From Peter Reagan at Birch Gold Group
This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Is $5,700 gold inevitable? Some mixed data from the world’s top mints on gold and silver demand; and how the global de-dollarization movement insulates nations from sanctions.
Compared to stocks, gold is 60% undervalued (for now)
MoneyWeek’s Dominic Frisby is an analyst to watch. His precious metals analyses are full of insights, and his latest observation on gold’s price is fascinating. Frisby shows off his decades of experience by reminiscing about gold’s price trajectory from the late 1990s to now.
This isn’t just a nostalgia piece, though. Frisby points out three important points in gold’s price history: $250/oz in 1999, $1,910 in 2011 and $1,920 today.
Why these?
First:
There was the low in 1999 at $250/oz, marked for all eternity by Chancellor of the Exchequer, Gordon Brown, as he sold off two-thirds of British gold at the bottom of the market when there were no compelling reasons to do so.
Ouch. To give Gordon Brown the benefit of the doubt, surely he assumed gold was no longer a prudent investment. (But what did he replace it with? I’ve no idea.) But remember, 1999 was near the peak of the dot-com bubble. Safe haven investments were out of fashion. Unprofitable, high-growth tech companies were all the rage – and yes, that does sound familiar.
The dot-com bubble popped, markets tanked, and another bubble inflated in its wake – the one history remembers as the Great Financial Crisis. Gordon Brown probably felt severe heartburn the day gold reached its all-time high of $1,920 in 2011, a 668% increase over the 1999 price.
Frisby points out that the 2011 peak in gold’s price was the culmination of several years of a historic bull run. And, as we’d expect after a long bull run, the retracement that followed was considerable. And quite possibly heartbreaking to some gold owners. (Consider, though, even gold’s low points of 2013 and 2014 were significantly above the Bank of England’s selling price.)
Fast forward to today – gold’s price is $1,920 again. Does that mean we’re at the peak of another bull market? Frisby thinks not.
And here’s the kicker. When we compare the S&P 500 index and gold’s price ratio from 2011, and project forward to today? Gold should be $5,700/oz.
Now, just to be clear, that should be is arguable. Currently, the S&P 500 is valued some 30% higher than back then. So it’s more likely the case that gold is considerably underpriced compared to stocks, even after their decline from “astronomically overvalued” to “merely twice as expensive as the historic median.” Frisby doesn’t necessarily think gold will surge to $5,700/oz – it could, but what’s more likely in my mind is that stocks will continue their fall toward realistic prices.
So, either gold rises to meet the S&P 500’s price level, or the S&P 500 falls to reasonable prices. Either outcome, Frisby predicts, will leave gold owners in an enviable position.
UK’s Royal Mint posts record sales figures
UK’s Royal Mint announced that its sales of gold bullion increased by 25% year-over-year, and silver sales increasing 29% over the same period. Unsurprisingly, Royal Mint said that March had the highest volume of monthly sales as the Russian invasion of Ukraine spurred safe-haven demand and brought gold to a new all-time high. Interestingly, they saw a 5% increase in new buyers – so it wasn’t just goldbugs and silver stackers driving demand, but new investors interested in securing their savings, as well.
Andrew Dickey, the Royal Mint’s Director of Precious Metals Investment, is bullish on gold’s prospects this year. He said that recessionary concerns, general uncertainty and crypto market turbulence should all contribute to heightened gold demand:
Looking forward to 2023, many financial experts are expecting this momentum to continue, which will promote a level of confidence in investors of precious metals following IMF warnings of a recession. Evidence shows that previous recessions have had an impact on the gold price increasing, with the metal historically deemed a ‘safe haven.’
The U.S. Mint’s sales figures appear to be trailing those of Britain’s Royal Mint. But is it really a lack of demand, or is something else playing a role? Out of the four precious metals’ sales figures that the U.S. Mint revealed, we can’t help but focus on those of silver. For example, 3,499,000 1 oz American eagle silver coins were sold so far this month, compared to 5,001,000 coins sold last January.
