In May this year, gold peaked above $2,050, in line with US debt ceiling talks. Most economists and analysts predict that the gold and silver markets will remain bullish, expecting prices to rise while still expecting a recession in the latter half of this year.
So as global markets continue to slow, why are gold or silver prices predicted to continue to rise?
Gold Spot Prices: $1962.00
Silver Spot Prices: $25.10
Let’s start with the best-known and loved precious metal, long considered an excellent choice for portfolio diversification and a hedge against inflation.
Gold spot prices are predicted to rise to around $2,200 in the next 12 months.
The World Gold Council has reported a mixed picture of gold demand for the first quarter of 2023. On the one hand, there was strong buying from central banks and increased demand from the largest gold-consuming nation, China. However, there was a decline in demand for ETFs and a reduced demand in the second biggest gold-purchasing nation, India.
Central banks worldwide showed significant growth in gold buying, adding 228 tonnes to global reserves.
Gold bar and coin investment also increased by 5% compared to last year, although there were variations in different regions.
The fluctuation of the gold price is influenced mainly by changes in the global economic and geopolitical climate.
Gold Price History
In 1971, the gold standard ended, resulting in the linking of gold to US dollars ending. During this period, the price of gold was no longer limited and substantially increased throughout the 1970s.
The history of this precious metal is particularly interesting in regards the USD, with government confiscation and control of gold prices taking place on numerous occasions.
1979 Oil Crisis
The 1979 oil crisis demonstrates how gold performs in the face of a geopolitical crisis. Between the period when President Nixon put an end to the gold-backed dollar in 1971 and 1980, the price of gold experienced a substantial increase, soaring from $35 to $850 per ounce.
The price surge was primarily attributed to the oil crises, rampant inflation, and global conflicts during that period – sound familiar?
These years played a significant role in shaping the gold market. When tensions began to ease, investors became less apprehensive, leading to a decline in the price of gold.
Black Monday is described as the worst day for equities in US history. On October 19, 1987, the Dow Jones,which is a major wall street stock market index, fell by a massive 22.6%.
During this particular stock market crash, gold initially rose by 4.2% and peaked at $491.50. However, it then declined and settled at $481.70.
The following day, the price of gold slid further to $463.20 and eventually recovered, reaching $502.30 by December 1987.
Defined by the International Monetary Fund as the most extreme economic and financial breakdown since the Great Depression, the next disruption to the gold markets came with the global financial crisis of 2008.
The global markets remained highly unpredictable in the following years, causing gold prices to surge from $700 per ounce in 2008 to $1,900 per ounce in 2011. However, global stock prices began stabilizing again after 2011, when gold spot prices gradually declined.
The spot price of silver averaged $21.71 in 2022, and it is predicted that it could reach upward of €30 in the next two years.
Although all commodities have been in a super-cycle since 2020, silver stands out, as it is relatively cheap.
We may be witnessing the beginning of a recession in some parts of the world, but demand for silver, driven by industries, is likely to remain strong.
Silver serves two main purposes in today’s market. Firstly, as a precious metal, and secondly, it acts as an industrial metal with awide range of uses that continue to grow. Silver is, of course, also used in jewelry, silverware, and countless other objects.
One of the most significant influencers on the silver markets is the increased industrial use and demand for green technologies, particularly the need for silver for solar panel installations and electric cars. Noteworthy also is the fact that silver is used in the latest 5G mobile phone technology.
In 2022, investment in physical silver increased by around 18%, reaching a record high of 329 million ounces, and the price of silver increased by 3.7%.
Joshua Rothbart of J. Rothbart and Co recently gave us his insights into the precious metal markets, and he highlighted that gold prices are significantly impacted by paper trading, such as exchange-traded funds or ETFs. This financial instrument allows investors and traders to track gold’s price. However, they do not hold any physical assets.
Silver investors often get frustrated when they see that the price of silver can remain stagnant, even when the price of gold is on the rise. However, this has been proven to be a normal pattern with silver and gold spot prices throughout history.
