We are noticing a huge surge in demand for gold bullion products – either bullion coins or common-date $20 Gold Liberty and Saint-Gaudens double eagle gold coins even in circulated condition. Many more investors than before – or at least since the Great Recession of 2008-09 through the dollar downgrade of 2011 – are buying gold, and like it did then, will eventually push gold prices upwards. We are seeing evidence of this throughout America in several markets and in a recent Gallup poll.
The Gallup poll showed that Americans’ choice as one of their favorite investments for the long-term is gold, second only to real estate. In the past year, gold leaped over stocks, rising from 15% to 26%, from third place to second place and reaching its highest level in this annual poll (taken every April) since 2012. It’s interesting to note that, at least, some of gold’s gains came from people who previously favored real estate and stocks – further proof that gold is an increasingly important asset.
Gallup: Which of the following is your favorite long-term investment? (Poll taken April 2022 & 2023)
Investment 2022 Choice 2023 Choice
Real Estate 45% 34%
Gold 15% (#3) 26% (#2)
Stocks 24% (#2) 18% (#3)
Savings/CDs 9% 13%
Bonds 5% 7%
(No answer) 2% 2%
No wonder we are seeing such interest in gold bullion products in this time of multiple financial and geopolitical challenges. I’m sure we will also see a good percentage of these gold bullion buyers move up to rare gold coins within 18 to 24 months, as we have seen in all gold bull market cycles in the past.
Major Banks See Gold Rising to Record Highs in Debt Default Scenarios
Besides bullion demand, we now see rising gold ETF demand among Wall Street investors and rising demand for gold on the futures market, as well. The leading Australian bank, ANZ (Australia and New Zealand Banking Group), said on Monday, May 15 that, “We expect gold ETF flows to turn positive for the rest of this year.”
ANZ Bank has forecast gold rising to a record $2,100 an ounce by the end of 2023 and $2,200 in the second half of 2024. They see any price dips, like this week’s dip below $2,000, as buying opportunities.
Central Banks Continue to Load up on Gold in Record Amounts
In all the talk about the “de-dollarization” of global commerce, pundits talk about which currency will replace the dollar – will it be the Chinese yuan, the euro, or some combination of many currencies?
How about gold? The central banks of the world keep accumulating gold in record amounts. Demand for gold among central banks reached a first-quarter record high in 2023.
Despite gold’s strong price rise in the first quarter – rising 9.2%, from $1,812 to $1,979 – the World Gold Council’s (WGC) quarterly “Gold Demand Trends” report stated total gold demand was up only 1% from the same quarter last year but that was a quarter of high demand due to Russia’s invasion of Ukraine in February of 2022. This year, in the three months ending March 31, central banks added 228 metric tons of gold to their coffers, the highest total in any first quarter since central bank gold data began in the year 2000.
This follows a year of robust central bank gold buying in 2022 – the most buying of any year since 2011.
Top central bank buyers last quarter were (1) The Monetary Authority of Singapore (69 tons); (2) The People’s Bank of China (58 tons) and Turkey (30 tons). Also, Chinese consumers bought 198 tons of gold jewelry last quarter, 41% of the global total, with demand resurging after the removal of Beijing’s strict zero-Covid measures. Investment gold demand surged in March after the failure of Silicon Valley Bank.
The WGC added that total gold supply also increased by 1% year-over-year, including a first-quarter record high in mine production of 856 tons and higher recycling of 310 tons, so this year’s high gold price is causing some recycling as well as some re-opening of marginal mining operations to add to supply.
The World Gold Council expects the most gold buying to come from the emerging nations, dubbed the BRICS (Brazil, Russia, India, China and South Africa: India bought about three tons in the first two months). This ties in with the BRICS becoming identified with the “anti-dollar” or “de-dollarization” movement of the future, in which the U.S. dollar will soon be replaced as the leading foreign exchange currency – either by the Chinese yuan, gold, cryptocurrencies or by a combination of choices.
Basically, there is a war for the control of the 21st Century between the U.S. and China, with the buying and accumulation of gold being one of the battlefields for monetary control between the U.S. and China, supported by the other BRICS nations. The BRICS need a dominant hoard of gold to support their various currencies against the dollar and euro. More and more global trade is now denominated in Chinese yuan, with China making more and more separate agreements with nations to trade only in yuan.
The transition is already underway. It used to be that all commodities were traded universally in terms of the U.S. dollar. Now, about 50% are traded in dollar terms, the other 50% in yuan or another currency. Russia has already deferred to China by trading in yuan due partially to sanctions following its war against Ukraine. China recently settled a liquid natural gas (LNG) trade with France in yuan for the first time ever. All of this supports gold, as another “anti-dollar” trade.
More Investors Switch from Crypto to Gold
The Wall Street Journal recently featured an article on how investors are switching from Bitcoin and other cryptocurrencies back to the proven, “old reliable” alternative currency – Gold.
The article stated the number of Google inquiries about buying gold hit a record as “Crypto Investors Chase World’s Oldest Asset,” explaining, “the old-school precious metal has new allure for a generation seeking a respite from the cryptocurrency roller coaster.” Yes, even younger investors like a 27-year-old Canadian college student profiled in the article are seeking real money “in uncertain times.”
This is one of the main reasons why gold bullion coin sales have turned around in the last few months at the U.S. Mint and the SPDR Gold Shares, the leading gold exchange-traded fund (ETF) has gained about 20% in the last six months.
Of note, is that as of May 31, the U.S. dollar is off to its worst yearly start since 2018 and it is down 9.3% since its high in September 2022. Meanwhile, Bitcoin has lost about half of its value since late 2021 and it has lost much of its “magic dust” appeal of “always going up” after falling over 75% at one point. The abrupt collapse of FTX, a leading crypto exchange, also caused a decrease in confidence among some crypto fans.
One sign of the times is that crypto advertisers spent $70 million on several ads in the 2022 Super Bowl, but not one crypto ad ran in the 2023 Super Bowl. The entire cryptocurrency market is valued at $1.2 trillion, while all the known above-ground gold market assets are valued at $14.5 trillion – or 12 times more, so it is a fallacy to compare the $2,000 price of an ounce of gold to one Bitcoin at $28,000 or so.
As we have often said, Bitcoin is only 12 years old, at most, while gold has been prized by nearly every civilization on every continent, independently, for 5,000 years, from ancient Egypt to Mexico. Gold is what partially drove global exploration, luring Europeans to the New World and the 49ers to California. Modern nations keyed their currencies to gold as recently as 50 years ago and most paper currencies only lost value when they abandoned gold as a price stabilizer. Many investors are now waking up to that fact and buying gold as it is up 586% since 2000 and the Dow and S&P are up only 197% and 184%, respectively.
