The Federal Reserve’s recent interest rate cuts by 25 basis points has sent ripples through the financial markets. While this move initially caused a dip in gold prices, the long-term outlook for precious metals remains strong. Let’s explore why gold will continue to grow in price.

Market Reaction to Interest Rate Cuts

Following the rate cut, gold and silver prices experienced a short-term decline. Typically, a drop in interest rates would lead to an increase in the price of gold. This unexpected reaction was influenced by the Fed’s hawkish tone regarding future rate cuts. Even though there was an interest rate cut, the Fed implied there would be less interest rate cuts in 2025. However, these short-term fluctuations do not affect the underlying strength of gold as an investment.

The Long-Term Bullish Case for Precious Metals

Despite the Fed’s cautious outlook and attempts to control inflation, several key factors suggest that gold will continue its upward trajectory in the coming years:

Economic Uncertainty: The global economic landscape remains uncertain. Geopolitical tensions, potential recessions, and ongoing financial instability create a favorable environment for gold as investors seek safe-haven assets to protect their wealth.

Inflation Concerns: Inflation is driven by fiat currency. This issue is not going away. Gold has historically performed well as a hedge against inflation.

Monetary Policy and Debt Levels: While the Fed’s current stance is less dovish, the long-term reality of high national debt and the need for supportive monetary policy will lead to further rate cuts. These measures tend to weaken the dollar and boost gold prices.

Gold as a Long-Term Investment

It’s crucial to remember that gold is a long-term asset. Although its value may fluctuate in the short term due to market reactions and economic policies, its historical performance showcases its ability to preserve wealth over time. Unlike other investments that can be more volatile and dependent on market cycles, gold offers a stable and enduring store of value.

Short-term price movements should not sway investors; instead, they should focus on the broader economic and geopolitical factors that underline gold’s intrinsic worth. Holding gold as a long-term investment can provide financial security and diversification benefits, protecting your wealth.

Conclusion

While the Fed’s recent rate cut actually led to an initial dip in gold prices, the long-term outlook for gold remains positive. Economic, inflationary, and global uncertainty create a strong foundation for gold’s continued growth. Gold should be viewed as a long-term asset, capable of preserving wealth and providing stability.

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Looking back over 2024, gold prices surged to record highs, significantly influenced by central bank buying. This trend was marked by unprecedented rates of reserve accumulation by banks around the globe. Let’s explore the key events and their impact on the gold market over the past year.

Record-Breaking Central Bank Purchases

Central banks were on a gold-buying spree throughout 2024, with total purchases reaching historic levels. Countries like China, Turkey, and India led the charge, significantly bolstering their gold reserves. For instance, the People’s Bank of China added a substantial 27 tonnes of gold during the first quarter alone, contributing to a total global net purchase of 290 tonnes in that period – the highest Q1 total since records began in 2000.

Geopolitical Tensions and Economic Uncertainty

Geopolitical tensions, particularly the ongoing conflict in Ukraine and the resulting sanctions on Russia, prompted central banks to diversify their reserves away from U.S. Treasuries. This strategic shift was aimed at safeguarding national wealth against potential fiscal instability. By the end of 2024, these banks held 36,089 metric tons of gold, reflecting a significant increase from previous years.

Response to Interest Rate Cuts

A notable factor that impacted gold prices was the response to interest rate cuts by major central banks, including the Federal Reserve. As predicted, the Fed implemented a rate cut in September, which reduced the opportunity cost of holding gold. This move made gold a more attractive investment, contributing to its bullish run and pushing prices above $2,600 per ounce as we approach the end of the year.

The Role of Exchange-Traded Funds (ETFs)

In addition to central bank demand, there was a resurgence in demand for gold-backed ETFs throughout 2024. Western investors poured into these funds, particularly in North America, further driving up gold prices. The combined effect of central bank purchases and ETF inflows created a robust market for gold, sustaining high prices throughout the year.

