Amid superficially upbeat economic data driving stock markets to new highs, the narrative told by Wall Street and government agencies faces scrutiny from precious metals investors. On Thursday, the Bureau of Economic Analysis reported a 3.3% growth in Gross Domestic Product (GDP) for the fourth quarter, exceeding expectations.
However, concerns arise as these gains are attributed to seasonal inventory and export boosts, which are unlikely to be sustained. Alternative economic indicators, such as the Leading Economic Index, are already showing signs of decline, pointing towards underlying weaknesses in the economy.
Despite these warning signs, optimistic chatter about a soft landing dominates Wall Street. The mainstream media labels the current economic state as a “Goldilocks” scenario, emphasizing a cooling inflation front coupled with sustained spending growth.
In the midst of bullish sentiment, precious metals are overlooked as potential safe-havens. Softening demand has led to reduced premiums and contributed to price weakness in 2024. Although gold pulled back from all-time highs at the start of the year, support at the $2,000 level has held, with the current price at $2,027 per ounce, marking a 0.6% decline for the week.
Silver, showing a small weekly gain of 0.5%, sits at $22.94 an ounce. Platinum and palladium, erasing losses and posting gains of 1.2% and 1.0%, trade at $925 and $996 per ounce, respectively.
Despite the lack of interest from U.S. investors, gold is experiencing a boom in other parts of the world, particularly in China. The Chinese gold market has thrived despite the country’s economic challenges. Gold prices in terms of the Chinese yuan have hit record highs, making China the world’s largest retail buyer of gold.
Chinese households are increasingly turning to gold for wealth protection, with jewelry purchases rising 8% last year. Demand for gold coins surged nearly 16% in 2023, and the People’s Bank of China increased its gold reserves by 225 tons. China’s move to make it easier for depositors to convert cash into gold suggests a strategic geopolitical play amid rising tensions with the United States.
On the global stage, the U.S. dollar is losing market share in central bank currency reserves, while gold is gaining ground. The downgrading of U.S. debt by credit ratings agencies Standard and Poor’s and Fitch, coupled with reckless fiscal and monetary policies, poses a significant threat to the U.S. dollar’s hegemony.
As Money Metals intensifies public policy efforts, bills supporting sound money initiatives have been introduced in various states. Bills removing sales taxes from gold and silver purchases and eliminating income taxes, including those in Kentucky, Wisconsin, Vermont, New Jersey, Hawaii, Indiana, and Alaska, have gained traction.
