At the time of writing, gold is up over 14% on the year, and silver prices are up over 26%. What’s been driving it? The same factors we have been seeing for some time now: increasing demand from emerging markets and strategic moves by central banks.
With such consistent demand coming from these sources it’s unsurprising that experts are declaring this to be the start of the bull market. We see emerging market and central bank demand as core components to gold’s strength, but it has also been gaining short-term support thanks to monetary policy decisions and economic data releases.
The Bank of Canada cut rates this week by 25 basis points, becoming the second major bank to embark on a new easing cycle. The first mover was the Swiss National Bank.
And just earlier, the ECB surprised absolutely no one by cutting rates from a record 4% to 3.75%. All eyes are now on the Bank of England, who may well look to cut rates later this month, in the midst of the election campaign.
Worse-than-expected US jobs data has also provided some support. But, as with central bank monetary policy announcements, the impact of this on the gold price this week will be short-lived.
We implore you not to get too caught up in the weekly and monthly data releases. Instead focus on how these feed into longer-term drivers of the gold price - namely the fact that over 70% of physical gold demand comes from China, India, and the Arab countries, or even that since the Russia invasion of Ukraine central bank purchases have nearly tripled.
Why gold is omnipresent in our monetary system, and why it is entering a new bull market is something I discussed in my interview with Chris at Peak Prosperity. You can see a couple of highlights here, or watch the full thing here.
Next week, we will be speaking to author and financial expert Jared Dillion. Any questions you have for him, please send them our way.
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