Gold goes past $2,700 per Oz

Gold has now gone past $2,700 per Oz for Dec 2024 futures, and all this is happening after interest rates have started falling globally. 

Globally among the developed countries - their governments, most of their corporations and citizens have accumulated huge unsustainable debt, and hence central banks can't keep interest rates higher for longer. Already, central banks like the US Federal Reserve have done a lot of damage to its citizens, corporations and government by keeping interest rates unsustainably higher for longer, and now are forced to rapidly cut interest rates to reduce further damage. The effects of the damage itself which is already done, will only be visible in coming months. 

Hence we can expect further jumbo interest rate cuts in coming months, across the developed world which would put upward pressure on gold prices to raise higher.

The fact that just the first interest rate cut in the US, has pushed the gold prices to $2,700 per Oz, and further maniac interest rate cuts which are nevertheless coming, given huge debt levels - gold prices would only be under pressure to go higher above $3,000 per Oz pretty soon.

 

Gold has found a strong floor at $2,500

Since March - April of 2024, globally the financial markets have seen extreme increase and decrease in rate of volatility (as measured by financial market volatility index - VIX), like it happened in mid-April or in early August. Even during these periods Gold held steady.

Also not to mention that Gold has been mostly trading above $2,500 per Oz during this period since March -April 2024.

To be sure, while Gold has been strong, staying above the milestone of $,2500 per Oz, if there is a major event like a financial crises, or a global recession, or a sudden surge/spike in inflation, or higher interest rates staying higher for longer than anticipated - under all these circumstances financial markets will be impacted not mildly but significantly with dire consequences in  the aftermath. Gold however will be mildly impacted, and might go below $2,500 per Oz, or in a worst case scenario all the way down to $2,000 per Oz which is a 20% drop consistent with past US recessions like in 2008 or 2000-2001. 

However the good news is if Gold investors can ride this period without panicking, Gold has potential to be a multi-bagger - go 5x-6x higher in the aftermath of this financial event.  Between 2001 to 2011 in aftermath of 2000-2001 recession - Gold went up from $250 (yes two hundred and fifty only) per Oz in 2001 to $1,950 per Oz in 2011 - a 9x-10x multi-bagger in just one decade.

Time To Buy - Gold and Silver Mining Stocks

Now that Gold has broken above $2,300 an Oz in April 2024, and remained steady at these levels.  $2,300 an Oz, is the new base price for Gold.

Silver also has broken above $30.0 an Oz in May 2024, silver has broken above this price first time after 2012-13, after more than 10 years. Now $30.0 an Oz, has become the new base price for Silver.

As a gold and silver metal investor, happy to see these breakout levels for both these precious metals, both of which are in the beginning of a major bull market, which will go into mid 2030s, considering the magnitude of inflation, particularly hyper-inflation which has been created globally. The inflation story is not ending, and inflation will only get bigger as creating inflation is the only solution governments have globally to solve problems.

While gold and silver metal can be bought even now, as they are going even higher for rest of this decade, and into mid 2030s, one sector where price is still cheap in gold and silver mining stocks. Gold and silver mining companies stocks have never been this cheap, and last time more than 10 years ago during 2011-2013 these mining stocks had peaked and since then had fallen. 

Now with record inflation globally since 2020 Covid pandemic, and prices of everything from cars to food to hair cut increasing in double digits globally, in a high inflationary cycle since 2020-2021 - precious metals which protect purchasing power are the ultimate inflation protection assets. 

Therefore its high time to buy these gold and silver mining company stocks, which will only go up as more new gold and silver need to be digged from earth, and current levels of above ground gold and silver metals are decreasing given very high demand from top buyers of Gold and Silver globally - China, India, Singapore, Turkey etc. Even in western markets, demand for gold and silver bars from retail investors has gone up recently in 2024. Costco was able to sell $800 million in Gold bars in 2 months over retail counter, after they introduced 1 Oz gold bar as a product over retail counter at their Costco wholesale stores. Once Hedge funds and other large institutional investors in western countries who have noticed this surge in interest in gold and silver get in, that's when even gold and silver mining company stocks will take off, along with the actual metals.

 

Gold Settles Above $2,300

Gold prices have now crossed $2,300 per Oz. 

Gold Has Not Reached Peak Levels

 Gold price are above $2,100 per Oz for few weeks now, and even touched $2,200 per Oz levels last week. Already many so called pundits and experts are saying Gold has reached all time highs, peak levels etc.

This is absolutely wrong. Gold is very cheap now.

Let me explain -

When Gold prices reached $1,900 per Oz 13 years ago, in 2011 that was much higher value for Gold in 2011 itself, then its current nominal value at $2,100.

Because in 2011, purchasing power of $1,900 worth of money was much higher then the value of $2,100 worth of money now as paper money gets inflated and loses its purchasing power over time.

Similarly when Gold prices had reached $850 per Oz in 1980 that was the all time high for gold, priced in USD.  Because the purchasing power of what all you could buy in 1980 with $850, was much higher then what little you can buy with $2,100 today.

Therefore in real purchasing power terms Gold is still very cheap. 

Gold Steadies Above $2,100 For A New Bull Market

Gold has steadied above $2,100 per Oz for more then a month now. This at a time, when interest rates have been highest since 20 years, for more than a year now in US, EU and UK. Even Japan is about to increase interest rates, for first time since 2007.

Yet, Gold typically does well when interest rates start falling. Just imagine how Gold would perform when interest rates do start falling, as high interest rates cannot be held on higher for longer, without some credit crises or financial crises happening, which will cause interest rates to fall.

So Gold is at the cusp of a major new bull market. 

The previous major bull market for Gold, which lasted from 2001 to 2013 - increased the price of Gold from $250 per Oz to $1,900 per Oz - and the bull market which started in 2001 has continued in other currencies beyond 2013.