Welcome to SurvivalBlog’s Precious Metals Month in Review, presented by Gainesville Coins. Each month, we take a look at “the month that was” in precious metals. We cover gold’s performance and the factors that affect gold prices.
What Did Gold Do in February?
Everything moved against gold in February. Hot inflation numbers and a stronger dollar pushed back the probable date for the Fed’s first rate cut. A huge tech bubble in stocks pulled money out of bonds and other safe havens to chase record stock prices.
Spot gold started February at $2,054 an ounce and ended the month $20 lower at $2,034 an ounce. The February 1st close was the highest for the month. The lowest settlement for February was $1,992, hit on both the 13th and 14th.
Spot silver began February at $23.15 an ounce and ended at $22.46 for a loss of 69 cents for the month. The high close was $23.40 on the 16th, and the low for the month was $22.07 on the 12th.
Factors Affecting Gold This Month
STOCK MARKET RALLY
Stocks set several new record highs in February, giving investors little reason to seek the safety of gold. The big story was the tech sector, with NVIDIA rocketing over 28% this month and lifting the entire tech sector with it.
CRYPTO FRENZY
Bitcoin started February at $42,000 and peaked $20,000 higher at $63,700 on the 28th, acting as the biggest magnet for FOMO money this month.
HOT INFLATION
Higher than-expected consumer and wholesale inflation did precious metals no favors this month, as it was a major factor in pushing back the first rate cut by the Fed. A vivid example of how inflation affects gold prices was seen on Feb 29th with the release of the Personal Consumption Expenditures report for January.
Headline PCE came in at 2.4%, as expected, down from 2.6% in December. Core PCE fell to 2.8% from 2.9%. Even though the numbers were as expected, gold took off. Spot gold jumped from $2,028 to $2,051. Gold futures advanced from $2,036 to $2,059.
Other Central Banks
The Bank of England left rates at 5.25% this month in another 6-3 split decision. The majority voted for a pause, but two wanted a 0.25% rate hike. The other member wanted to move in the opposite direction, voting for a 0.25% rate cut.
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The European Central Bank also left rates the same this month at 4.00%. Two-thirds of economists polled by Reuters expect the ECB to make its first rate cut in June.
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The Bank of Japan will raise benchmark interest rates out of negative territory in April, according to many economists.
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The Turkish central bank paused its series of monster interest rate hikes this month, leaving the benchmark rate at 45%. This was expected after the new central bank president said that rates were now high enough “to establish the disinflation course.”
Central Bank Gold Purchases
The World Gold Council Central Bank Gold Report released this month covered December 2023. Globally, central banks bought a net 29.8 tons of gold to end the year. Notable buyers included Turkey (17.7t), Uzbekistan (9.3t), and China (9.0t).
The only big seller in December was Kazakhstan, at 10.0t.
Gold ETFs
Global gold ETFs saw their eighth straight month of outflows in January. As usual, when there are net outflows, US funds are the perpetrator. North American gold ETFs shed 36.2 tons, while European gold ETFs saw 17.5 tons of outflows.
Asia was the only region where gold ETFs saw net inflows in January, with 3.1 tons. The “Other” nations saw a net outflow of 0.4 tons, for a global total of 51 tons of outflows.
(“Other” are Australia, South Africa, Turkey, Saudi Arabia, and UAE.)
On The Retail Front
Bullion sales took a dive at the US Mint this month. 1.7 million American Silver Eagles were sold in February, compared to 4.9 million in January. 18,000 ounces of American Gold Eagles of all sizes were sold, compared to 123,000 ounces in January, and 13,500 American Gold Buffaloes were sold in February, compared to 46,000 last month.
Market Buzz
Gold at $3,000 in the next 12 to 18 months?? Citi analysts say it’s possible but unlikely. It would take a global recession, and for central banks to double their gold purchases to hit the $3K mark.
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Commerzbank is a bit more practical, restating their forecast of $2,100 by late this year.
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UBS says that Fed rate cuts will lift gold to $2,200 this year.
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An article of interest at the Gainesville Coins site: How the US Crushed the Move Toward a Post-Bretton Wood Gold Standard and Created The Dollar Hegemony.
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It was a good Lunar New Year for gold retailers in China, as the public continued to pile into precious metals as the collapsing real estate sector threatened to crash the economy. Gold jewelry sales were up 24% from last Lunar New Year.
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Newmont, the world’s largest gold miner, saw its share price fall 7.5% to near a 5-year low after its latest earnings report. The company announced that it is cutting its dividend and selling off assets as it restructures the company to reduce redundancies after its acquisition of rival Newcrest last October.
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Looking Ahead To Next Month
February’s 11th-hour boost gets gold prices back to practically year-to-date highs after hitting 2024 lows below $2,000 just two weeks earlier. Looking toward March, the largest driver of gold prices will once again be estimates of when the Fed’s first rate cut will be. The Fed will continue to be steered by inflation reports.
The most likely factor to boost gold besides the Fed will be another regional banking crisis. The collapse in the commercial real estate market means that another banking crisis will happen, it is only a matter of when.
This month, we have a treasure story of a different kind. A very rare solid gold LEGO mask was discovered in a bag of junk jewelry at a Goodwill store in DuBois, Pennsylvania. It was auctioned off on Goodwill’s online auction site, fetching $18,000.
– Steven Cochran of Gainesville Coins.
Proviso: This column is intended for educational purposes only. It is not intended as investment advice. Past performance does not guarantee future results.