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Money Metals News Alert
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January 6th, 2025
– Strong performance by both gold and silver over the past year – all
happening while the dollar held up well has been unusual.
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A reversal lower in the
dollar would create a real tailwind for gold, silver, and commodities in
general... and that???s something we do foresee happening in 2025.
At the moment, all markets
are without a clear direction – they???re essentially in a ???wait and see??? mode
while the new Donald Trump administration is installed this month.
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Gold : Silver Ratio (as of
Friday's closing prices) – 89 to
1
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Just How Good Was Gold in 2024?
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Gold was one of the best-performing
asset classes in 2024, outgaining the red-hot U.S. stock market.
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People who follow
financial news know that gold had a great year.
Despite its typical apathy
toward gold, even the mainstream was forced to sit up and take notice. But you may
not realize just how well gold did.
The
gold price rose 26.5 percent in 2024, setting several new price records along
the way.
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It was the biggest annual percentage
gain since 2010 during the quantitative
easing (money printing) years in the wake of the 2008 financial crisis.
During its sustained rally, gold set
40 new all-time highs based on the afternoon London Bullion Market Association
p.m. price. The most recent was $2,777.80 per ounce on Oct. 30.
Gold also set a
record in real terms, cracking the inflation-adjusted price all-tome high set
back in 1980.
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Most people fixated on the red-hot
U.S. stock market last year. Gold was better.
The yellow metal edged out U.S. stocks
to rank first among traditional asset classes. Gold also performed better than
U.S. bonds, dollars, commodities, and global treasuries.
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With its huge post-election surge,
Bitcoin was the only asset to beat out gold. The cryptocurrency
price more than doubled, rising 111.5 percent.
The World Gold Council pinpointed
three factors driving gold???s impressive bull run.
- Strong central bank and
investor demand, which offset declining consumer demand
- Heightened geopolitical risk
due to increased conflicts, along with a busy electoral year across the world
- Periods of opportunity costs
when markets saw lower yields and a weakening U.S. dollar.
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Silver remained well below its
all-time high throughout 2024, creating the impression that it underperformed.
However, it had a pretty solid year as well.
Silver kicked
off 2024 at $23.99 per ounce and closed out the year at $28.91, a 20.5 percent
gain.
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Silver???s gains weren???t
quite as beefy as U.S. stocks, but it still outperformed emerging market stocks,
U.S. bonds, commodities, and global treasuries.
Investors will want to
keep a close eye on silver as we move into 2025. Historically, silver has lagged
behind gold in the early stages of a gold bull run but outperforms the yellow
metal in the later stages of the rally.
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There are also several signs that
silver is underpriced.
Analysts project that there was a
fourth straight supply deficit in the silver market, meaning there was more
silver consumed than was pulled out of the ground or reclaimed through recycling.
This market deficit is expected to come in at around 182 million ounces.
The gold-silver
ratio also indicates silver is underpriced. The current gold-silver ratio is
over 88-1. That means it takes 88 ounces of silver to buy one ounce of gold.
In the modern era, the gold-silver
ratio has averaged between 40-1 and 60-1. When the gold-silver ratio gets far
above the high end of that historical average, it tends to return to the mean with
a vengeance.
For instance, in 2020, the gold-silver
ratio set a record of 123-1 as Covid hysteria gripped the world and then plunged
to around 60-1 as central banks around the world cranked up the money creation
machine to cope with governments shutting down economies.
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Most mainstream
analysts expect the gold bulls to keep running in 2025.
Goldman Sachs and JP Morgan both
project gold will crack the $3,000 level this year.
A JP Morgan analyst wrote, ???We
maintain our multi-year bullish outlook on gold for a third year in a row. ...
Gold still looks well situated to hedge the elevated levels of uncertainty around
the macro landscape heading into the initial stages of the Trump administration in
2025.???
Central banks and Asian demand drove
the 2024 gold rally, with Western retail investors largely remaining on the
sidelines. If they jump into the market this year, we could see another strong
upward price surge.
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If there is a major economic crisis,
(and that is entirely possible given the massive level of debt and the large
number of bubbles in the economy) the Federal Reserve will most likely slash rates
back to zero and start running QE After all, that's the fork it knows.
In this scenario, the price of gold
would likely blow through the roof.
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This week's Market Update was
authored by Money Metals Writer Mike Maharrey.
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