Inside the 21st Century Gold Rush WSJ B

5/13/24, 5:25 PM Inside the 21st Century Gold Rush - WSJ
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For
non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1 800 843 0008 or visit www.djreprints.com.
https://www.wsj.com/ inance/commodities-futures/gold-prices-2024-investment-dc6248b2
Inside the 21st Century Gold Rush

Geopolitical turbulence and economic worries have fueled an appetite for bars, coins
and jewelry, especially from small investors
By Bob Henderson Follow

May 11, 2024 5:30 am ET
Eric Vazquez, a lineman for a power company in southwest Florida, says he’s
holding a lot more gold than most financial advisers would recommend. Not just
in his portfolio, but also in bars and coins spread between several secret
locations.
It is a strategy for a world that he worries is growing more chaotic. The

government keeps spending beyond its means. Stock prices can crash from a
tweet. Ensuring his wife and children go to bed at night in peace, Vazquez said,
requires owning tangible assets, not just a claim on them through some
exchange-traded fund.
“At least in my adult life, nothing’s gotten better,” said Vazquez, who is 33. “And I
just feel like I want to take as much of my own livelihood, my own safety, my own
family’s safety, into my own hands.”
Gold futures price
a troy ounce
Note: Front-month contract.

Source: FactSet
Worries about war, discord and mounting government debt have fueled a
worldwide rush by individuals and institutions into what Wall Street calls
https://www.wsj.com/finance/commodities-futures/gold-prices-2024-investment-dc6248b2?st=1kwaviv38ttdv43&reflink=desktopwebshare_permalink 1/4
“physical gold”— bars, coins, jewelry and nuggets. Widespread stockpiling has
helped lift prices more than 40% since October 2022, to $2,367 a troy ounce.
The climb has at times perplexed analysts, because it didn’t coincide with a
typical feature of prior rallies: mounting bullish bets in futures, options and ETF
markets. Also, gold pays no income, and generally becomes less attractive to
investors when rising interest rates drive up the payouts from other relatively
safe assets, like bonds. Yet the metal’s sharpest ascent occurred between this
past February and April, just when the Fed started signaling that rates might
stay higher for longer then Wall Street expected.
Now, many think prices were boosted

Quarterly Chinese gold imports
by legions of Chinese consumers.
metric tons
Nervous about their country’s shaky
economy and seeking hard assets
outside its collapsed property
market, they recently have hoarded
physical gold. Customs data showed
the country racked up 194 metric
tons of gold imports in March, a 40%
increase over February and the
biggest monthly inflow in at least
seven years.
But people the world over are

scooping up the precious metal. They
are paying premiums to buy gold in
Asia and the Middle East, Nicky
Shiels, metals strategist at MKS
Source: General Administration of Chinese Customs, PAMP, wrote in a note to clients last
BNP Paribas
month. Costco’s business selling
bullion is booming in the U.S.
Worldwide demand for bars and coins, which are typically bought by individuals
rather than institutions, grew by 36% between 2019 and 2023, according to the
World Gold Council trade organization.
People tossing bars and coins into their shopping carts don’t usually have Wall
Street-levels of concern about the path of monetary policy, analysts say. They
often want something they can stash or carry, to shield themselves from
potential catastrophes.
Investors’ rush to gold has compounded demand from central banks, which
stockpile stacks of bars as monetary reserves. The banks roughly doubled the
pace of their gold purchases after Russia invaded Ukraine in 2022, according to
the WGC, aiming to diversify their portfolios. Some, including China’s, were also
spooked by sanctions imposed on Russian central bank reserves and are now
retreating from dollar-based assets like Treasurys, analysts say.
The acceleration in central bank and consumer buying has broken a traditional
tendency of gold prices to fall when inflation-adjusted interest rates rise, said
David Wilson, senior commodity strategist at BNP Paribas. Prices would be
about $1,000 lower were it not for all the metal being accumulated, according to
his modeling.
“There’s just growing uncertainty, whether it’s economic uncertainty or

geopolitical uncertainty,” said Wilson.
Global annual gold demand
Bars and coins ETFs
metric tons
Source: Metals Focus, World Gold Council (bars and coins), Bloomberg, company ilings, ICE Benchmark
Administration, World Gold Council (ETFs)
Waves of new buyers emerged after the Covid market crash and last year’s
regional banking crisis, said Alex Ebkarian, chief operating officer of precious
metals dealer Allegiance Gold. More recently, new trade agreements between
countries such as Russia and China have spawned anxiety about the U.S. dollar’s
diminishing role in the world, prompting some investors to seek stability in the
currency favored by the pharaohs.
“They’re asking themselves the what-if question,” said Ebkarian. “’What if the
dollar continues to devalue? I don’t want to have all of my assets be paper
based.’”
Ballooning global debt is also luring investors away from government-issued

currencies and into the precious metal, said Aakash Doshi, Citigroup’s head of
commodities research in North America. Global debt grew by 24% to $313 trillion
between the beginning of 2020 and the end of last year, according to the
Institute of International Finance.
Hedge funds and other speculators have begun ramping up bullish futures and
options bets. Doshi believes the financial market will catch up to the physical
one, propelling the price of gold to $3,000 in the next six to 18 months.
“It might be that [the market’s] just realizing that ‘Hey, gold prices were
probably too low,’” he said.
Soaring debt is one reason Barry Kitt buys gold. The Dallas-based 69-year-old
said his calculations show it has beaten inflation since 1913 and the S&P 500
since 2000.
A former hedge-fund manager who now runs a family office, Kitt is comfortable
with financial products and uses ETFs when he wants to trade quickly.
Nonetheless, most of his gold is physical, including several large crystalline
nuggets.
With ETFs, he said, “You don’t own gold, you own a piece of paper. I want to own
it. I want to know it’s mine.”
Write to Bob Henderson at [email protected]
Appeared in the May 13, 2024, print edition as 'Global Turmoil Sparks New Gold Rush'.
Videos

Inside the 21st Century Gold Rush WSJ B

Uploaded by

Copyright:

Available Formats

Inside the 21st Century Gold Rush WSJ B

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Inside the 21st Century Gold Rush WSJ B

Uploaded by

Copyright:

Available Formats

5/13/24, 5:25 PM Inside the 21st Century Gold Rush - WSJ

Inside the 21st Century Gold Rush

By Bob Henderson Follow

It is a strategy for a world that he worries is growing more chaotic. The

Gold futures price

Note: Front-month contract.

Now, many think prices were boosted

But people the world over are

“There’s just growing uncertainty, whether it’s economic uncertainty or

Global annual gold demand

Bars and coins ETFs

Ballooning global debt is also luring investors away from government-issued

Write to Bob Henderson at [email protected]

You might also like