The current moment is crucial for the precious metals industry, and a monthly close at an all-time high could signal the start of a new secular move in gold. This potential shift is anticipated to be driven by central banks, which still hold 80% of sovereign debt relative to their balance sheet assets, and traditional portfolios that have yet to include gold as a defensive alternative. As this trend unfolds, there is an opportune moment to actively explore market expressions of this view. Additionally, other precious metals like silver and the mining industry are poised to be significant beneficiaries of this long-term trend, despite their current distressed state.
Today is undeniably a pivotal moment for the precious metals industry.
A monthly close at an all-time high would likely mark the beginning of another secular move in gold.
This is yet to be propelled by two primary buyers:
▪️Central banks, which, even with their recent… pic.twitter.com/12V0ScTkFI
— Otavio (Tavi) Costa (@TaviCosta) November 30, 2023
Family offices, which manage investments for families typically with assets of $100 million or more, are increasingly investing in private markets rather than public stocks, even amidst market rallies. This shift highlights a significant change in their investment strategies. The focus is not just on private markets; these offices are also expanding their interests into alternative assets like real estate and commodities.
Gold futures have recently surged to their highest levels since August 2020, marking a significant turnaround from a previous bearish trend. This shift is highlighted by the emergence of a bullish indicator known as a “golden cross.” This technical pattern occurs when a short-term moving average, such as the 50-day moving average, rises above a longer-term moving average, like the 200-day moving average. This crossover is often interpreted by investors as a sign of increasing momentum and potential for further price gains in the gold market.
Amid market uncertainty, investors are holding record amounts of cash, reflecting skepticism about the economy’s health despite official positive statistics. The stock market’s optimism is driven more by expectations of Federal Reserve rate cuts rather than true economic strength. With concerns about the long-term value of cash due to inflation and credit risks, there is increasing interest in gold as a stable and potentially more profitable alternative. Investors are looking for a catalyst to shift from conventional assets to precious metals like gold, seeing it as a safer option in uncertain economic times.