Gold Shatters Another Record High - And It's Still a Bargain
World in Chaos, Dollar Devaluation, Central Banks' Gold Grab, and the Fed's Surrender
Gold has finally done it... It smashed through its previous record, soaring past $2,580 an ounce. As I write this, the metal is up an impressive 25% year-to-date. This makes it one of the best-performing commodities of 2024.
But if you think you've missed the boat, think again. This is merely the opening act of a much grander performance. So, to help you capitalize on what's coming next, in today's essay and another later this week, I'll show you why gold – and gold stocks – are still bargains, and why I believe they're headed much higher.
Let’s dig in.
The Perfect Storm
It’s not hard to see why gold is up so much this year. The world's a powder keg, and the fuse is burning. Ukraine, the Middle East, the South China Sea – we're one misstep away from global chaos. With geopolitical tensions at a boiling point, smart money is fleeing to gold's time-tested safety.
But if the global order is a house of cards at this point, then the United States is its shaky foundation—and it's never been shakier.
The U.S. government’s debt has recently surged past $35 trillion – that's roughly $105,000 per person or $270,000 per household.
The numbers are just staggering: $2.3 trillion added to the debt in just 12 months. That's $6.4 billion daily, $266.7 million hourly, $4.4 million every minute.
Now, the U.S. won’t default because it would be political suicide for those in power. Their only way out is devaluing the dollar.
I know most people don't believe currency devaluations can happen in highly developed countries like ours. But the writing’s on the wall—this debt isn’t getting paid back. And while this spells unimaginable trouble for society and the economy, it will propel gold to heights we've never seen before. And those holding it will be well-positioned to weather the storm.
Central Banks' Gold Rush
Now, the mainstream media may not like to talk about it, but the prospect of dollar devaluation is a big reason why central banks are stockpiling gold at rates we haven’t seen in half a century. Take a look at the next chart below.
Now consider this for context:
In 2023, central banks made net gold purchases of 1,037 tons, just shy of 2022's multi-decade record.
Their average gold reserves increased from 9% to 11% in a single year.
Central banks now own 18% of all gold ever mined, which is roughly 37,182 metric tons.
Their demand has tripled, now making up about 25% to 30% of total global demand.
The factors above are a big part of why gold is hitting its all-time high right now.
And here’s the thing: central banks aren’t speculators. They’re not concerned with the day-to-day price swings. They buy gold for long-term, strategic reasons.
What’s also really telling is that they usually don’t make such large, consistent gold purchases over extended periods like they have recently.
To me, all these central bank gold buys signal they’re preparing for a major shift in the global financial system. And most likely, it’s tied to the coming move away from dollar hegemony.
If I’m right, this likely means central banks will keep buying. In fact, a recent OMFIF survey confirms that about 15% of central bank managers plan to increase their gold exposure over the next 12-24 months.
According to their calculations, this could lead to an additional $600 billion worth of gold reserves in the next few years.
And if you take a quick look back at the chart above, it looks like it's already happening. Central bank net demand reached 483 metric tons in the first half of 2024. That’s 23 more tons than the same period last year, making it the strongest H1 on record.
Gold's Golden Moment
So, yes, gold is at its all-time high. And yes, it looks to be headed even higher.
I get it if you’re hesitant about buying something at its peak price. Often, it’s not the best idea. But with gold right now, you’ve got to factor in the timing. And honestly, it couldn't be better.
After a year of pretending to fight their self-inflicted inflation disaster, the Federal Reserve is finally ready to wave the white flag and crank up the printing presses again.
As of today, market expectations show about a two-thirds chance of a 0.5% rate cut and a one-third chance of a 0.25% cut at tomorrow’s meeting. The market is also pricing in about a two-thirds chance that the Fed will slash at least 1.25% from the benchmark rate by year-end.
Make no mistake, this is the Fed capitulating. They've realized the house-of-cards economy and stock market are too fragile to handle higher rates, so they’re falling back on the only playbook they know: easy money.
This shift to easy monetary policy is guaranteed to reaccelerate inflation. While the effects won't be immediate, they will come back with a vengeance.
There's also a strong chance we're headed toward stagflation — that toxic mix of high inflation and low economic growth, much like what we saw in the 1970s — and it could happen as soon as 2025.
And what performed exceptionally well back then? You guessed it — gold. In fact, even with gold rallying above $2,500 per ounce today, when adjusted for inflation, we still haven’t topped the high of about $2,670 in today’s dollars. Take a look.
And here’s the thing. It won’t be just the Fed cutting rates. The European Central Bank (ECB) slashed rates for the second time in three months earlier this month. The Bank of England has cut rates too. So have Brazil and Pakistan.
The takeaway? We’re entering a new era of easy money. This global trend is just starting, and it’s going to be a major boon for anyone owning real assets that can’t be printed.
Regards,
Lau Vegys
P.S. Doug Casey believes that the Fed's decision to cut rates and increase the money supply will create a bubble in commodities, particularly in monetary metals like gold and silver. That's why a significant portion of our Crisis Investing portfolio focuses on these stocks, which Doug himself owns. With that in mind, stay tuned for Part Two of my essay this week, where I’ll move the discussion from gold to gold stocks and explore why they’re still an incredible bargain.