Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover gold’s performance and silver’s performance and examine the factors that affected the metal prices.
WHAT DID GOLD AND SILVER DO IN SEPTEMBER?
It was yet another month of solid gains for silver and gold, including fresh all-time highs for the latter. As we enter the fourth quarter of the calendar year, the precious metals continue to reinforce the conviction that they are experiencing a durable bull market.
Both metals started the month lower on the first trading day of September. Silver slumped below $28 per ounce on Sept. 3rd and again on Sept. 6th. Thanks to big rallies on Thursday, Sept. 12th and Friday, Sept. 13th, the argent metal did not fall below the $30/oz mark for the rest of September. Spot silver prices peaked as high as $32.60/oz during intraday trading on Sept. 26th, the highest level in nearly 12 years.
Gold spent the first two weeks of the month treading water around the $2,500 level. It surged to new record highs above $2,600/oz in the days following the Federal Reserve Open Market Committee (FOMC) meeting, posting back-to-back gains of more than 1% during a single trading day on both Sept. 19th and 20th. Gold managed another such performance on Sept. 24th, jumping 1.1% higher.
The new all-time high closing price for spot gold ($2,673.50) came on Sept. 26th. Each of the two metals closed the month modestly lower from their peaks. Gold settled just above $2,630/oz while silver ended the trading session north of $31/oz on Sept. 30th.
FACTORS AFFECTING GOLD AND SILVER THIS MONTH
It’s increasingly been the case that a confluence of several factors are driving precious metal prices higher. The various puzzle pieces are fitting together perfectly: signs of economic weakness, prolonged military conflicts, falling interest rates, and growing investor demand.
Both gold and silver got a boost at mid-month when the Fed cut rates by a larger-than-expected margin of 50 basis points (0.50%). With stocks and home prices still at record highs, this supersized rate cut indicates two possibilities, neither of which are mutually exclusive:
1. Something is quite wrong with the underlying financial system;
2. The policy decision was simply political, given this was the last FOMC meeting before the November election.
The last time the Federal Reserve reduced rates with the S&P 500 index trading at record highs was in September 2007. We all know what happened shortly thereafter. It may be wise to interpret this Fed action primarily as a signal to markets, because changes to interest rates only take an effect on the economy with a lag. The real impact may not be felt until 6–12 months from now. Nonetheless, rates are expected to come down further before the year is out. This creates a higher likelihood of bounceback inflation—a potential that gold and silver markets appear to be pricing in already.
Stoking inflation is the only “solution” available to the U.S. government now that it’s facing a debt crisis that is getting exponentially worse (quite literally and mathematically). For the first time ever, interest payments on the federal debt will exceed $1 trillion this year. Those interest payments are in a stage of parabolic growth: Just two years ago, the annual interest expense on U.S. debt was less than half what it is now.
The inescapable reality of escalating war in the Middle East is also supporting strong gold demand. Israel is now fighting with Hezbollah in Lebanon in addition to its current year-long campaign against Hamas. Meanwhile Ukrainian strikes are threatening deeper into Russian territory. Each provocation and response by the two sides makes the possibility of any imminent negotiated settlement on Ukraine seem more remote.
On the investment side, wealth management funds have finally been increasing their allocation toward commodities, especially gold. Gold ETFs listed in the West saw their fourth straight month of net inflows.
CENTRAL BANK GOLD PURCHASES
Note to readers: Most data about international gold reserves are delayed by a month. They are not typically reported to the International Monetary Fund (IMF) and are instead compiled by private organizations such as the World Gold Council (WGC).
Globally central banks were net buyers of 37 tons of gold in July. That was a 206% increase month-on-month compared to June.
The National Bank of Serbia bought 5 tons of gold in July, its biggest monthly purchase since October 2019.
As of August, Mongolia’s central bank has added 10 tons of gold to its reserves year-to-date.
The National Bank of Poland purchased 6 tons of gold in August. Its gold stockpile has risen 39 tons so far this year.
