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Why Gold then Silver are Poised to Ramp 2024 and Beyond

Summary

  • Gold closes consecutively above $2000 in fiat US dollar terms, achieving historic monthly/quarterly/semi-annual/annual closes above $2050 oz.
  • Report explores global gold and silver market status for the year 2023, indicating potential for further revaluations.
  • SD Bullion provides a follow-up on the Biden Administration's demand for EU action on Russia's frozen $300 billion in US Treasury savings by February 2024.
  • Analysts predict significant consequences on the US dollar system if Russia's assets are expropriated.
  • Reports suggest a shift away from the fiat US petrodollar in global oil trade, indicating potential challenges for the US dollar.
  • Concerns arise about excessive US household exposure to stocks, raising comparisons to past lost decades in the stock market.
  • Market observers suggest considering a rotation of stock winnings into gold, emphasizing the potential for gold to outperform stocks in the coming years.
  • Analysis by David Sommers points to the potential for gold to reach $8,079 per ounce based on historical ratios with the S&P 500.
  • Financial indicators suggest a possible starting block for a global banking crisis in 2023, with failed banks, consolidations, and job losses. Gold is viewed as a potential safe haven amidst growing uncertainties.

Happy New Year to all of you out there, from our team at SD Bullion.

For gold in fiat US dollar terms, this was another consecutive weekly close above $2000 and for the first time in history alongside monthly / quarterly / semi annual / annual closes above $2050 oz.

Later in this report we will take a look around the world at where major gold and silver markets are finishing this year 2023, with a roadmap ahead for how much further both respective precious metals have in potential revaluations higher to come.

First a quick follow-up on last week's SD Bullion Market Update regarding the Biden Administration's demand that the EU come up with a plan by the end of February 2024 to potentially confiscate Russia's $300 billion in frozen US Treasury savings and hand it over to their opposition in war Ukraine.

The Financial Times covered that story this week while former US debt plumbing system architect Kathleen Tyson stated, "This expropriation of Russian assets will punctuate the end of a century of FX official reserves accumulation, except in G7 Daisy Chain and Anglosphere states. The rest of the world reverts to gold in self-custody as reserves and innovates new bilateral trade models for food and energy security."

Even Nobel winning economist Robert Schiller admitted this week to a paper in Italy that such an action would cause a cataclysm on the US dollar system.

Meanwhile the Wall Street Journal reported this week that already an estimated 20% of the global oil trade was bought and sold in fiat currencies outside of the once dominant fiat US petrodollar.

If the stock market is designed to gather the largest amount of retail buyers before its typical lost decades perhaps we are again nearing another such point as US household exposure to stocks is as excessive as it once was before the lost decade and a half 2000 to 2015. And well above the overexposure stocks achieved before the lost decade of the 1970s.

In regards to current gold prices versus the S&P 500 stock index is at currently, other market onlookers echo a point I keep hammering home on this channel suggesting it is time to possibly rotate some stock winnings into bullion before the next major shift in revaluation trends commence.

Commenting on the room for gold to move in the coming years, David Sommers states, It would certainly seem that there is room to go a lot higher. The price of an ounce of gold in dollars/S&P level is still only 0.435. It was 1.69 as recently as August 2011. With the S&P at 4,781, a comparable ratio would make the price of gold $8,079 per ounce."

What David is referring to is merely for gold divided by the S&P 500 getting back to its August 2011 levels. This chart here helps illustrate how crazy the overvaluation of gold over the S&P 500 can get during bull market mania phase highs like the top in January 1980.

There is a massive runway for gold to outperform stocks in the years ahead.

Yet the western investment advisor class is still asleep on gold with near no allocation at all. Of what allocations they would make will likely end up not in bullion outright but in inferior unsecured underperforming mining shares and unsecured ETF slush funds like GLD or IAU.

Gold market investor and commentator Fred Hickey wonders aloud what happens with gold prices once western institutional investor classes return to reallocating back into gold stating the following this week on Twitter, X.

Since March 2020, back when COMEX began double counting unsecured 400 oz gold bars in ETFs additionally as supposedly backing their fractional reserve warehouses, we have seen a steady drop in the reported GLD tonnage / gold price ratio.

That ratio is now down to its lowest level since the world's largest unsecured gold slush fund began its existence all the way back to the year 2005. 

Sure the accounting trickery bought the COMEX more time and the illusion of stability, but their underlying fractional gold pile has been basically cut in half over the last just over three years of time.

In financial history, 2023 may be remembered for the starting block of a future global banking crisis. This chart is only updated through May 2023, but in total there were five failed banks in the USA this year, and Swiss G-SIB Credit Suisse basically failed by being bought out for pennies on its once bloated share price by UBS.

There have already been over 61,000 bank jobs lost in the year. We suggest this is only the start as the system consolidates toward a global bank system trending towards more CBDC adoptions and market share.

And while hard US debt is on the cusp of ballooning past $34 trillion to close the year in which another deluded stock market bubble nears its all time nominal highs.

I again suggest considering that gold bullion will like past stock market bubble eras be looked back upon as being cheap even now priced at just over $2000 oz.

The spot gold price closed above $2,050 oz again completing record high wicks on monthly, quarterly, and annual closes which is important for chart onlookers in search of bullish technical breakout signals.

The spot silver price finished slightly down on the week finishing just under $24 oz for the end of the year 2023.

The spot gold silver ratio rose on gold's strength over silver to finish at 86 on the year.

Industry spokes-group for the silver investment industry, the Silver Institute was out again highlighting ongoing and further upcoming deficits, where current shrinking silver supplies versus increasing demand in the global silver market is to be the norm in the decade unfolding.

They also briefly highlighted the promising future for silver in replacement of Platinum Group Metals in potential industrial allocations for the growing hydrogen fuel economy to come.

As well, they again covered that mining strikes in the largest silver producing country of Mexico put a damper on silver supplies coming out of our neighbor to the south this year.

Yet they didn't mention the key and most important point that major silver exchanges and depository inventories of silver in China, on the COMEX, and in the City of London have seen major reductions since the spike high levels during the 2020-2021 Covid peaks. Dropping -73%, -70%, and -32% respectively over the last few years.

At some point all these contributing fundamental and fiat financial folly factors will result in a rapidly climbing silver spot price, and I suggest we are not all that far off. As yearly price charts in major gold markets are signaling that they will begin becoming unaffordable to the average woman and man on the street.

Annual gold price charts in fiat US dollars, fiat Euros, fiat Chinese yuan renminbi, and fiat Indian rupee are all signaling breakouts are either underway or about to begin in earnest.

The same cannot be said for laggard silver and that is what bullion bulls should expect to see. Gold leads, eventually silver follows and outperforms even gold in an eventual bullion bull mania.

Here are annual silver price charts in fiat US dollars, fiat Euros, fiat Chinese yuan renminbi, and fiat Indian rupee. With the final fiat rupee chart for silver closest to a coming break out phase where the poor man's gold, silver does its typical outperformance runs.

Thus far in the 21st Century gold has outperformed silver, but before this bullion bull mania ends my suggestion is we will likely end up seeing something akin to what we saw play out in 1980. If that does occur we could see a day where from here to there silver outperforms gold by more than 4 times from here to there.

If you believe like I do, we are slowly stumbling into one of the biggest store of value crises the world has collectively endured. Owning bullion, especially one which is still more than half off its all time nominal price high will likely prove to have been a sound decision today.

That will be all for this last 2023 edition of our weekly SD Bullion Market Update. We will see you in 2024. 

As always to you out there, take great care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...

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