Hi,
When looking at the precious metal community, you are beginning to see some frustration regarding the volatility in price over the last year. However, what is being wildly misunderstood is the financial environment we find ourselves in today is NOT the ideal situation for gold and silver prices to see spikes in price, and so the fact they have shown any gains at all is a win for the asset class. Of course, due to precious metals being sound money, they respond best to rising inflation, as their main job is to protect the loss in purchasing power citizens would see if they otherwise just held Canadian Dollars in the bank. Looking at price deterrents, it is the rise in interest rates being used to try to combat inflation over the past 2 years being the main driver of the headwinds facing precious metal prices today. That said, what is being missed is the underlying positive about how these assets have been performing during conditions that are usually conducive to prices dropping and what this ultimately means for their future.
The fact that precious metals have been holding their ground through this year even with interest rates being raised at a record pace would suggest that markets are not expecting the Federal Reserve to win their battle against inflation, which is what was predicted by many before the fight even started. That being because they are truly stuck between a rock and ahard place. Central banks run the risk of tightening too much and crashing the economy as we saw with major banks in the United States earlier in the year OR they would keep interest rates too low and what became 10% inflation would have continued to soar into the stratosphere. However, during the past year, all we have been told is that the market is completely fine, 401ks are fine, retirement portfolios are fine, citizens stock and bond portfolios are fine, but is that true? There have been many financial experts (some being mentioned in our newsletter last week) that have been ringing the warning bell, trying to let people know that the worst may not be behind us, and that the financial fiasco seen between 2020 and 2022 was likely just the beginning.
What is not being talked about however is the fact that gold is actually outperforming major stock indexes when going back to January 1st of this year, silently bringing the holders of gold some nice gains up to this point. Through October, gold has shown incredible strength continuously pushing toward $2000/oz USD, breaking through the barrier on October 30th. On that day, gold was up 9.12% since January 1st, while the S&P 500 clocked in at 7.8% the same day. Yes, the S&P 500 has gone on a slight run since then over the past 3 days over taking gold gains by a fraction of 1%, but looking at trends, the S&P 500 is down almost 10% since August 1st, while gold is up close to 4% since the same time. Looking at other major indexes, outside the NASDAQ, gold continues to be a bright spot in the overall financial market. The Dow Jones Industrial Average is only up 0.38% since January 1st, while the Russell 2000 is down 5.65%, showing that outside an always unpredictable and volatile tech sector, gold has been one of the best performing assets of the year. With all that said, we have not even touched on what November has historically looked like regarding the price of gold, and spoiler alert, it is the month that has in the past sparked epic runs in the price of gold to the upside.
Just note, all below calculations are based on United States Dollar gold prices.
On October 31st, 1972, the price of gold closed the month at $63.90/oz. A run was then started in November of 1972 that propelled gold prices to $184.55/oz by October 31st, 1974, for a percentage increase of 188.81% in just 2 years.
On October 29th, 1976, the price of gold sat at $123.15/oz after a slight pull back in price between ’74 and ’76. However, again, November of 1976 sparked a run that saw gold prices peak at $533.60/oz on December 2nd, 1979, showing an increase in price to the tune of 333.29% in just 3 years.
On October 31st, 1984, the price of gold per ounce was $333.50. Once again, November starts a run that pushed gold to $486.10/oz by November 30th, 1987. Another 45.76% in just 3 years.
On October 31st, 1999, gold had seen some pull back moving toward the new millennium, now sitting at $290.20/oz. The following November, gold once again was shot out of a cannon, finishing at $833.20/oz by December 2nd, 2007, just prior to the Great Financial Crisis of 2008, logging a 187.11% increase in price.
On October 31st, 2008, just after the Great Financial Crisis began, the price of gold per ounce was sitting at $724.93. By November 30th, 2011, starting in November of 2008, gold rocketed up to $1564.60/oz showing another increase over 100%, sitting at 115.83% for that 3-year stretch.
On October 31st, 2018, gold found its way back down a couple hundred dollars from the 2011 price, sitting at $1216.19/oz. However, another hot November turned that around pushing the price per ounce for gold up to $1897.90 on November 30th, 2020, a 56.05% increase in just 2 years.
For our last example of gold success that started in November we look at the most recent run that saw gold prices on October 31st, 2022, sitting at $1632.51/oz, finishing at our current price per gold at time of writing of $1981.90/oz. This marks a 21.40% increase in prices that again started in November.
Going a little deeper to put all of the above gold price runs into context, each of these runs that started at the beginning of November saw an average price increase per year of 43.10%, which is far greater than any stock portfolio manager would promise as their high-end of returns. Likely 4x as high.
The one thing that cannot be disputed when it comes to gold, is that when this asset decides to wake up and go on a price run to the upside, it really RUNS. Given how much previous success gold has had through November and December, you can bet we will be glued to price charts following gold’s progress in what remains of 2023. That said, if you wish to get out ahead of any meteoric price increase in gold that could be sparked by any number of pieces of financial tinder currently on the golden fire, Au Bullion is here to help. Below you will find our new 1 Oz Gold Bars by Asahi minted to celebrate Diwali. This piece can act as an incredible gift to a family member or tosecure any wealth you are looking to protect moving deep into the future.
