Silver & Gold Up 20% YTD

Rick Rule, a highly respected figure in the field of natural resources and mining, has provided valuable insights into the current state and prospects of the gold market.

Known for his decades of experience and deep understanding of the commodity market, he has observed a decline in the spot silver and gold markets this week.

The spot silver price closed significantly lower this week, with today's closing price slightly below $29 per ounce.

The spot gold price, however, reached its highest monthly closing price, remaining above $2500 per ounce.

The silver-to-gold ratio has rebounded to 86 amid the relatively weak silver price.

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Craig Hemke of TF Metals reminded his followers on Twitter that similar end-of-month gold price suppression has been more successful in the past than this week's version.

For instance, at the end of October last year, we saw gold fail to break through the $2000 per ounce mark at the end of the month, followed by a bull market rally that now exceeds a $500 per ounce increase and price breakout.

All this is happening when 25 gold market analysts predict an average gold price of only $2250 per ounce for 2024.

Gold has performed well so far this year, rising by more than 20% in almost all fiat currencies.

Although today's relatively strong dollar may have some suppressive effect on the spot price at the end of the week, the upcoming Federal Reserve rate cut cycle has analysts believing there is more room for upward movement.

Please listen to your views on the future trend of gold - this is a positive for gold.

It reduces the opportunity cost of holding non-yielding assets, such as gold, so people are flocking to invest in gold.

Gold has performed well, with a gain of more than 20% so far this year, making it one of the best-performing commodities we track.

So what's next?

If it's bullish, could it test prices of 26, 27, 28 dollars or even higher?

For now, based on the single factor of interest rates, we might see prices stabilize, which is in line with the pattern of gold's performance during rate cut cycles.

If you recall the situation over the past 20 to 25 years, the bursting of the internet bubble in 2001, the global financial crisis in 2008, and the tariff wars in 2019, prices generally stabilized at the start of the rate cut cycle.

Therefore, we might expect prices to remain stable on this theme, but there are many other drivers at play.

The US dollar is currently at its lowest level in 13 months, which could also be a catalyst for future gold rallies, right?

Absolutely.

It's a dollar-denominated asset, which makes it incrementally cheaper, so people will also be more willing to buy based on this.

What other factors are driving the market?

In this cycle, the main driver is the change in US interest rates, with cash rate policy being transmitted through bond yields and real interest rates.

However, there are some very obvious positive factors at play, such as wars.

There are many conflicts going on currently: Russia versus Ukraine, Israel versus Hamas and Hezbollah.

These are factors that we have noticed have actually driven prices to rise stepwise over the past 12 to 18 months.

They cannot be ignored, but they are also difficult to quantify because we do not know exactly how the market perceives these risks.

As central banks continue to buy record amounts of gold reserves and now use more yuan in payment settlements, gradually phasing out the major dollar settlements.

This trend of de-dollarization and central banks buying gold instead of bonds will continue.

Turning to this week's silver market, UBS reiterated its forecast for silver spot prices to rise to $36 to $38 per ounce later this year, citing further weakening of the dollar, the upcoming Federal Reserve rate cut cycle, growing industrial demand leading to further market supply gaps, and continued strong silver demand in China.

With the recent reduction of import duties in the Indian market from 15% above spot to just 6% above spot, we have seen an increase in gold and silver import demand in that market.

Despite local gold prices reaching an all-time high, India is still expected to achieve about 800 to 1000 tons of gold imports this year.

India's silver import numbers for 2024 may also grow, benefiting from increasing solar, jewelry, and investment demand, approaching 7000 tons of silver.

And it's not just India's solar silver demand that is expected to grow; Bloomberg New Energy Finance reminds the world that the demand for silver-made solar cells is not only rising this week but is expected to continue to grow into the mid-2030s.

So, despite silver's relatively strong gains by the end of 2024, with spot prices rising by more than 20% on average, surpassing the price forecasts of more than 25 silver market analysts in almost all fiat currencies, the potential for silver spot prices to continue to rise at the end of this year and beyond is gradually taking shape in the many aspects we mentioned this week.

So I suggest buying on price pullbacks and preparing for the long term.

Fitz reported this week that the US deficit currently accounts for 8.1% of GDP.

When people say the economy is very strong, they almost always overlook the historic deficit we are currently running, a situation that has not been seen since World War II, the 2008 global financial crisis, or the 2020 COVID crisis.

Without running this deficit and balancing the budget, the US GDP could collapse, and a recession would have already been evident.

At the same time, with the rise in US unemployment, the fiat Federal Reserve is hinting at a shift to a rate cut cycle next month.

We have seen indirect evidence of a recession from corporate earnings conference calls, namely that the average American consumer is now stretched thin on basic living expenses.

Todd Vasos, CEO of major US retailer Dollar General, said this week that their core customers are currently very price-sensitive and are looking for value wherever they can find it.

Their core consumer base, which accounts for 60% of Dollar General's customer base, comes from households with an annual income of less than $35,000.

Inflation continues to have a negative impact on these families, with more than 60% of households claiming that they have had to make sacrifices when purchasing basic necessities due to rising prices, in addition to paying more for rent, utilities, and healthcare.

An increasing number of customers report that they are now using credit cards to pay for basic household needs, with about 30% of customers having at least one credit card that has reached its limit.

The CEO's comments are corroborated by data showing that American consumers continue to carry a record $1.34 trillion in credit card debt.

Meanwhile, the US savings rate is currently at an all-time low, so it's no surprise that credit card delinquency rates are rising across all age groups.

Given all this debt, this week Goldman Sachs, BASF, HSBC, and Industrial and Commercial Bank of China Standard Bank of London reached a settlement on platinum and palladium price manipulation lawsuits, paying only a minor fine of $20 million.

The latest admitted case of precious metal price manipulation involved the daily twice platinum and palladium pricing, with the four guilty financial institutions sharing customer data, front-running expected price movements, and placing false inducement orders, allowing banks to avoid losses on their short positions in the futures market.

Similar price manipulation data also points to consistent manipulation of gold and silver prices in a similar historical time frame.

The data from the gold market from 2006 to 2012 shows that gold prices have been consistently suppressed during the London morning and afternoon gold price fixing process.

Looking at the data over the 24 years of the 21st century, a similar price suppression procedure is still active, although perhaps not as effective as before.

Looking back at the performance of the platinum market during the settlement litigation from 2008 to 2014 essentially illustrates what happens to artificially suppressed markets: they eventually face physical shortages, spot prices explode, and eventually find a higher equilibrium price.

For example, platinum, which was at a low of $180/ounce during the 2008 global financial crisis, soared to a high of $3400/ounce in early 2022.

Another indirect piece of evidence of a potential recession is the announcement this week that Goldman Sachs will lay off 1300 employees, 4% of its workforce.

Later, we will discuss the most interesting news in the silver and gold markets this week after the advertisement, and why many fundamental reasons lead analysts to openly predict that spot silver and gold prices will rise by the end of 2024.