Metal Market Report August 2024 - Week 3 Edition
We Predicted $2,500 (or Higher) Gold for 2024 Last October – And It’s Here!
In October 2023, during a meeting with publisher and previous Republican Presidential hopeful Steve Forbes, we predicted gold would reach $2,500 in 2024 “and much higher if the wrong guys win” in the November election. Well, the “wrong guys” are meeting in Chicago this week and current Vice President Kamala Harris is clearly enjoying a honeymoon in the polls. Unsurprisingly, her press coverage by the liberal mainstream media has been uniformly positive despite her not holding any press conferences yet or answering any substantive policy questions from the press.
Her one policy statement, which was made on Friday, August 16, was a clear mistake, repeating President Richard Nixon’s price control gaffe, he launched on the same date 53 years earlier. Nixon abandoned the foolish plan after 90 days of higher inflation and cheating, leading to a decade of super-high inflation and recessions, dubbed “stagflation” but Harris and her socialist followers are embracing it.
Candidate Harris was particularly tone-deaf in attacking grocery store chains as her first target since they only make a razor-thin 2.5% profit margin and pay most of their workers near minimum wage. It seems like Harris is a Grinch who wants to limit income on low-paid workers and staff in supermarkets.
After she announced her plan, gold soared to $2,500 and is staying there during her honeymoon with the press and during convention week, assuming she is bound for glory in November. But a lot can happen in the next 11 weeks, since gold is more likely hovering around $2,500 for a variety of other reasons as well:
Gold is trading around $2,500 because:
(1) The world’s central banks have been the biggest buyers of gold since COVID struck in 2020. Central bank demand for gold has been responsible for the purchase of nearly one in every ten ounces of gold produced by the mining sector in the past five years. Since 2004, central bank gold has risen 7-fold in dollar value, to $2.4 trillion, while most currencies have lost value.
(2) Gold is far more than an inflation hedge: Inflation at 2% or 3% or interest rates at 4% or 5% are trivial when gold rises from $250 to $2,500 in 25 years or from $2,000 to $2,500 in less than one year.
(3) Gold is a crisis hedge: Gold has steadily gained as the war in the Middle East continues and could expand into a regional war from a northern invasion by Hezbollah into Israel which is being funded by Iran. Likewise, the war between Ukraine and Russia is growing more intense as drone attacks have been reported against Moscow and China could also choose to expand its borders with an attempt to at taking Taiwan. All of these conflicts are impacting gold.
(4) The federal debt is also out of control and neither major political party shows any resolve in attacking the growing problem, leaving investors looking for ways to hedge their investments.
In addition to the national debt, Americans are running up high-interest credit card debt at a record pace. According to Lending Tree, the current mountain of credit card debt amounts to $1.142 trillion. This total is up by $372 billion since the first quarter of 2021 when Biden took office, and interest rates were much lower.
U.S. debt includes federal, corporate and personal debt. On the personal level, as credit card debt spirals higher, housing costs have almost doubled due to rapidly rising rents and mortgage costs that have resulted in evictions or homelessness for thousands of Americans. Plus, we’ve seen increased closings of offices, businesses and restaurant chains.
When I am out and about with fellow coin dealers at events around the country or when I talk to customers and dealers on the phone each week, they say they often like to take friends or clients out to dinner but now they tell me of a wave of restaurant closings in their areas. Here is a sampling from a Forbes article, “Major Restaurant Chains That Have Closed Down Locations Across the U.S. in 2024.”
- Applebee’s has announced the closing of 25 to 35 restaurants this year, after closing 33 in 2023.
- Boston Market began last year with 300 locations and says that number is now down to 27.
- TGI Friday’s said it would shut down restaurants in “36 underperforming markets” this year.
- Red Lobster filed for bankruptcy this year and has already shut down 93 locations.
- Denny’s is closing 57 restaurants this year and Outback Steakhouse, owned by Bloomin Brands, has closed 41 locations as its stock dropped from $29.90 a share to under $17 a share this week.
There are multiple causes of these closures, including higher minimum wage laws in many areas, higher prices of many foods, higher rents and interest on mortgages, fewer willing workers and fewer affluent customers to pay higher prices in the current economy – but this is the “Biden/Harris” economy in action.
Today, both candidates, former President Donald J. Trump and Harris, are talking about how much they are going to spend and what income they are NOT going to tax – like tips or Social Security income – but neither is addressing our mountain of debt. That is one of the reasons why gold stands alone as the one commodity that keeps rising this summer. Remember, Steve Forbes said gold could go “much higher than $2,5000” if the wrong guys win … Rising gold prices bring many customers into the gold bullion and rare coin market. If you already have gold and other precious metals investments, you are ahead of the game, but you should still call your representative and routinely add to your portfolio. Also, be sure to ask about our profit-boosting 20/20 Program.
The Olympics Are Over – And Team America Grabbed the Most Gold
An Olympic Gold Medal is priceless, but for those cold-hearted investors out there who wonder about its melt value, the medal is worth about $1,000. A gold medal is not made of solid gold. A gold medal is mostly silver, with 523 grams (over a pound) of silver covered by a thin veneer of six grams of gold. Ironically, the silver in the gold medal is worth about the same ($495) as the gold ($484) at today’s prices since the gold-to-silver ratio (about 85-to-1) is close to the same as the medal’s gram-to-gram ratio (523/6).
Gold Hits New All-Time High And Doesn’t Seem To Be Retreating
Gold closed over $2,500 for the first time, at $2,501 on Monday, August 19, then leaped to $2,544 at one point on Tuesday, August 20, rising over $100 (+4%) in a week., This is probably, in part, due to the popular surge of Kamala Harris and her favorable press coverage and the euphoria at the Democratic National Convention. Silver rose from $27.25 to $29.48 in the same week (+8%) but failed to breach its recent high of over $30. The dollar has weakened this summer, assisting in gold’s rise in price. I will write more on this next week, so be sure to sign up for my weekly Metals Market Report to stay up to date.