Are the silver American eagle sales figures going to catch up to those of last January? The better question is: if they don’t, do we really believe it’s due to a lack of demand? We’ve spoken about the U.S. Mint having difficulty sourcing silver for a while now. If the total sales figure for this month clocks in below last year’s sales of silver American eagles while other world mints are posting record numbers, I believe it’s safe to conclude that demand is not the issue.
Rather, once again, that U.S. Mint seems unable to keep up with demand. Hopefully, we won’t see a return to the sky-high premiums that shocked silver buyers during the worst of the pandemic panic. Hopefully.
Even so, it’s probably a good idea to buy silver sooner rather than later – just in case…
Here’s why countries are hoarding gold during a time of rising interest rates
It’s not that often that the official sector steals the spotlight in the gold market, but we might be in such a time right now. And for good reason! Globally, central banks are buying gold faster than at any time in the last 50 years.
Via The Economist
(Side note: Here’s why central bank gold reserves are important.)
It’s not exactly a concidence that the last time we’ve seen this much gold bought by central banks, the year was 1967 and gold was still the global reserve currency. And neither is this point something we can overlook. In 1967, a central bank buying gold might have only meant buying the world’s tether. Now, it represents something different.
Kitco’s in-depth analysis delves into why countries are buying up gold during a time of rising interest rates and surging inflation. It’s a long-winded story that can just as easily be explained with a single sentence. Or, for that matter, a single word: independence.
Why? This is all in light of the most recent episode of weaponizing the U.S. dollar. There is no question that Russia overreached with its invasion of Ukraine. But by financial intervention via freezing assets and imposing sanctions (rather than a military intervention), did the U.S. make an overreach of its own? I’m afraid the answer is yes.
Sukhi Jutla, Sukhi Jutla, co-founder & COO of MarketOrder, put it this way:
Recent months have seen many central banks stockpiling gold – perhaps because of rising inflation, but it could also be part of a wider strategy to help them become sanction-proof.
BRICS is obviously representing a kind of trade competitor, among many other things, to Western nation groups. It includes countries that have felt the sting of being cut off from the Western financial system, a sensation they aren’t keen to continue experiencing. And wherever they go with their planned development of a new alliance, gold will follow.
“We are and will continue to see more nations use gold as a trading mechanism, or in some cases to back other trading mechanisms – whether they be local/regional currencies or digital assets,” said William Stack, financial advisor at Stack Financial Services LLC.
With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.
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As always, will enjoy it if it happens, but will NOT be holding my breath. FAR TOO MANY absolutely have to keep it low for various reasons. I’m prepared either way. Looking forward to $100 an ounce silver too. Promises, promises.
Can someone explain to me how $5700/oz gold is not simply another way of describing the loss of value of the $USD?. Obviously having gold or silver in hand for making some needed purchase/trade makes sense, but what difference would gold at $500,000/oz or silver at $33,000/oz make to anyone presently not trying to sell gold/silver? Until we get away from the idea that PM pricing in dollars has some intrinsic meaning absent an ironclad legal definition of what measurable weight of gold/silver equals a dollar, I cannot see any point to the discussion. As an aside, I have a little notebook of my dads’ (who was born in 1905) from the early 1930’s in Colorado recording his earning $.25/$.50/DAY as a laborer!
It is probably the dream of most stackers to pay off their mortgage through pm inflation.
Just checked the US mint web site. They want $80 oz. for new 90% silver dollars. Even bags of junk pre 64 silver going for $45+ per oz. locally
Hum, I’m only a dumbass but sounds like a rip-off somehow as silver spot is $21.65 today.
When I was buying junk silver my rule of thumb knowing those in the business have to make some profit or would not be in business, was 6 to maximum 10% over spot. Times have changed I suppose. I’ll take the $45 today!
Yep, miss those days, also. PM markets have been so heavily manipulated that suppliers who can deliver physical charge 30+% premiums, see London Whale and LIBOR slap-on-wrist encouragement to paper over empty vaults.
Our generation won’t have a way through this globalist dismantling of civilization anyway. Real/traditional money only works with moral citizen rule-of-law, i.e. no counterfeiting it, murdering for it, or stealing it (aka taxing its use by unrestrained govt), but ALSO goods and services are produced and can be purchased by mutually beneficial, two-party agreement. Free-market/society 101 stuff that goes over 90% of people’s heads because they purposely were not taught it.