The Reserve Bank of India bought 3 tons of gold in August, its eighth straight monthly increase. India’s gold reserves have grown 45 tons in 2024.
The Czech National Bank added almost 2 tons of gold in August, marking 18 straight months of purchases.
The National Bank of Kazakhstan sold 5 tons of gold in August. For four months in a row, it has been one of the few central banks in the world actually selling gold.
In early September, the Bank of Uganda announced plans to start buying domestically-sourced gold to add to its international reserves.
ON THE RETAIL FRONT
Retail sales of silver coins through the United States Mint were steady in September. The mint sold 1,652,000 American Silver Eagles, in line with the totals from each of the last four months. Demand for gold coins saw a steep drop-off of roughly 50% from the previous month. 20,500 oz of Gold Eagles plus 8,000 oz of Gold Buffaloes were sold to distributors.
This brings the U.S. Mint’s year-to-date sales figures to 19,302,000 Silver Eagles and a combined 491,000 ounces of gold. Although the silver sales are keeping pace with the recent past, this year’s gold coin production is well below trend, on track for its worst year since 2019. On the other hand, sales of bullion from Perth Mint were mixed in the latest month of data, with silver demand declining amid a recovery in gold output.
The U.K.’s Royal Mint will no longer mint coins for any foreign countries beginning next year. This brings an end to seven centuries of precedent. At its height, Britain was minting coins for several dozen foreign nations. Back on this side of the Atlantic, the U.S. Mint produced over 405 million new coins for circulation in August as the country’s money supply is once again climbing.
Elsewhere on the retail market, wholesaler Costco saw its gold bar sales increase last quarter in spite of consistently rising gold prices. Costco is reportedly generating $200 million in revenue per month from gold bars.
MARKET BUZZ
Historically, silver outperforms gold following a Fed pivot toward lowering rates.
Goldman Sachs is encouraging investors to “go for gold,” publishing a $2,700/oz price target. The bank’s commodity desk also sees silver prices soaring, but lowered its copper price target to $4.60/lb (about $10,000 per ton).
ING bank says the gold rally is just getting started.
French financial giant Société Générale predicts gold prices will average $2,800/oz in 2025.
UBS revised its gold target $150 higher to $2,850/oz by the middle of 2025.
Australia’s ANZ bank is forecasting gold to hit $2,900/oz by the end of 2025.
Citi remains bullish on silver, calling for prices to hit $38–$40 per ounce by mid-2025.
The production costs of silver mining are increasing, raising the equilibrium price for miners.
The Royal Mint is expanding its program of recovering precious metals from discarded electronics. It could result in “as much as half a tonne of gold, 1,000 tonnes of copper, 2.5 tonnes of silver and 50kg of palladium” being recovered annually, according to Financial Times.
India imported 45.4 million oz of silver in August. This represents roughly 20 days of global silver production, worth $1.3 billion.
India also imported a record amount of gold in August at a cost of over $10 billion.
LOOKING AHEAD TO NEXT MONTH
From a macroeconomic perspective, the biggest driver for the metals next month may be the People’s Bank of China turning back on the stimulus spigots. If economic conditions continue to worsen, plenty of that extra liquidity will find its way into the gold market as a safe haven.
There will be no FOMC meeting until November, so there is little chance of interest rates moving again between now and then. One key event to watch for will be the BRICS meeting near the end of October.
Falling oil prices of late could help turbocharge mining company profit margins, but this trend may also contribute to lower metals prices overall if miners are able to increase production (a rather big if, given the scarcity of newly discovered ore deposits and the long lead time for new mining projects to become operational).
Investors in the West are now heavily net long on paper gold contracts. Given that positioning, we should expect a pullback in metals prices and more volatility in the short-term. There is a fair possibility that gold is overstretched right now, but that hasn’t stopped the yellow metal from chugging higher to this point. – Everett Millman of Gainesville Coins