Blanchard Index
Exclusive Precious Metals Market Outlook and Recommendations
Index updated April 1, 2024
The Blanchard Monthly Index is a roll-up of industry news and economic trends affecting the precious metals market and trading world.
Check back each month for insights and commentary from our leading experts and contributors.
The Blanchard Economic Report
Gold Jumps to New Record above $2,200
The price of gold rocketed to a series of new record highs throughout March, ending the month above $2,200 an ounce. Gold has climbed an astounding 23% over the past six months.
It’s hard to point to just one factor that is propelling gold higher right now as there are multiple demand drivers for the precious metal.
Bullish factors for gold include forecasts that the Federal Reserve will slash interest rates in 2024, an unsettling brew of geopolitical hotspots around the world, and worries that the stock market is ripe for a fall. What’s more, central banks and strong Chinese buying continue to push gold to ever-higher levels.
Fed Signaled Three Rate Cuts in 2024
At its March meeting, the Fed kept its key interest rate unchanged, but signaled that three rate cuts are expected this year. That left the Fed’s benchmark rate at a 23-year high of 5.25% to 5.5% for the fifth meeting in a row.
What’s ahead? Three rate cuts this year would tug the Fed’s key interest rate down to 4.5% to 4.75% by year’s end. Falling interest rates historically are a strong positive indicator for gold as it removes competition, since the metal pays no dividend.
Stock Market Looks Frothy with High Stretched Valuations
The stock market has been climbing to new highs, driven largely by outsized performance of the so-called “Magnificent Seven,” mega-cap tech and artificial intelligence stocks.
The current stock market buying frenzy is being compared to the dot.com rally, which saw a stock market boom turn into a bust, resulting in a major market crash.
There’s no denying it. Stocks are expensive. The S&P 500 is trading at a P/E ratio of 24.77, which is well above its longer-term average of about 19. Many investors today are taking money out of the stock market and shifting into a larger allocation of precious metals in order to protect, preserve and continue to grow their wealth as the stock market moves into uncharted territory.
There have been 28 bear markets since 1928, with an average stock market decline of 36%. However, some bear markets in stocks have been much worse—for example, the 2008 financial crisis saw a 51.93% decline in the stock market. While you can’t control the stock market, you can mitigate some of your risk with an allocation to gold.
Geopolitical Concerns, Domestic Politics
From the Russian war against Ukraine to the Israel-Hamas war in the Middle East to on-going tensions between the U.S. and China, global security is fragile. There’s a tremendous amount of concern about what could happen in the future on the military front, the political front and the economic front, which has sparked increased demand for gold as a safe haven.
Chinese Continue Buying
Adding to the strong demand picture for gold, China imported 367 metric tons of the precious metal during the first two months of this year. That represents a 51% increase from the same period last year, according to official data.
The Bottom Line
Gold is setting new records and big banks expect more gains ahead. Citigroup, J.P. Morgan and TD Securities all have $2,300 price targets in place for gold this year. Investing in gold now could lock in significant price gains. Do you own enough gold? Don’t get left out during this historic gold run.
Our Recommendations
The high-end rare coin market remains an attractive buying opportunity for long-term investors. Rare coins offer investors an opportunity for significant price appreciation in the current environment.
The appeal of rare coins to investors is their impressive historical price appreciation, which has outpaced the level of the underlying precious metal.
Buying Rare Coins
For investors able to hold 5–10 years, ultra-rare acquisitions offer the safest store of wealth and the strongest growth potential. Accumulate the highest-quality coins that you can afford. This strategy will pay off handsomely as rarity tends to appreciate the fastest.
Buying Precious Metals
An accumulation strategy is probably the best option for clients wishing to add to holdings.
Trading Precious Metals
Silver continues to offer a better value than gold. Generally, readings above 65 signal that silver is undervalued and is a strong buy signal for the metal.
The gold/silver ratio is a way for investors to measure the relative value of these two metals. The ratio indicates the number of ounces needed to buy one ounce of gold. Investors have long turned to this ratio to identify attractive long-term entry points for precious metals purchases. A high ratio is generally viewed as a signal that silver is undervalued relative to gold. That is what we’re seeing now.
Current Ratio: 89 oz. silver = 1 oz. gold
You may want to consider converting some gold holdings into silver.
Popular silver products: 10 oz. & 100 oz. silver bars, Silver American Eagles in monster boxes.
