“Gold has always been the safety net. Despite all the rhetoric, [central banks] are still telling us that’s still true.”– John Karow, Precious Metals Advisor
The precious metals industry is ablaze with renewed demand for gold as investors across the board hedge against what’s expected to be a rough year economically.
Watch the video to hear Scottsdale Bullion & Coin Founder Eric Sepanek and Precious Metals Advisor John Karow explain who’s buying, why they’re buying, and where gold prices are headed.
Gold Demand Notches Record High
It’s no secret that gold purchases surged throughout 2022 on the back of a faltering economy, but a recent report from the World Gold Council revealed the sheer extent of that demand. Globally, investors scooped up a staggering 4,741 metric tonnes of gold which represents an 18% jump from last year and an 11-year high.
Retail gold investors pulled more than their weight by scooping up 1,217 tonnes of gold, the highest demand in 9 years. Central bank purchases of gold reached their highest point since 1950 at 1,136 tonnes.
Central Banks Stockpile Gold Despite Fiat Support
These numbers reveal a disconnect between what governments the world over are saying and what they’re actually doing. As governments constantly reassure their citizenries that fiat currency is strong and stable, their financial arms are stockpiling gold at record rates.
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This dissonance can only mean one of two things: there’s a grand conspiracy (unlikely) or the governments are just as scared as the average investor.
“The gold reserves [central banks] are bringing in show a big red flag that the hedge needs to be there because they are concerned about fiat currency.”– Eric Sepanek, Founder Scottsdale Bullion & Coin
Gold has always been a refuge during times of economic uncertainty, and the increase in gold holdings among central banks reveals what they really think of the future.
Why Aren’t Gold Spot Prices Reacting?
The discrepancy between the spot price and physical price of gold (and silver) has many investors scratching their heads. In reality, these two indicators of gold value aren’t always aligned as the paper and physical markets are subject to different factors. Understanding the spot price of gold requires awareness of the motivations of big players in the space.
There’s an incentive for major institutions to put their fingers on the scale to keep gold spot prices down. They’re able to invest when gold prices are lower in anticipation of a significant increase in value in the near future. Just last fall, JP Morgan traders were convicted of fraud in attempted manipulation of the gold market. However, it’s only a matter of time before spot prices jump to new highs reflecting the true value of gold and mirroring record demand.
Where Are Gold Prices Headed in 2023?
Heading into February, gold prices will most likely remain where they currently sit in this middle range of prices. There will probably be some routine ups and downs and maybe even some significant upward jumps.
Demand is expected to continue soaring as all investors hedge against a fledgling economy, pointing to higher prices in the future. The gold price forecast for 2023 is in record-setting territory with many experts expecting the precious metal to notch new highs relatively soon.
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As trust in fiat currencies wanes, the US dollar’s position as reserve currency is under direct threat. Major economies such as India, Brazil, and Russia are eagerly looking to reduce their dependence on the greenback. China is set to deliver the death blow as Xi Ji Ping pressures Saudi Arabia to deal oil in yuan instead of USD which would give rise to the Petroyuan.
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