Gold Above $2000
And holding steady…
Last month gold breached the all-important milestone of $2000 and is finding support there. What is driving these all-time high prices for gold? Several things.
1. Banking crisis
We’ve experienced a lot of bad news in the banking sector with the collapse of SVB and First Republic and the indications that many other banks are at risk from bad lending decisions. What’s more, it is looking like the expectation of Fed bailouts might not pan out for all these banks.
Inflation remains stubbornly above the target rate of 2%. Official CPI still sits at 4.9% but core prices, including food and energy are at 5.5%. Worse, gas prices may be about to take off with the summer driving season upon us driving demand, while the OPEC production cuts are squeezing supply.
3. De-dollarization and geopolitical issues
As the conflict continues in Ukraine, it underlines the unreliability of the US, and the weaponization of the US dollar. Central banks are less buyers of US debt and more buyers of gold to shore up their reserves. This means we are less able to export our inflation, which keeps it here at home. It also drives the price for gold, as central banks buy by the ton, not the ounce.
There are other factors, of course, but these are the big 3 right now. Do you think these issues are going ease? Or get worse in the near future?
If you think these issues are escalating, then even at prices just north of $2000, gold is still in buying territory. Trying to time the market, waiting for a dip, often leads to missed opportunities. The best time to buy is NOW. Later might not be better and the dip you’re looking for may not come.