August, 2024 in Precious Metals, by Everett Millman

Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover gold’s performance and silver’s performance and examine the factors that affect the metal prices.

WHAT DID GOLD AND SILVER DO IN AUGUST?

The precious metals enjoyed another month of modest gains in August. The results would have been more impressive if not for a sharp sell-off on the last trading day of the month.

Spot gold began the month around $2,450 per troy ounce and finished at $2,502/oz. Silver prices opened August below $28.50/oz and closed out 40 cents higher at $28.82, a roughly 1.4% increase.

The week beginning August 5th was particularly unkind to the metals, even as markets for stocks, bonds, and currencies experienced heightened volatility. Silver slumped lower by $1.93 per ounce over the course of Monday, August 5th through Wednesday the 7th. That represented a 6.8% swoon and brought spot silver to its low for the month at $26.68/oz. Gold lost almost 2.5% over the same period.

A swift turnaround began in earnest on August 8th: gold rallied 1.75% and silver jumped 90 cents (+3.4%). Both metals surged higher again on August 12th as gold broke the $2,470 mark for a new record high. Between August 15th–16th the silver price popped 5.9% higher while gold breached the $2,500 plateau for the first time ever.

Two weeks of modest fluctuations followed. Both of the precious metals topped out on Tuesday, August 27th—silver once again poked its head above the key $30/oz level, and gold made another all-time high at $2,524 per Troy ounce.

FACTORS AFFECTING GOLD AND SILVER THIS MONTH

The most consequential drivers for the metals of late have been the general state of the economy, the gradual return of interest in gold from Western investors, and interest rate policy. For now, ongoing longer-term trends such as central bank gold-buying and multiple hot wars have somewhat receded into the background.

Markets are forecasting the benchmark U.S. interest rate to be 100 basis points (1.00%) lower by year-end. Although this may prove to be an ambitious projection (or wishful thinking), you can basically pencil in a rate cut from the Federal Reserve at their next meeting. This expectation is largely “baked into” the gold price already, though seemingly less so for silver.

Some pundits and lawmakers are even lobbying for the central bank to cut rates by as much as 75 bp all at once rather than its customary 25 bp increment. We shouldn’t rule out the possibility that the Fed will cut rates by 50 bp. This would be bullish for gold and silver, as lower rates reduce the opportunity cost of holding bullion compared to yield-bearing assets.

On average, during the last three rate-cutting cycles, silver prices gained over 300% from trough to peak. Gold has historically risen more than 5% in the immediate aftermath of the first rate cut of those past cycles. Since we are at the very beginning of another cycle, this pivot in monetary policy ought to support higher metal prices—especially for silver.

Meanwhile, the return of recession fears has simultaneously lifted demand for gold in North America and Europe while strengthening the case for reducing interest rates. A good proxy demonstrating this shift comes from trends in online search engines: user queries for “how to buy gold” have spiked over the last several weeks.

Belatedly, signs of weakness in the economy are finally showing up in government data. In reports from the Labor Department this month, unemployment numbers saw a massive downward revision. Job growth over the past year was overstated by nearly 900,000 jobs. Nonfarm payrolls figures have now been revised lower in 15 of the last 16 months. This not only reveals that the American economy has been less resilient and robust than is widely believed, but it also reinforces the fact that data published by three-letter agencies in Washington are (at best) woefully unreliable or (at worst) intentionally wielded in deceitful ways to manipulate markets and influence public perception.

Amid an election-year political circus at home and social upheaval abroad, the mood of the United States and the country’s economic outlook are reminiscent of the 1970s. Make no mistake that virtually every platform being proposed by the political class to address the public’s socioeconomic concerns is going to exacerbate inflationary pressures if enacted.

Nonetheless, the biggest headwind that the precious metals face right now is if strong gains in the equity markets in the near-term draws investors away from safe havens.

CENTRAL BANK GOLD PURCHASES

Note to readers: Most data about international gold reserves are delayed by a month. They are not typically reported to the International Monetary Fund (IMF) and are instead compiled by private organizations such as the World Gold Council (WGC).