I think we are a half century out from that full and necessary cleansing of cheaters and extortionists. Hopefully your grandchildren will launch well through what value lesson you preserved for them.
Bought $1000 face value of junk silver back when silver was less that $10. Will make good walking around money someday I figure.
I’ve a large ammo can packed with junk silver coins in rolls. It’s actually been a few years since I opened it. I really liked holding Ben Franklin half dollars almost as much as silver dollars. I’m not interested in selling now. I know it’s easy to buy but can a person sell?
Yes there are many places that will buy your metals. Kitco is just 1 of many.
Certainly but are these outfits going to PAY ME $45oz? I highly doubt it. Like so many things , say residential housing, when looking for a home dealing with real estate agents it’s like everything they show a person is worth ten times its weight in gold. Try to sell, at least how I remember it, your house is just “not worth that”.
Lawyers, bankers, real estate brokers/agents, car dealers are all lumped in the same category of stench. When the term “upside down” became popular with car dealer crooks people desiring to “trade in” probably walked out of a car dealership bug eyed. “Sir, with what you owe you are way “upside down”. “But Kelly Blue Book says the vehicle with its low mileage and good condition is “worth” $xxxxx”. “Sir, we don’t use Kelly. We use the Black Book.”
Den of thieves, brood of vipers.
Beats tulips.
Been seeing “gold undervalued” for at least a decade.
“Going to break out soon!” for just as long.
Problem is that it is always based on “how it should be” and not “how it is”.
The entire market is a fraud, this is known, nobody really cares, so it will continue. When 95% of the market is “paper”, talking about reality is a joke.
No Name I have no idea how old you are but I suspect you are young (no fault of yours once upon a time we were all guilty)…every market today is a FRAUD…you are living a FRAUD country…in a FRAUD world.
He is 100 years of reality…but this is nothing compared to 5,000 years of GOLD REALITY.
(However, Silver is the move unless you have real wealth…just saying)
GOLD PRICES – 100 YEAR HISTORICAL CHART
Interactive chart of historical data for real (inflation-adjusted) gold prices per ounce back to 1915. The series is deflated using the headline Consumer Price Index (CPI) with the most recent month as the base. The current month is updated on an hourly basis with today’s latest value. The current price of gold as of February 15, 2023 is $1,838.02 per ounce.
https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart
Cool story bro.
I among many things have metals,that said,whatever the ounce will buy me today the ounce will buy the same even at twice it’s value,tis a inflation hedge/one of many items used in parallel economy.
All basics covered,sure,gets some metals AFTER all basics covered.
This informative post brought to you by Prepper Duck.
“All basics covered, sure, get some metals AFTER all basics covered”.
Wise wisdom…is always precious.
Basics,tis a subjective thing/idea/ect.
We just do the best we can with preps/local folks/skills ect.
I feel we will not have it all covered but we try and have a good start point may see thru the other side or at least clean it up enough for others to thrive in the other side,either way works for a old man like me.
Gold goes to $5700 when a Big Mac Combo is $90.00.
Silver’s price in particular is heavily controlled in the markets.
However, the costs to mine and bring it to market makes it the most undervalued asset on the planet.
With availability dwindling and uses increasing there will be some day, some time when its true value is recognized and can’t be controlled by paper contracts. Force majure?
I’ll wait…
Schoolmarm puts the kid in the corner for light punishment. US sanctions whomever. The west schoolmarms whomever. They’re catching on, the kids.
“When we compare the S&P 500 index and gold’s price ratio from 2011, and project forward to today? Gold should be $5,700/oz.”
Serious question:
How did you come to the conclusion it’s not the S&P 500 that should be at 1400, instead?
I’m going to laugh if gold hits only $5,699.00!
I watched an interview with an Italian man who wept at losing the vineyard and his home his grandfather passed to his father and then to then weeper, who invested with Bernie Madoff and lost everything.
He lost sight of what real wealth was, his land and what it produced, not paper dollars.
I think the point of PM’s is not how many pieces of paper you can get, but what item of real value can you trade them for, no matter what the currency of the day might be.
Or, it’s just a shiny piece of metal.