Conclusion

Reflecting on 2024, the gold market was shaped by a confluence of factors but one of the biggest was central bank buying. As they strengthened their gold reserves and investors sought safe-haven assets, the outlook for gold remained strong. Given the favorable market conditions, 2024 presented a prime opportunity for people who invested in Gold.

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After a strong year for gold and silver, the market has seen a downturn since the election. It can be easy to get nervous and panic, but it’s important to remember that these short-term movements are a normal part of the market cycle. Instead of panicking, this is a great time to recognize the value of dollar cost averaging.

Understanding Market Movements

Precious metals, like any other asset, experience price volatility. Over the past few weeks, we’ve seen some significant swings. This price “ping pong” can be influenced by various factors, including economic data releases, geopolitical events, and market sentiment shifts. While these movements can be dramatic, they are typically temporary and do not alter the long-term value proposition of investing in precious metals. The world is still printing money, which means gold will continue to be a good investment when pitted against fiat currencies.

The Power of Dollar Cost Averaging

One of the most effective strategies to manage market volatility and avoid emotional reactions to market movement is dollar cost averaging (DCA). This approach involves regularly investing a fixed amount of money into precious metals, regardless of the price. Here’s why Dollar Cost Averaging is a smart strategy:

1. Mitigates Risk: By spreading out your investments over time, you reduce the risk of making a large purchase when prices peak. This helps to smooth out the effects of market volatility.
2. Builds Discipline: Dollar cost averaging encourages disciplined investing habits. It removes the emotional aspect of market timing and helps you stay committed to your long-term investment plan.
3. Cost Efficiency: When prices are high, your fixed investment buys fewer ounces of precious metals. When prices are low, the same amount buys more. Over time, this can lower the average cost per ounce, enhancing your overall return.

Practical Tips for Dollar Cost Averaging

• Set a Schedule: Decide how often you will invest (e.g., monthly, quarterly etc…) and stick to it.
• Determine an Amount: Choose a fixed amount to invest each time, aligning it with your financial goals and budget.
• Don’t Get Fixated on the Price: The price will go up and down, but it will continue to go up in the long term. Instead of being paralyzed by watching the price, buy at regular intervals regardless of it.

Long-Term Perspective

At Fisher Precious Metals, we advocate for a long-term investment approach. Precious metals have proven to be a reliable store of value over time, preserving wealth through economic ups and downs. By focusing on the big picture and consistently applying dollar cost averaging, you can confidently navigate short-term market fluctuations.

Conclusion

Recent movements in the precious metals market are a natural part of the investment journey. Remember the importance of dollar cost averaging instead of getting caught up in the daily price swings. This disciplined strategy allows you to build a solid portfolio over time without the stress of market timing. Stay the course, and keep your eyes on your long-term goals.

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It is the day after the election, and gold and silver have tanked. What should you do? Should you sell, should you buy? Will gold and silver continue to tank? Here are some things to keep in mind.

Trump’s Economic Perception

• Better for the Economy: President Trump is perceived as better for the economy. His policies, which focus on reducing regulations and taxes, are conducive to economic growth.
• Calming Geopolitical Conflicts: Trump has made clear that he intends to lower the temperature of the conflicts around the world, such as in Ukraine and the Middle East. Geopolitical conflicts typically lead to buying gold as a safe haven asset. Demand for gold and silver could lessen which could make the price tank. 
• Cutting Government Waste and Tightening Trade Deficits: His proposed policies aim to reduce government spending and address trade imbalances, which can positively impact the economy.

However, Remember:

• Debt Accumulation: It’s crucial to remember that Trump’s administration added a substantial amount of debt, nearly as much as the current administration has.
• Real Estate Debt: Trump’s real estate  business empire is built significantly on debt.
• Promises and Debt: His promises of tax cuts and increased spending (e.g., no income tax, no tax on Social Security, no tax on tips, lowered corporate and personal tax rates, and military rebuilding) will likely require significant borrowing, potentially increasing national debt.
• Rebuild the Military: Trump has made promises to rebuild our nations military, this also carries an expense.
• China, Japan & the EU: These regions are aggressively expanding their monetary base, printing more money to stimulate their economies. This practice typically leads to inflation, which in turn can drive up the prices of precious metals.

