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Metal Market Report June 2022 - Week 5 Edition

June 2022 - Week 5 Edition

Shady Russian Gold Could Still Infiltrate Market, Affect Price

Gold remains above $1,820, despite the 8% rise in the U.S. Dollar Index (DXY) so far this year. Gold’s price reached $1,840 per ounce over the weekend but Western sanctions against Russian gold pushed the yellow metal down a bit Monday morning after the Group of Seven (G7) nations voted to ban new imports of bullion from Russia in another attempt to punish Russia for invading Ukraine. The key nation among the G7 is the United Kingdom (UK), since London plays a major role in distributing gold bullion. However, markets in Asia will keep trading Russian gold and nobody knows the gold’s origin after that!

The Number of Gold Investors and Volume of Gold Investing Keeps Climbing

Gold bullion is the clear winner among major investment asset classes, so far, in 2022 – merely by staying relatively level in U.S. dollar terms and rising substantially in terms of most other leading currencies. Since many global stock markets are mostly down by double digits and bonds fall in price as their yields rise, gold is the winner by merely holding on to its value.

Gold’s superior performance has driven more mainstream investors to the gold bullion market, both in physical coins and bars and in gold exchange-traded funds. In the physical market, we have reported on the U.S. Mint’s dramatic year-over-year increase in gold coin sales. Next week, we will bring you the mid-year report on Mint bullion sales. This week, we heard from the Royal Canadian Mint that total international gold bullion coin sales rose in the first quarter by 14%, year-over-year, to nearly 59 metric tons. That made it the best quarter in 35 years for gold bullion coin sales on a global basis, and we know from history that after 18-24 months about one in six bullion coin investors start to look into buying rare coins.

As for gold ETFs, we reported this past week that the World Gold Council calculated that total gold ETF sales rose to 268.8 metric tons in Q2, 58% above the 170 metric tons bought in the same quarter in 2021. Now, we have learned the total number of investors who have put money into some form of gold exchange-traded products since the start of the pandemic in March 2020 is now over four million, up 747% from the number of gold ETF investors before March of 2000.  In time, these paper gold investors will want to own the “real thing,” – gold coins in their hand and some will want to own rare coins, too.

Gold Still Dominates the 21st Century

Gold has already won the 20th century, since the U.S. dollar lost 98% of its value to gold in the century after the birth of the Federal Reserve Bank in 1913. Gold has also beaten the dollar handily in the last 50 years since Nixon closed the gold window in 1971. Gold has also beaten stocks over the past 50 years.

Gold skeptics always like to measure its performance from its “bubble peak” of $850 in January of 1980, but gold was only above $700 for about a week and that kind of measurement is just as unfair as measuring stocks from their peak last January. Over any reasonably long-term period – say, 25, 50 or 100 years, gold outshines most major stock indexes and certainly it has whipped the U.S. dollar quite easily.

As we reach the end of June, we are now 22-1/2 years into the new century. Even though the U.S. dollar is at a 20-year high against a basket of other leading currencies, gold has trounced the dollar easily by gaining 529% in U.S. dollar terms – and significantly more in terms of other currencies.

Compared to the major U.S. stock market indexes, gold has tripled the returns of the U.S. stock market.

Gold has a 5,000-year track record of performance as “real money.” In the past decade, cryptocurrencies arose as a competitor to gold and cash, but most people bought bitcoin and other crypto’s to make a quick buck, not to use them as money. After that bubble popped, many recent investors have run for the exits because of crypto’s extreme volatility.  Still, there is a real future for private currencies as a means of exchange using blockchain technology.

 

 

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