A brief recap of lagging reports from June:

• Azerbaijan’s central bank added 10.3 tons of gold from April to June.
• Singapore sold 12 tons of gold in June, bringing its reserves back down to 229 tons.
• The central bank of Jordan bought 2 tons of gold in June.
• In aggregate, central banks globally were net buyers of 12 tons of gold in June.
• The Czech national bank bought 2 tons of gold in July, its 22nd straight month of purchases.
• Uzbekistan added almost 10 tons of gold in July.
• The Reserve Bank of India added 5 tons to gold reserves in July. RBI has bought gold every month of 2024 so far.
• Kazakhstan sold 4 tons of gold in July, marking its third straight month of net sales.
• Qatar’s central bank bought 2 tons of gold in July. Year-to-date its reserves are up 8 tons.
• Jordan added 4 tons of gold in July, a third straight month of net purchases.
• Taiwan’s central bank said the quiet part out loud by admitting its gold reserves support the value of its national currency.

ON THE RETAIL FRONT

Despite indications that demand for silver and gold is beginning to climb in Europe and the U.S., it appears that a shrinking proportion of that demand is being met by bullion products from state-owned mints.

The United States Mint distributed 850,000 ounces of American Silver Eagle coins in August. Across the different sizes of the American Gold Eagle coin, and including the American Gold Buffalo, the mint sold a total of 15,500 oz of gold. These figures for gold and silver production are both about 50% lower than the next-lowest month of sales this year.

If the U.S. Mint doesn’t post any updates to these numbers after the fact, August will stand as its weakest month of precious metals sales since last December. Sales of various collectible coins made of gold and silver were likewise tepid.

On the other side of the Pacific Ocean, sales rebounded at Perth Mint in Western Australia. The most recent data from July show that the mint produced almost 1,000,000 oz of silver between bars and coins, a significant jump of over 90% compared to the previous month. It was nearly the first time Perth cracked the million-ounce mark in silver sales since February. Gold coin sales rose 13% month-on-month, totaling over 25,000 oz.

MARKET BUZZ

Bank of America is calling for a $38/oz silver price in 2025; UBS raised its target to $36–$38 per ounce.

Mike McGlone, a macro strategist with Bloomberg, says it’s “only a matter of time” before gold hits $3,000/oz.

Samsung has developed solid-state batteries that would require 1 kilogram of silver each. The silver-carbon composite batteries are expected to have much longer life spans and to charge far more rapidly than current lithium-ion batteries.

The world’s largest solar panel farm is now operational in China after more than $2 billion was spent on the project.

India’s silver imports are on pace to double by year’s end. In addition, its gold imports from Switzerland jumped 46% month-on-month in July.

Swiss gold exports to the United States and the United Kingdom also rose sharply.

The ratio of the gold price to the S&P 500 is back at levels last seen during the “Nixon Shock” in August 1971. Gold’s year-to-date returns are outpacing the major stock indices.

Consumers went on a massive gold-buying spree in India following the reduction of import duties mentioned in last month’s column.

Several fascinating stories about hoards of old coins hit the news recently. A staggering gold coin collection from Denmark is slated to go on sale for the first time in a century. In Turkey, a hoard of Persian gold coins was discovered in a pot buried beneath a house. A construction worker in Germany stumbled upon a huge stash of 700-year-old coins.

LOOKING AHEAD TO NEXT MONTH

In recent history, September has been a seasonally bad month for gold and silver. Precious metals prices have fallen during September in each of the past six years. Obviously, the past is not prologue in financial markets, but the pattern is still worth keeping in mind.

The next Fed meeting concludes on September 18th. While any interest rate cut is broadly positive for both silver and gold, it will also be welcome news for the stock market. Depending upon how euphoric the reaction from Wall Street is, it may temporarily knock the luster off of the metals by comparison.

There’s also a presidential debate between President Trump and current Vice President Kamala Harris scheduled for September 10th. The economic fallout from a potential Democrat victory in November has been coming into sharper focus after Harris proposed a series of nakedly deleterious policies, from implementing price controls to taxing unrealized capital gains. – Everett Millman of Gainesville Coins