All of this requires money, and it has to come from somewhere! All of that new money, rather than, making gold and silver tank, would lead to an even higher price.

Investment Strategy

Bottom line—today is a day to buy. Gold and silver have tanked. BUY THE DIP! I never say that, but I am saying that today. DON’T GET GREEDY thinking the metals will get cheaper. DON’T be scared to buy. Just buy a little—you don’t have to buy a lot. Gold will be $3500 – $4000, and silver $50 by the end of next year. Global expansion of the M2 money supply is sufficient in itself to drive the metals higher.

Remember, investing is about balancing risk and reward. Diversify your portfolio, stay informed, and make calculated decisions based on the latest economic data.

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Gold’s price rise reflects concerns that world bankers, international monetary authorities (and you and I) should know.  Everyone in the know understands this is unsustainable.  The populous is told everything is fine and just continue to put your trust in the central banks. 

Debt is very, very easy to create with fiat currency.  However, the more debt you make, the less valuable is the previous debt you created.  You can not randomly create gold.  It only inflates at about 1.8% per year.  World governments know this, hence their increased gold holdings.

Not only is debt growing but, of course, the interest due on that debt continues to grow. Tell me, is this sustainable?

Gold price will continue to rise and do very well for the balance of 2024 and into 2025.  We could see $3,000 this year and probably $3,500 to $4,000 next year.  Silver should ride its coattails and maybe outperform.

Finally, I know that the gold price seems high. I have been at this for 30 years. It has always seemed high, and it’s going higher. Dollar-cost averaging in modest amounts on a consistent basis is, and always has been, the best approach.

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Great returns, right?  Well, all the liquidity (money) created by central banks has to go somewhere, right?  So, are all these 1 year asset classes performing well in real terms, or does all this money have to find a home?  People know that if they keep it in the bank at negative real yields, it is depreciating.  Thus, government basically incentives people to buy some asset, any asset with the hope their purchase will outplace inflation, which at its core is M2 (broad money supply) growth.

Money supply growth drives GDP growth – while everyone feels like they are barely treading water or even falling backwards.

What to do?

• Buy precious metals (tangible and private)
• Buy Bitcoin
• Buy technology (the only stock sector I would invest in)
• Buy real estate (do you want the hassle)
• AVOID fixed income and any debt instrument (Bonds,  Treasuries and CD’s are debt instruments)

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With the world becoming more and more unpredictable, central banks worldwide are increasingly trading U.S. dollars for gold. There are several compelling reasons behind this shift. By delving into these specifics, we can gain a clearer understanding of how this could influence the price of gold.

Russia

Russia has been at the forefront of this movement, and its central bank has significantly ramped up its gold purchases. They have increased its daily gold acquisition by 700%. This strategy is part of a broader effort to reduce reliance on the U.S. dollar, driven by geopolitical tensions and economic sanctions stemming from the conflict in Ukraine. By holding gold, Russia aims to safeguard its economy from external shocks and assert greater financial independence.

Turkey

Turkey has significantly increased its gold reserves, reaching an all-time high of 584.93 tonnes in the second quarter. This aggressive expansion is part of a strategic move to diversify its foreign exchange reserves and hedge against geopolitical risks. Since 2016, the Turkish Central Bank has added nearly 300 tonnes of gold to its holdings and 14.63 tonnes in 2024 alone.

