Some things never go out of style—and that includes gold. So when times get tough or the future seems uncertain, Americans often rediscover their love of the precious metal.
On Tuesday, February 14, 2023, news came out that inflation (as measured by the Consumer Price Index) once again came in hotter than expected. According to Kitco News, this helped push gold prices “just below $1,900,” which was actually as high as $1,877.40, in intraday trading. Meanwhile, CNBC reported that the “stubbornly high inflation reading” sent the Dow Jones Industrial Average down more than 150 points.
Are Americans on the verge of falling further in love with gold?
Gold is also experiencing soaring demand around the world.
I’ve written before about the massive increase in gold demand from central banks around the world, but they’re not the only ones who have been buying.
In January 2023, Britain’s Royal Mint reported a new record in bullion demand for 2022, which includes a 25% increase over the previous record set in 2021. Business Insider reported on February 14, 2023, that Russian citizens are “scrambling to buy gold and stash their savings, fueling a fivefold surge in demand.” And as tracked by the London Bullion Market Association, gold saw a record annual average price of $1,800/oz. in 2022.
Here’s another interesting piece of information from the World Gold Council (WGC): While total bar and coin demand increased in 2022, demand for gold exchange traded funds (ETFs) and similar products actually dropped. It seems that consumers may be more interested in owning real, tangible gold than a paper-based version through an ETF.
America may be facing a “rolling recession.”
On February 13, 2023, Fox Business wrote about the possibility of a “rolling recession”—a term coined by Loyola Marymount University economics professor Sung Won Sohn as “a hybrid economy in which industries and sectors essentially take turns contracting, rather than declining all at the same time.”
The article notes that we’re seeing a manufacturing recession, slumping housing prices, and large layoffs in the tech sector, as well as “the twin threats of high inflation and the Federal Reserve’s most aggressive interest-rate hike campaign since the 1980s.” However, we’ve also seen an increase in our nation’s gross domestic product (GDP) and the lowest unemployment rate since May 1969.
To me, the idea of a “rolling recession” is another sign of the constant economic uncertainty we’ve been facing for several years now. If industries and business sectors are now going to take turns experiencing a recession, it could leave consumers in a constant state of anxiety wondering if the assets in their portfolio will be next to take a hit. And Sohn also noted that “there is still a danger the nation stumbles into an economy-wide recession,” according to Fox Business, adding even more uncertainty to the equation.
Where, then, will Americans look for help protecting their wealth?
When faced with economic uncertainty, Americans turn to gold.
From the earliest days of our nation, gold has been a place Americans turn to when faced with uncertainty. During the Civil War, for example, coins that contained precious metals disappeared from circulation because citizens were hoarding them to protect their wealth. And almost like clockwork, we’ve seen time and again how Americans turn to gold as a form of wealth insurance.
Gold never truly goes out of style. As a form of generational wealth and as part of a well-balanced portfolio, gold will always remain popular with Americans. So when our economy faces major market uncertainty, we tend to rediscover our love of gold as a protective asset. If you’d like to discover what gold can do for your portfolio, give us a call today.