold nears $2,000 for the third time in three years
It’s not the most accurate thing to say, perhaps, from a technical standpoint, as gold has seesawed across that level quite a bit over the last three years. But in that time, there were three spectacles that brought gold to $2,000 from various sideways trades. Those were the lockdowns, the Russia-Ukraine war and now the conflict between Israel and Hamas.
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The strength of gold’s performance continues to affirm that investors are concerned. There has already been an oil price spike related to Saudi Arabian cuts after Russia invaded Ukraine. To the Saudis, that conflict was a lot more proxy than the latest one. Now closer to home, whether this and many other Middle Eastern nations get involved is on everyone’s radar.
It is a little strange to see gold hit the same high over and over. On one hand, it’s affirmative for prices. On the other, we can’t help but draw comparisons to the 2008-2011 period, as gold went up, down, then to a new all-time high. Is it doing something similar, but more protracted due to greater overall craziness of world affairs?
Many seem to think so, as Frank Holmes recently wondered if this was the start of a bull market in gold. A start around the $2,000 level? It’s a notion many gold investors will want to entertain. This video deep-dive from Incrementum says a “new golden era” might be upon us. And Saxo took note that there are many layers to the story of gold’s rise (beyond armed conflict).
Whichever of these debates we subscribe to, it’s clear that analysts see a lot of upside. Market participants aren’t exactly reluctant to ominously forecast “correction” any time an asset climbs, but this time, these voices appear lost in the noise.
Anyone with a close eye on the gold market over the last year knows it’s been doing very well. Seeing seasoned analysts suggest that some kind of bullish action might just be starting after all the outperformance we’ve seen is bullish in itself.
Egypt gold premiums skyrocket; Iranians stockpiling gold
Egypt has come up in the news this year as another country hoarding gold on the consumer level. It was not dissimilar to Turkey, though comparisons could also have been made to a few other nations. While not on the scale of Turkey, the tale of Egypt’s gold consumption is similar: a “who knows” sovereign currency and difficult access to foreign markets with comparative stability.
The war in Gaza pushed Egypt’s local gold price up 12% in two weeks. While Turkey poured its gold into the economy, Egypt went for a different approach by exempting gold-carrying travelers from various fees and hassles. This brought 1.5 tons of gold into the country within six months period, though premiums have soared even amid such a massive import boost.
Egypt will now likely join the likes of China among nations whose premiums considerably exceed that of LBMA spot. One could argue that this is merely proof that emerging-market currencies are flimsy, but did you know that gold recently hit an all-time high of $3,159 Australian per oz? You probably didn’t miss that gold has also posted highs in the Canadian dollar, as well as the British pound while Western markets wondered if $2,000 is coming again.
Clearly, the destruction of currencies is more complicated than we can cover here. The primary takeaway is, we should consider more data than simply gold’s spot price in U.S. dollars to determine its relative global performance…
Not waiting for any particular conflict to start, Iran has imported 7.45 tons of gold ingots on the consumer level in the six months between March and September. It’s now the 8th most popular import in the country. The reasons are likewise tied to a struggling economy with a weak currency, even as we are told marvelous trade partnerships with China and Russia are forming and strengthening.
To us, gold looks like the only safe haven in all of that.
Gold vs. the Federal Reserve
The Federal Reserve hasn’t yet conquered inflation, nor have they given up the fight. Pushing interest rates up to 5%, which is supposed to lure consumer dollars out of investments and into savings accounts, doesn’t seem to be working as planned. Even as banks beg for your deposits and advertise APYs as high as 5.4%, gold steadily rose over the last few weeks to just shy of $2,000.
Onlookers might find this strange, conflict or not, given the perception that high gold prices and high yields are supposed to be natural enemies. Like cats and dogs (or Alabama fans and Auburn enthusiasts), they simply cannot coexist. The economist’s explanation for this “common knowledge” is about opportunity cost. If you consider physical gold and a savings account as equivalents, gold doesn’t pay a yield. Thus higher interest rates are supposed to lure safe-haven investors out of precious metals, into the open arms of philanthropic megabanks who are delighted to pay you a nickel for every dollar you loan them.