India

In 2024, India has significantly increased its gold reserves, with the Reserve Bank of India (RBI) purchasing nearly 13.3 tonnes of gold in the first two months of the year. This move is part of a broader strategy to diversify its foreign exchange reserves and hedge against inflation. The RBI’s gold purchases have contributed to a $3 billion rise in forex reserves, reaching $648.5 billion

China

In 2024, China has continued its aggressive gold-buying spree, with the People’s Bank of China (PBOC) purchasing an additional 18 tonnes of gold in the first quarter alone. This move is part of a broader strategy to diversify its reserves and reduce reliance on the U.S. dollar amid ongoing global economic uncertainties. China’s central bank has been transparent about its gold-buying activities, signaling a strategic shift towards greater financial security.

The Case for Trading Dollars for Gold

There are several reasons why central banks are opting for gold over the dollar. First, gold is a tangible asset with intrinsic value, unlike fiat currencies, which can be subject to inflation and devaluation. Second, gold acts as a hedge against economic instability and geopolitical risks. Third, gold’s liquidity and universal acceptance make it a versatile reserve asset.

De-Dollarization Movement

This trend is part of a broader de-dollarization movement in which countries seek to reduce their reliance on the U.S. dollar. By diversifying their reserves with gold, these nations aim to protect their economies from potential dollar fluctuations and economic sanctions. As Americans, it is easy to become self absorbed and internally focused.. However, the world is quickly moving away from the dollar and towards gold. As the dollar becomes less demanded, it will become inflated even more than it already has.

Trading for Gold’s Impact on Prices

As more central banks buy gold, the demand for this precious metal increases, driving up its price. This trend is likely to continue as geopolitical tensions and economic uncertainties persist. For people like you and me, this means gold could become an even more attractive asset, potentially leading to higher prices. Remember, as the dollar continues to lose value through inflation, the price of gold continues to rise.

Future Outlook

Looking ahead, the demand for gold is expected to remain strong. Central banks’ continued shift towards gold is likely to keep prices elevated, making it a valuable asset for both national reserves and individuals. 

The trend of central banks trading dollars for gold is driven by a desire for greater economic security and diversification. As this movement gains momentum, it has the potential to drive gold prices even higher.

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Gold is in the process of establishing a new base at $2,500.  Much as when gold fought to establish a base earlier this year at $2,000, and traded above and below for a period, we now see the same thing at $2,500.  If I am an investor, what should I do?  Let us take a look at the charts first:

1 Year Chart

Above is the 1-year chart of gold (gold-color line and price of gold on the right side) and the S&P (black line and price on the left side).  I drew the blue line from start of the period to today.  As you can see, gold has both underperformed and overperformed the S&P in the last 12 months.  Gold is currently out-performing the S&P on a 1-year basis.  The trend is definitively up.

5 Year Chart

Above is the 5-year chart of gold, the S&P (black line) and percentage increases for both on the left-hand side of the chart.  The red line is the simple moving average of the gold price. 

Gold was pretty flat from 2021 to 2023, but has since accelerated upward, now outperforming the S&P on the 5-year time frame.  Are you surprised?

Personally, I was calling for $2,500 by the end of this year, not as early as this past August.  Where will gold end in 2024?  I do not know, but what I do know is that gold is going higher.  Ask yourself, “what would cause gold to decline?

• Declining sovereign debt?
• Declining deficits?
• Decreased geopolitical tensions?
• No future monetary stimulus?
• BRICS’s abandoned
• Petrodollar reinstated?

Bottom line, everything that drives gold higher will remain in place.  I predict we will easily see gold at $3,000 in twelve months and very possibly $3,500 by end of 2025.

Finally, I hear “gold is too expensive” all the time.  Please consider this:  The gold price never really changes.  Rather, the denominator (the U.S. dollar) continues to decline in value.  It just takes more of increasingly less valuable fiat currency to purchase an ounce of gold, which doesn’t change.

“Gold is a treasure, and he who possesses it does all he wishes to in this world.” – Christopher Columbus

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If you’ve been tracking gold prices over the past year, you’ve likely noticed a remarkable trend. Gold keeps climbing, breaking new barriers, and what was once considered a good buying price is now a distant memory. Let’s dive into how gold has surged over the last 12 months and why waiting for a significant drop might be futile. Instead, the best strategy would have been—and still is—to dollar cost average.

