About two weeks ago in Mount Pleasant, I was waiting for a friend to come out of her business to meet Oberon, our new Corgi puppy and office mascot. The store owner was not dog-friendly, which is understandable. I get it. While I waited outside, I peered into the window next door of a gold and silver pawn shop.
Curiosity won, and I walked in, puppy in hand. To my surprise, very few gold and silver coins were in stock.
I asked the clerk, "Where's all the gold?" half joking, half serious. He replied, "We sold out, and we can't keep any in stock." This gold and silver pawn store in Mount Pleasant was selling 1-ounce silver dollar coins for almost 50 dollars.
Fifty dollars is absurd! Usually, the physical rate for a 1ounce silver should be very close, if not strictly at the spot rate +/- a commission by the dealer. (Silver spot is $23 and change at the moment)
It is no secret that the physical demand for Gold and silver is higher than usual. Usually, from an investment standpoint, I look at Gold as a pet rock. Nothing more!
But there are a couple of crucial things that have changed in global policy that make me wonder about investing in this space.
60% of world trade occurs in Dollars.
The annexation of Russia from the Dollar system was the first time the USA had ever weaponized the Dollar against a country.
BRICS (Brazil, Russia, India, China, South Africa) and now Saudi Arabia, UAE, and Egypt have expressed interest in a new currency to compete with the Dollar.
In 2022, China was the single biggest buyer of foreign Gold despite having the largest mine reserves in the world.
Input costs for Precious metal companies are going down. (diesel land rights are their core costs)
Global economies are slowing down, and Gold has a history of predicting a problem 6-12 months out.
I am beginning to look at Gold differently after a hard year in this space. The strong Dollar we had in 2022 beat it up quite a bit. Raymond James has some astute Analysts in this industry and I value their opinion.
Nothing more can be said about how I feel about Gold. Unfortunately, it would cross the recommendation threshold by the laws of my industry.
Regards
Christopher R. Lakian