Categories: Precious Metals
Topics: Gold Stocks

Investing in Gold & Gold Stocks in 2023

As gold continues to flirt with all-time highs just north of US$2,000 an ounce, it’s important to take time to view the yellow metal’s enduring strength from a safe haven perspective — a role it has held over the millenia. 

A combination of limited supply, universal acceptance as currency, wealth diversification, and psychological appeal make gold a traditional safe haven commodity.

We’re being reminded of that today by gold’s stellar performance in the face of geopolitical turmoil, including Putin’s war of aggression in Ukraine, and economic uncertainty here at home as a result of inflationary pressures and a rash of recent bank failures.   

Gold’s long held stature as a safe haven commodity is underpinned by a number of factors. Let’s take a look at a few of those now. 

Limited supply: Gold is a rare and finite resource, which means that its supply is limited. This gives it intrinsic value that is not subject to inflationary pressures that can erode the value of fiat currencies.

Universally accepted: Gold is universally accepted as a store of value and a medium of exchange. It has been used as a currency for thousands of years and is still widely accepted as a means of payment today.

Diversification: Gold can be used as a hedge against inflation and as a diversification tool in one’s investment portfolio. It has a low correlation with other assets, such as stocks and bonds, which means it can help to reduce overall portfolio risk.

Psychological appeal: Gold has a psychological appeal as it is often seen as a symbol of wealth and financial security. In times of economic uncertainty, investors turn to gold as a safe haven asset, which can drive up its price.

We’re seeing that right now with gold’s highly impressive price performance over the last couple of quarters as central banks continue to load up on the yellow metal.

In general, central banks hold gold as a reserve asset to diversify their foreign exchange reserves and to provide a hedge against inflation and currency fluctuations. 

Of little surprise then, many of the world’s largest central banks have become net buyers of gold in recent years, with several increasing their gold holdings by a large degree as part of their reserve management strategies.

A recent World Gold Council report noted that gold held in central banks has risen to its highest level in 50 years — estimated at 36,782 tonnes.

The latest gold purchasing data shows central banks bought 417 tonnes in Q4 2022. The data for Q3 2022 was recently revised upward to 445 tonnes from 399 tonnes.

For context, the average quarterly purchase since 2013 was 128 tonnes. 

Central bank gold purchases as a percentage of global gold demand are also up significantly — in fact, tripling to 34% from their average of 11% over the past several years.

Overall, 2022 marked the highest level of net gold purchases on record dating back to 1950 and the 13th straight year of net central bank gold purchases.

The buying spree has been particularly notable in places like China, Turkey, Croatia, and India. 

Many people speculate that China keeps several thousand tonnes of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE). That, of course, should come as little surprise considering China’s lack of transparency on, well, pretty much everything! 

At present, the gold market is testing resistance at US$2,000 an ounce as inflationary pressures continue to cool slightly.

According to a number of metals analysts, gold’s current bullish momentum may hit a new stride in the coming quarters as the latest inflation data seems to indicate the Federal Reserve may be close to being done with its rate raises. 

The CME FedWatch Tool shows that markets see a nearly 54% chance that the US central bank will leave interest rates unchanged after its meeting in May.

Is Gold About to Break Above All-Time Highs?

In terms of all-time highs for gold… you don’t have to look back very far.

The intraday record high for gold futures came in March of last year at US$2,078.80 an ounce. 

Given the present bullish posture in gold, that record high is well within reach — quite possibly in the coming few weeks. 

A sustained breakout above US$2,000 could very well open up the floodgates to a much higher gold price over the coming quarters, which means holding some physical gold, along with select gold equities, makes a lot of sense right now.  

For those looking into physical gold purchases — including gold coins — I strongly recommend giving my friend and colleague Van Simmons of David Hall Rare Coins a call at 949-567-1325. 

He’s simply the best in the business… and he’s always willing to take time to share his wealth of knowledge in the world of numismatics with interested investors — no matter what your net worth may be. 

Secondly, if you’ve never been on a gold-mine site visit, you need to check out this video tour by our own Nick Hodge.

He calls it “America’s Next Biggest Gold Mine” and you’ll know why as soon as you watch it.

The company is advancing a high-grade gold resource in the safe confines of Idaho, USA, and it’s currently trading undiscovered around US$0.50 per share. 

The team on the ground there has already confirmed 4 million gold ounces on their expansive property… and the company is preparing a Prefeasibility Study for a first-phase restart of gold production.

Check out Nick’s mine tour here... you’re sure to learn something new!

Mike Fagan
Editor, Daily Profit Cycle