from Birch Gold Group:
After shattering 30 all-time high price records, global demand for gold also hit an all-time high this year. Is massive demand causing record high prices? Or are high prices causing fear of missing out? Let’s dive into the forces behind record gold demand…
Your News to Know rounds up the most important stories about precious metals and the overall economy. This week, we’ll cover:
- Gold demand hits $100 billion for the first time ever
- Election year is good for gold regardless of the results
- Something is amiss in the inflation readings…
- …should we believe them or not?
TRUTH LIVES on at https://sgtreport.tv/
Gold demand sets new record over $100 billion
As the World Gold Council noted in a recent report, gold demand recently passed $100 billion, and almost nobody noticed. Well, Bloomberg did. And the Financial Times is paying attention.
Central banks haven’t broken the previous year’s record (officially, that is), purchases are tracking 2022 levels. Total gold demand increased 5% year-over-year, which is no small development! Total gold demand for the third quarter came in at 1,313 metric tons – or 42,214,000 troy oz.
If demand continues this way, we’ll have to start asking where the gold is coming from.
Despite record demand, sales of gold coins and bullion bars remains subdued. Jewelry demand has declined as well – suffering from high prices, I assume. Now, for jewelry this makes sense – that $1,000 ring you were looking at now costs $1,400? You might reconsider. Investment gold, though, we expect to be price insensitive. When the price of gold bullion goes up, we’re mostly seeing loss of currency purchasing power.
With this in mind, who pushed gold demand past this landmark figure the most?
Here’s my list of suspects, with most influential at the top. This is mostly an intellectual exercise, though – demand is so strong and broad-based, one source of demand isn’t necessarily more or less important than the others:
- Central banks from around the world (but mostly emerging markets)
- Chinese and Indian gold buyers, who have kept buying despite sky-high premiums, dealer scams and government incentives against physical gold ownership
- Speculators who seemingly appeared out of nowhere and started buying gold by the billions
- Middle Eastern consumers who are using gold to flee from destroyed currencies
- Vietnamese consumers, who have formed an informal trading network because the official one wasn’t cutting it
Who’s missing on this list?
It’s mostly the Western gold investor. Here in the West, it’s somehow considered impolite or old-fashioned to buy gold bullion. Meanwhile, everone else in the world diversifies with physical precious metals as a matter of course. Why wouldn’t you?
Why this divide? I have some theories – basically they boil down to this: If you haven’t lived through a true financial crisis, the benefits of owning physical precious metals might not be as clear to you. The more recently you’ve been confronted with financial ruin, the more likely you are to see the benefits of owning tangible assets.
I don’t doubt that Western investors will return to the gold market. Obviously, that will contribute even more to demand. But I do wonder how many more ounces their money would’ve bought had they made their move sooner rather than later.
Here’s why either candidate’s win is good news for gold
The thing every gold investor no doubt wants to know is how gold will fare in the upcoming four-year tenure. Donald Trump and Kamala Harris are mostly on the opposing side of rhetoric, as was the case during Trump’s first candidacy with Hillary Clinton opposing.
Every pundit has an opinion, so we’ll focus on the hard data. We’ll start with Harris, given that she is Joe Biden’s VP and has arguably grabbed the reins as Biden’s term in office draws to a close.
Whether we blame supply chain snarls, the Fed’s absurdly slow pace of interest rate hikes or the trillions and trillions of deficit spending flooding the economy, Biden’s presidency will be remembered for historic inflation. That obviously helped send gold to its current levels.
The analysis I linked to above claims that a Harris presidency would be less inflationary than that of Trump. It’s not exactly clear why that would be the case… Harris has sworn to back massive spending on nearly every front, from small businesses to first-time homebuyers.
You personally might not benefit from these pork barrel programs, but dollars to fund them will be printed nonetheless. And we know what that means for the price of gold.
What about a second Trump term? Well, Trump has always often gone on record wanting a weaker dollar. A weaker dollar makes U.S. goods more affordable overseas – great for manufacturing and for exporters, not so great for everyone else. I hope you know this by now, but just in case: A weaker dollar invariably means stronger gold.
What isn’t being given nearly enough attention is that the Federal Reserve will probably continue to have an even bigger role in the dollar’s strength or weakness (regardless of who is nominated as chairman). The Fed has to cut rates. Lower interest rates means a weaker dollar and therefore higher gold price.
No amount of rhetoric can get around this issue. Today’s interest rates are still high compared to the last 24 years – and that was a period long enough that an entire economy adapted to cheap credit. In this situation, the Fed has to either keep rates high and let the dead wood, the cheap-credit-dependent malinvestments, collapse. That’s beneficial for long-term economic health – but obviously quite traumatic in the short term.
