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Gold Rush in the Making? Case for Higher Gold Prices Gets Stronger Lombardi Letter 2023-01-19 14:42:07 gold prices gold price price of gold gold sales gold market gold bullion Royal Mint Royal Canadian Mint Perth Mint The likelihood of higher gold prices continues to increase as major mints around the world continue to report robust gold bullion sales. Interestingly, there’s an increased demand for gold in a region that’s not necessarily known as a gold consumer. Here’s where gold prices could be headed. Commodities,Gold https://www.lombardiletter.com/wp-content/uploads/2023/01/american-gold-coins-2021-08-31-11-23-12-utc-150x150.jpg

Gold Rush in the Making? Case for Higher Gold Prices Gets Stronger

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Gold Rush in the Making? Case for Higher Gold Prices Gets Stronger

Outlook for Gold Prices Is Rosy

There seems to be a gold rush happening these days, and it makes a strong case for much higher gold prices in 2023 and beyond.

Gold bugs are already familiar with this, but it’s worth mentioning for new readers: the mainstream media does a horrible job at covering developments in the precious metals market. You rarely hear in the news how the yellow precious metal is doing. So, if you aren’t hearing about gold from the mainstream financial press, it doesn’t mean nothing is happening.

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The fundamentals of gold continue to get better. The demand side of the gold market remains robust. The key thing to note is that investors look at gold as a hedge against uncertainty. Gold hasn’t lost its purpose, as some would suggest, and this is despite interest rates going higher. The investment world sometimes refers to gold as a useless asset when interest rates are increasing.

To get an idea of how the current demand for gold looks, see what’s been happening at mints around the world. They see the demand for precious metals firsthand. Lately, mints have been busy selling precious metals at an extremely fast pace.

Britain’s Royal Mint Reports Robust Gold Sales

Britain’s Royal Mint says its gold bullion sales went up by 25% in 2022. The Royal Mint witnessed an uptick in gold demand in March 2022 as Russia’s invasion of Ukraine encouraged investors to rush toward gold. The mint also saw gold demand jump in September and October 2022 as Britain went through a period of political uncertainty. (Source: “Royal Mint Sees Record Bullion Demand in 2022 as Sales Increase 25% for Gold, 29% for Silver,” Kitco, January 17, 2023.)

Regarding what’s ahead for gold, Andrew Dickey, the Royal Mint’s director of precious metals investment, said, “Looking forward to 2023, many financial experts are expecting this momentum to continue, which will promote a level of confidence in investors of precious metals following [International Monetary Fund] warnings of a recession.” (Source: Ibid.)

He continued, “Evidence shows that previous recessions have had an impact on the gold price increasing, with the metal historically deemed a ‘safe haven.’ Other factors affecting demand include a slowing of the cycle of interest rate hikes by central banks, their continued purchasing of vast quantities of gold and crypto disappointment.”

Canadian & Australian Mints Report Heightened Demand for Gold

While the gold bullion sales data from Britain’s Royal Mint is encouraging, the data from other countries’ mints make the convictions for higher gold prices much stronger.

Take a look at the Perth Mint, the biggest mint in Australia. In 2022, it sold 1.1 million ounces of gold bullion. This was 6.3% higher than in 2021. The Perth Mint stated that it had witnessed a surge in gold demand from Europe as consumers were looking to hedge against inflation and the uncertainty around the Russia/Ukraine conflict. (Source: “Perth Mint Sees Record Bullion Sales in 2022; U.S. Mint Sees 22% Drop in Gold Demand and 43% Drop in Silver,” Kitco, January 11, 2023.)

As for the Royal Canadian Mint, in the third quarter of fiscal 2022, it sold 354,00 ounces of gold bullion, up by 14% year-over-year.

Marie Lemay, the Canadian mint’s president and CEO, said in the mint’s third-quarter press release, “We are ahead of plan and expect to exceed our financial goal of delivering even greater than expected returns to Canada and Canadians.” (Source: “Royal Canadian Mint Reports Profits and Performance for Q3 2022,” Royal Canadian Mint, November 18, 2022.)

She continued, “As market conditions evolve, the Mint continues to demonstrate the effectiveness of its business strategy and its ability to deploy its resources to be as responsive as possible to adapt to forecasted and unforeseen shifts in market conditions and customer demand.”

We Could See Some Gold-Price Weakness, But Consider it a Blessing in Disguise

Dear reader, major mints around the world seeing robust demand for precious metals make my bullish view on gold prices stronger. It’s also interesting to see the demand for gold increase in regions like Europe, a rather uncanny place for gold demand, but it’s pretty clear there’s an appetite for the yellow precious metal there.

Recently, gold broke above $1,900 per ounce, a price that was seen as a resistance level. At the time of this writing, gold prices remain above that level.

However, as there’s growing noise about a global economic slowdown, a recession in the U.S., a peaking of interest rates, and a cooldown of inflation, it’s possible that, in the near term, all the uncertainty will cause a “sell all” event. When investors panic-sell, they tend to unload everything in sight, including precious metals, which could hurt gold prices.

If gold sells off, it could be a giant blessing in disguise. After the sell-off, the price of the yellow precious metal might not remain low for too long. The price of gold could make a run for $3,000 an ounce within a few years.

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