A Year of Unprecedented Growth

In the past 12 months, gold has seen an impressive rise. Gold has climbed from around $1,800 per ounce to over $2,500 per ounce. This is a significant increase that keeps pushing the bar higher and higher. Many people I spoke to at the beginning of the surge said, “I will buy once it gets back to $1900.” Which then became $2,000, $2,100, $2,200, etc. The bar kept getting higher and they still hadn’t bought gold.

The Changing Landscape of “Good” Buying Prices

As gold continues to climb and set new records, the benchmark for what is considered a good buying price keeps evolving. Just a few months ago, $2,000 per ounce was seen as a high point. Today, that price seems like a bargain compared to current levels. This constant upward movement has redefined expectations. We tend to have short memories as we will see the price drop 30 dollars one day and think “wow gold has dropped”. We forget and ignore the growth of almost $700 over the last year.

Breaking Barriers: A New Normal AS Gold Climb Continues

Gold’s ability to break through previous resistance levels has created a new normal in the market. Each time gold surpasses a new milestone, it sets the stage for further gains. Investors who were waiting for a dip at $2,000 are now looking at $2,500 and wondering if they should wait for another drop or jump in before prices climb even higher.

The Power of Dollar Cost Averaging

Instead of trying to time the market, a more effective strategy has been—and continues to be—dollar cost averaging. By investing a fixed amount of money at regular intervals, you can mitigate the risk of market volatility and avoid the pitfalls of trying to predict price movements. Instead of being paralyzed by watching the price and anticipating the next fall and subsequent rise, just plan to spend a certain amount at certain intervals. Over time, you will reap the benefits of investing in precious metals and accumulate the precious metals you want. As the gold price climbs over time, you will be able to realize that as you accumulate metals.

Conclusion

The past 12 months have shown that waiting for a significant drop in gold prices might be a losing strategy. Gold’s upward trajectory continues and shows no signs of slowing down. Instead of waiting for a dip that may never come, it might be wise to consider the long-term benefits of dollar cost averaging. You can take advantage of the climb without being paralyzed by watching the price movement.

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In recent years, central banks worldwide have been buying gold in much larger quantities than in the past. This has potentially negative effects to the US economy, and the dollar. According to the World Gold Council, central banks bought a record 1,081.9 tons of gold in 2022. In 2023, that number was 1,037.4 tons. For context, in 2021, central banks only bought 450.11 tons. 2024 has already shown that it will be no different this year. But what does this mean, and why should you care?

Central banks traditionally hold gold for its stability and value retention. However, the recent surge in purchases indicates a shift in priorities. By boosting gold holdings, central banks aim to reduce their reliance on the U.S. dollar. The dollar has been the dominant global reserve currency. This diversification helps mitigate risks associated with dollar-denominated assets. In other words, the uptick in gold indicates a move away from the dollar, which will have drastic effects on the US economy.

Gold is also seen as a hedge against inflation and economic instability. With high inflation rates and wars all over the globe, central banks are viewing gold as a reliable store of value. Gold is also significantly less susceptible to monetary policy changes than fiat currencies. Additionally, growing concerns about the long-term strength of the U.S. dollar, driven by factors like the rising U.S. national debt and the worsening political climate, motivate these gold purchases. Central banks are preparing for potential declines in the dollar’s value by securing a stable asset.

This trend also aligns with a broader move towards de-dollarization, as countries like Russia and China seek alternatives to the dollar for international trade and reserves. The increased gold reserves signal a cautious outlook on the dollar’s future and suggest a shift towards a more multipolar currency system.

In summary, central banks’ gold stockpiling reflects a strategy of reduced reliance on the U.S. dollar. If the banks are moving some of their holdings to gold instead of the dollar, maybe you should as well.

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