29 December, 2023
The odds are higher than you might think…
And we’re about to tell you exactly why the $3,000 level is realistic.
There are several forces at play. Some of them are unprecedented.
They are poised to drive gold higher… despite pretty much everything that has been holding gold back.
Higher interest rates… a strong dollar… well, these days, gold has been delivering fantastic growth in spite of these reasons.
We aren’t saying that gold will go up in a straight line. Nothing does.
But in the long term, the outlook for gold is great.
And here’s why we think it can breach $3,000 per ounce next year.
As of writing, gold has reached its all-time nominal heights. On Sunday, December 3, its price soared beyond $2,120 per ounce.
One of the reasons gold has been on a tear is market expectations.
After a series of interest rate hikes, central banks around the world are expected to start lowering interest rates sometime in 2024.
That’s what everybody’s attention is directed to. And fair enough, interest rates are a powerful driver for gold. Low interest rates (and a weaker U.S. dollar that results from them) push the price of gold up. High interest rates depress the price of gold.
But interest rates are still high. In the U.S., the benchmark rate is over 5%.
However, central banks play another key role in the gold market.
In 2023, central banks have been buying massive amounts of gold. In the first half of the year, they bought 387 tonnes of gold to store in their reserves. World Gold Council points out that it’s the highest amount of gold purchased by central banks since 2000.
And note that we’re talking about the first half of 2023.
The timing of this is peculiar… turns out, central banks aren’t that bad at investing in gold after all. They purchased massive quantities of gold right before it started soaring.
Is it a coincidence? Maybe. But a curious one, given that central banks are the ones in charge of interest rates, which have an outsized impact on gold.
And they have plenty of capacity to continue buying gold. For example, the single largest central bank buyer of gold in the world was the People’s Bank of China. It bought 103 tonnes in the first half of 2023.
But even after PBoC went on a gold shopping spree, its gold reserves as a percent of the total are just four percent.
In other words, it can easily double or triple its gold holdings if its current interest in gold remains. And we do not see any reason why it wouldn’t.
The world’s geopolitical situation is worsening. The war in the Middle East continues, and reportedly, U.S. warship and commercial vessels have been recently attacked by drones in the Red Sea.
This doesn’t bode well for global peace.
And central banks, much like any other investor, turn to the ultimate safe haven asset: gold.
But there’s another force that could drive gold upwards.
Central banks are some of the world’s largest gold buyers.
Individual investors can’t match their financial resources… but they can make an impact on the price of gold nevertheless.
Just recently, the CME announced that it had added options to its gold and silver microfutures.
These new tools give individual investors an opportunity to bet on the direction of the price of gold at a reduced cost.
Trading in those options is growing at over 20% per year, according to CME, as investors are looking to find new ways to get exposure to the price of gold and silver.
The CME also says that it has observed growth “in every region and every client segment” when it comes to its new gold products.
No single individual investor can match the prowess of an institution or a central bank.
But we saw what happened to the “meme stocks” when thousands of investors decided to stick it to the system and drive the prices of several stocks upwards.
This “silent wave” of individual investors who are tired of mainstream narratives will only grow and become more prominent.
And now they have more tools at their disposal than ever.
We will not be surprised to see some “meme momentum” in gold, as well as other precious metals and Canadian mining companies.
In our view, it’s long overdue.
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Disclaimer: This report is for informational use only and should not be used an alternative to the financial and legal advice of a qualified professional in business planning and investment. We do not represent that forecasts in this report will lead to a specific outcome or result, and are not liable in the event of any business action taken in whole or in part as a result of the contents of this report.
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