Silver tends to follow behind gold during periods of market growth. But eventually, silver catches up and even surpasses gold in terms of price performance.
Silver Price – History
Like gold, silver has also played a significant role in economic history as both an industrial metal and as currency for even longer than gold.
The Pound Sterling
Silver has long been seen as the money of the general public, unlike gold, which has long been associated with prestige and wealth.
Before the 20th century, silver was a crucial part of the British economy. The Pound Sterling, the currency of England, was defined as a pound of sterling silver.
When Sir Isaac Newton, the Master of the Royal Mint, then reevaluated the value of silver against gold, and thanks to the physicist’s policies, Britain became the first country in the world to adopt gold as its standard.
Silver also played a major role in the history of the American economy, with large silver deposits in Mexico providing abundant physical precious metals. As a result, silver coins competed with gold coins as the most valuable currency at times.
However, the gold rushes in California, Spain, and Australia shifted the focus away from silver and towards gold as the economic standard. As a result, silver was gradually phased out of common circulation by the 1900s, and it temporarily lost its status as a measure of wealth.
The 1960s witnessed significant developments in the silver market. The price of silver increased from 91 cents to $2.57 per ounce during this period.
As the US treasury gradually eliminated silver from currency, the value of silver witnessed a rapid increase, reaching $1.29. Savvy investors anticipated that once the treasury ceased supplying extensive amounts of silver, the price would skyrocket and swiftly purchase any available silver. The demand pushed the silver price up to a peak of $2.57 in 1968.
From the 1980s until now, there has been a sustained increase in the value of silver. Both economists and investors realize the value of silver as a reliable investment that retains its worth. Silver spot prices have steadily risen over time, with particular interest from financial experts between 2000 and 2012. Studying the history of precious metals prices will help us understand and shape our economic future.
Future Outlook – Precious Metal Prices
Why are precious metal prices going up as the other markets, including traditional stocks and the property markets, are struggling?
Gold and silver price predictions have been updated in reaction to the banking turmoil that hit in March of this year, which caused investors to seek safety and fear a recession while expectations of aggressive interest rate hikes by the US Federal Reserve diminished.
ABN-Amro Group projections estimated that the precious metal prices would average $1,900 per ounce in 2023 and rise to $1,950 by the end of 2024.
ANZ Research analysts, in May, increased their gold price predictions to settle at $2,200 by September 2024. Analysts cited turbulence in the US banking sector, high-interest rates, and uncertainty surrounding the debt ceiling.
We already know the US dollar is already in trouble. The whole world has started to move away from and reject the once almighty dollar.
If the history of gold and silver has proven anything, it is that these precious metals provide a form of insurance in times of crisis.
Purchasing and storing your assets offshore will prove worthwhile in case of market failures and governments taking control of assets.
Buying and finding secure storage anywhere can be challenging. By becoming a Nomad Capitalist client, you will benefit from our expert gold partners, just part of a personalized bespoke strategy designed to protect your assets and take you where you are treated best. Contact us today to find out more.
Gold and Silver Prices FAQs
The term “troy ounce” refers to a designated unit of measurement used in weighing precious metals, with origins traced back to Troyes, France.
Today the troy ounce remains the established unit of measurement for the physical precious metals market, guaranteeing compliance with purity standards. The abbreviated “t oz” or “oz t” are commonly used to denote troy ounces. A troy ounce is equal to (31.1034768 grams).
Despite the appeal, uses, and investment potential, platinum and palladium are less popular than silver and gold. The limited supply of these metals contributes to these precious metals prices volatility, discouraging some investors.
Palladium and platinum are scarcer than other precious metals. However, these two metals have significant industrial applications due to both having excellent catalytic properties. Commonly used in producing catalytic converters, which help reduce harmful emissions. From an investor’s point of view, however, palladium and platinum are far more volatile but are increasingly recognized as an investment option.
Gold and silver, however, have a proven track record and have historically held value, gold appreciating on average 10% each year.
Ultimately, the choice between gold, palladium, and platinum depends on factors such as intended use, market conditions, personal preference, and investment goals.