In the first quarter of the year, gold demand among central banks around the world reached record levels as investors see a mixed picture globally, said a report released this week by the World Gold Council.
Prices of the precious metal broke through the $2,000 per ounce barrier and are expected to reach record highs as a result of the prevailing uncertainty about the performance of the global economy this year.
This would be possible following the latest interest rate hike of 25 basis points (0.25%) by the US Federal Reserve, and the additional problems that could drag down the US banking sector.
Market analysts see a possible pause in benchmark interest rate increases as feasible soon. If so, investors would be pushed to reinforce their positions in gold and technology, according to JPMorgan.
Continuation of a trend that started in 2022
In its quarterly report on Friday, WGC‘s Gold Demand Trends, indicated that gold demand (excluding the over-the-counter market) fell 13% during the first three months of the year compared to the same period in 2022.
But last year’s increase was a direct consequence of Russia’s invasion of Ukraine. Investors dumped risky assets and took refuge in gold. Since then total gold demand has grown by 1% due to the market recovery.
From January through March, central banks added another 228 tons to their international reserves. This is the largest rate of gold accumulation in a first quarter since 2000 when these statistics began to be kept. However, this rate is lower than in recent quarters.
Senior market analyst at the World Gold Council, Louise Street, explained that the increase in gold reserves is a continuation of a buying trend seen last year by central banks.
“The top of the tree for gold in terms of why official industry institutions hold it is always things like its role as a diversification asset,” Street told CNBC.
He added that they are looking at gold’s “long-term store of value, but increasingly over the last couple of years, we’ve seen how much importance they put on its performance in times of crisis.”
The World Gold Council, however, expects that demand for the precious metal will tend to moderate in the following months of the year. Although it warned that previous purchases were concentrated in developing markets. Now demand is growing in the world’s most developed financial centers.
JPMorgan: Investors to opt for gold and technology
The U.S. bank believes that amid fears of recession in the U.S. economy, investors are likely to opt for gold and technology stocks. Gold is an asset that has historically served as protection for investors and countries.
In a note, strategists at JPMorgan Chase & Co, the “long duration” trade will bet more on gold, as well as growth stocks of technology companies and currencies (USD short).
Strategists such as Nikolaos Panigirtzoglou and Mika Inkinen, added that this investment option does not involve making large gains, due to the fact that there is currently a very inverted yield curve.
“The U.S. banking crisis has increased demand for gold as an indicator of lower real rates as well as a hedge against a ‘doomsday scenario,’” they said.
For JPMorgan, the long duration theme seems to be part of the consensus of investors and analysts in recent months. They noted that this type of operation looks “relatively attractive” because the downside is limited in the event of a mild recession in the U.S. However, if a deeper recession occurs, the upside is greater.
Written by Santiago Contreras for Investor Times ~ May 8, 20232
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Please allow me to introduce myself; I am Jeffrey Bennett, President of Kettle Moraine, Ltd., the parent of Sierra Madre Precious Metals.
I have been married for 52 years with two children and four grand-children, a veteran of Viet Nam, student of history (both American and film), and was host for fifteen years of Perspectives on America on the alternative airwaves, covering such subjects as, health and wellness, news, political satire, education and editorial commentary on current events through the teaching of history, and Protecting Your Wealth. In early 2018, I took a several month hiatus to complete some family business but returned to airwaves April 17, 2018).
At the age of ten, I sat in a bank-vault in the Citizens Bank of Mukwanago, Wisconsin with my grandfather going through bags of old American Peace dollars, hand-selecting each coin as dated rolls of 20 coins were carefully put together and rolled. Learning of the history of these beautiful pieces of Americana, I asked my grand-father, "Why are we doing this?" to which he replied, "Because someday they are going to do the same thing with the silver in our money that, that (S.O.B.) Roosevelt did with gold in 1933." It took only six-years for his prediction to come to pass at the hands of a disciple of Roosevelt's... and what will a Federal Reserve 'dollar' purchase today - and what will that old 90% Silver Peace Dollar purchase?
Although at the age of ten, there was little understanding of the meaning of it all, over the next half-century I became well-versed on the subject matter. During this summer of my education, I began to purchase silver coins as a collector and some small, international gold coins two years later - not an easy feat in the shadow of the Roosevelt confiscatory policies of 1933. Although those policies remained in effect until the mid-1970's, it was not until 1991 that I found that one could make a living providing precious metals and collectible, historic numismatic coins to a willing and concerned clientele.
It was also during that year, that I began a relationship with one of the first Trust companies to give the public access to gold and silver as part of an Individual Retirement Account (IRA) - and Kettle Moraine, Ltd., founded in 1995, but have ceased providing service due the the intense change-over of the provider.
In November 2011, after a 15 month broadcast on another network, I returned to the airwaves with my then revamped program, Life, Liberty & All That Jazz, and for over a quarter-century, I have been proud to serve the family of listeners of my numerous broadcast programs for physically-held precious metals for investors and collectors alike. On March 23, 2020 I launched my brand new - appropriately named program, The Edge of Darkness on the Republic Broadcasting Network, and thus continue to remain available to our long time clients and their families. Ah yes - find out what "inter-generational" wealth provision has done for our clients over the past three decades.
Don't buy the sizzle of that steak until you understand the cost! In other words, don't buy the bull being dispensed by the 'rare coin' pitchmen until you understand the full story. We, at Sierra Madre Precious Metals, will be proud to serve your needs.