February 2025 – Week 4 Edition
Gold ETF Demand Finally Picks Up – After Gold Makes its Big Early Move
Gold has risen for eight straight weeks (+12%) in the new year, setting new highs, so the trend followers in the derivative paper gold markets are finally waking up. The World Gold Council reported that 48 metric tons of gold (worth $4.6 billion) poured into North American gold-backed ETFs last week, the biggest one-week surge since April 2024. Gold ETF levels reached 84.2 million ounces last Thursday, the highest level since the start of 2024. With the U.S. Dollar Index (DXY) down 2% so far this year, gold is acting as a hedge against the dollar and inflation fears, with tariffs threatening to accelerate that trend.
As usual, paper gold investors are late to the game but we certainly welcome them pushing prices higher. However, these paper gold investors are usually short-sighted (late to the game and often early sellers on a correction), and they don’t have the anchor of holding the real thing – physical gold. If you don’t have physical metals in your custody, in a vault or in storage under your control, you may not really own any gold! This is especially true under the new threat of tariffs and trade wars with an increasingly anti-American European Union (EU) and the London Bullion Market, the world’s largest gold trading center.
The London Times recently reported that deliveries of physical gold from the London market are now taking four to eight weeks to process after requests, so you don’t really own physical gold if you buy paper gold. The paper gold market dwarfs the physical market, so it’s impossible to back each trade. The total amount of new gold mined last year was 120 to 125 million ounces. Even at a lofty $3,000 price level, that’s $360 to $375 billion in value but the trading volume in gold futures in any given week is $160 billion, or $8.3 trillion per year. That means each newly mined ounce is traded 20 to 25 times before it finds an owner.
This leverage makes the paper gold trader the “pusher” in the gold price wars but gold ETF and futures traders tend to be weak hands, letting the price trends determine their decisions. In contrast, physical gold holders are strong hands, forming a foundation during gold and silver bull markets, such as today’s market. The recent dips in stocks and added fears have brought more gold buyers into paper gold and today’s news indicates we’ll see more crises, as more critics of President Donald Trump air their fears in public. This is why, with the continued rise in gold prices and projections of $3,500 gold or more, I implore you to invest in gold bullion and consider rare coins, as their values have outpaced bullion prices through the years. If you haven’t done so, it’s time to call one of our professional representatives so you can buy gold or add more to your portfolio.
Big Banks Push Their 2025 Gold Targets up from $3,000 to $3,200 or Even $3,500
Speaking of trend followers, most of the big New York investment banks predicted $3,000 gold (in 2025) as of year-end 2024, including Bank of America, Citigroup, UBS, Goldman Sachs and JP Morgan Chase. Obviously, they tend to think alike, because at the end of 2023, most of these same major banks (Citigroup, Goldman Sachs, JP Morgan and UBS) had predicted a narrow range of $2,090 to $2,150 gold prices in 2024, so they missed on the low side by a mile (gold closed 2024 at $2,640). This tells us they all tend to say the same thing in groupthink, seldom straying from the herd, as loners get eaten by lions!
For the record, in October 2023, when gold prices were under $2,000, I predicted gold would eclipse $2,500 an ounce and trend even higher in 2024. The bankers, as you can see, were much slower to react and that likely cost their clients millions of dollars. Luckily, our clients reading my weekly Metals Market Report, were able to invest quicker and saw a greater return percentage on their investments.
Now, in February 2025, after gold’s big 12% move so far this year, many of these Big Banks have issued a variety of upgraded predictions, rising from their $3,000 original prediction to $3,200-$3,500, namely:
- Bank of America made the biggest leap, stating that a rise in consumer demand and institutional buying amounting to a 10% rise in demand could push gold up to $3,500 this year.
- Citigroup has also pushed its prediction up to a possible $3,400, based on investment demand relative to mine supply, stating “Our forecasts for investment and industrial demand as a share of mine supply, point to $3,400/oz prices by 4Q’25, while we take a more conservative base case, which suggests gold increases to $2,900 to 3,000/oz over the next 6-12 months” (already done!)
- Goldman Sachs raised its median target from $3,000 to $3,100, with possible increases to $3,200 with stronger central bank buying (70 metric tons per month) or $3,300 “if policy risks persist.”
February 25th Marked the Birthday of the first “Fiat Money” in America (“Greenbacks”)
Two acts of Congress were passed on the same date, one year apart, establishing the right of the federal government to print currency unbacked by gold, silver or other metal of value, contrary to our experience in the American Revolution. That’s when our cardboard “Continental” created so much inflation that General George Washington complained in 1779 that “a wagon load of money will scarcely purchase a wagon load of provisions.” Somehow that lesson was forgotten during our biggest national war since that time.
On February 25, 1862, an Act of Congress formed the Bureau of Engraving and Printing to facilitate the printing of President Lincoln’s new “Greenbacks,” and a year later, on February 25, 1863, Congress authorized the National Currency Bureau to regulate the quantity of this new fiat currency. The first Act mandated that “such engraving to be done at the Treasury Department, using government personnel …”
Very soon after the printing presses began to run, prices began to soar. According to the National Bureau of Economic Research, the stable prices of the previous 80 years soon rose by over 120% in the four years from 1862 to 1866 in Northern states. In the Confederate States, prices increased by an astronomical 9,000% as they printed money in higher denominations, almost without limit – causing the greatest hyperinflation in our nation’s history.
Gold soared to another new high on Monday, February 24th, while stocks declined for the third straight trading day. Gold reached a high above $2,970 in the futures market, within $30 of our minimum target of $3,000 for the year – even before the end of February. Silver hit nearly $33 before retreating to $32.50. Gold rose over five times as fast as the two major stock indexes during the first eight weeks of 2025.
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