(Sponsored Content) Last year, gold performed admirably, and silver was a laggard. I fully expect gold and silver to rally this year, and I fully expect silver to outperform gold. Therefore, your wealth insurance premium (gold price) is low, and your profit potential (silver price) is at its peak from current levels, notes Rich Checkan, president and COO of Asset Strategies International.

“It’s tough to make predictions, especially about the future.”
—Yogi Berra

Despite a relatively strong US dollar and Treasury yields rising from 0.11% to 5% in the blink of an eye, gold still managed to appreciate around 11% for the year. In the process, gold briefly touched new all-time highs at $2,152 per ounce.

Silver was pretty much flat for the year…quite boring to be honest.

What affected markets last year? I already mentioned two big factors above…a relatively strong US dollar and high Treasury yields. But there were other market-movers as well. In early October, the surprise attack on Israel by Hamas triggered a shift to safe haven assets for a month or two. Gold and silver benefited from those short-term flows.

However, the biggest driver of markets last year was the Federal Reserve. Early on, interest rate hikes caused investors to shy away from both equities markets and precious metals. Talk of interest rates going “higher for longer” increased the probability in investors’ minds of a hard landing for the US economy and an almost-certain recession.

However, with the Federal Reserve holding interest rates steady at the last three Federal Open Market Committee (FOMC) meetings for 2023, investors started to shrug off Fed Chairman Powell’s tough talk. And when he suggested a possibility of two interest rate cuts by May of 2024 at the December meeting, the markets shot higher.

So how did gold manage to hold firm? Central banks.

In 2022, central bank gold buying was more voracious than at any time in the past sixty years.

In 2023, central banks bought gold at an even faster pace.

As central banks prepared their portfolios for what they clearly envision to be challenging times ahead, the investor is largely out of this market, struggling to make ends meet amidst:

  • Higher inflation – up 3% this year on top of the 9% last year
  • Higher interest rates – which preclude refinancing homes from 3% to 8% to tap into equity
  • Higher credit card interest rates – as consumer credit card debt soars above $1.3 trillion!

The rosy picture the Federal Reserve is portraying regarding the strength of household balance sheets and savings in the US is as wrong as the picture they drew for us a year or two ago regarding “transitory” inflation.

Despite the lack of investor participation in the precious metals market, central banks have been able to support the gold price as they shed US dollars for the proven purchasing power protection of gold.

Will gold and silver surge in 2024? With the potential of some relief for investors in 2024 in the form of receding interest rates, we may very well see investors enter the gold and silver markets.

Central bank gold purchases are expected to continue into 2024 in a world where governments are utterly addicted to debt.

If the investors fan those flames with new buying of their own, I am certain the gold price will move above and sustain levels above previous all-time highs.

For silver, the potential is even stronger. There is a deficit in the supply of silver over the past two years that has more than absorbed the previous 11 years of surplus production. In addition, more silver will be needed to fulfill all the green initiatives governments around the world have adopted.

Silver prices typically lag gold prices in a bull market before outperforming them to the upside by a significant margin. So far, we have seen the lag in silver prices. This coming year is shaping up well to have the “poor man’s gold” shine brightly.

“But…Gold Is too high!” I hear this all too often right now, and I believe it is completely false. I heard these same cries when gold was $400 per ounce when I started in this business in 1996. They were wrong then. They are wrong again now.

True, gold is currently around all-time highs. But that does not mean the gold price is high. It was high in 2011. But after several years of consolidation, after several years of building support in a narrow range, after several tests of support to the downside at $1,600, $1,800, and at $1,900…gold is ready to move higher, not lower.

This is not the end of the previous leg up in gold prices. This is the start of the next leg up in gold prices.

In a few years, you will have either purchased gold and silver, or you will wish you had done so. Follow the lead of the central banks here if you wish to protect your future purchasing power…if you wish to Keep What’s Yours!

Good investing…

Learn more about Rich Checkan at AssetStrategies.com.