Blanchard Index
Exclusive Precious Metals Market Outlook and Recommendations
Index updated July 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
Precious Metals Shine at 2024’s Halfway Mark
Midway through 2024, precious metals are performing strongly with gold up 12% year-to-date and silver up 20%. Insatiable demand propelled the precious metals sharply higher since the start of the year, with gold setting several new all-time record highs along the way. Investors are turning to the safety of precious metals as a hedge against inflation, a store of value and as a proven portfolio diversifier amid the rising geopolitical and economic uncertainty seen around the globe.
Heading into the summer, notably a quiet time for financial markets, metals have pulled back modestly from their highs seen this spring. The current environment creates optimal conditions for long-term investors to trade their dollars for even more gold and silver right now—especially as Bank of America reiterates its call for gold to hit the $3,000 an ounce level in the months ahead.
The Macroeconomic Picture
Inflation: The latest Commerce Department reported revealed that inflation rose at the slowest pace in six months. The Federal Reserve’s preferred inflation report—the PCE Index—showed that inflation rose 2.6% in May.
The softer inflation data helps build the case that the Fed may begin to cut interest rates as early as its September meeting. Gold investors have been anticipating several rounds of interest rate cuts this year and next and lower rates would be friendly for precious metals.
U.S. Economic Growth: Real gross domestic product (GDP) was upwardly revised to a 1.4% growth pace in the first quarter, in the third and final estimate from the government. The upward revision was due to a lift from the residential construction section.
Digging into the details of the report, consumer spending was revised downward again and signals the path for consumer spending appears weak for the remainder of the year. Overall, the GDP report reveals that the economy cooled in the first quarter Economists expect the slowing trend in both business and consumer activity to give the Fed the green light to begin cutting interest rates later this year, with one or two cuts on the table this year.
Central Banks Buy Gold at Sizzling Pace
Central bank demand for gold has been an important factor pushing the metal’s price higher. And, there’s no sign that’s ending. Indeed, global central banks intend to increase their allocation to gold over the next year, according to the 2024 Central Bank Gold Reserves (CBGR) survey which recorded responses from 70 global central banks.
In total, 29% of central banks respondents plan to increase their gold reserves in the next twelve months. That is the highest level the World Gold Council recorded since they started the survey in 2018.
Last year, global central banks added 1,037 tonnes of gold to their vaults—the second highest annual purchase in history. And, that followed a record high of 1,082 tonnes in 2022.
Looking Ahead: Bank of America Predicts Gold Could Hit $3,000
Bank of America issued a new report predicting another upward surge in gold prices with a target at $3,000 over the next 12-18 months. The bank cites the start of Fed rate cuts and increased central bank gold buying as key factors that will help drive gold to fresh record highs.
Meanwhile, the Silver Institute projects that total silver demand will increase by 2% in 2024 fueled by surging demand from the solar industry and amid increased demand relating to artificial intelligence manufacturing. Total silver supply is expected to decline by 1%, creating a deficit in the silver marketplace, which will underpin silver to additional heights later this year.
Quiet Range Trade: Take Advantage of Summer Doldrums
The current pullback in gold and silver allows investors like you to increase your allocation to precious metals in an orderly market environment, and at a discount to the record high seen in gold this spring. Both gold and silver are projected to leap higher in the months ahead. Store your wealth in the gold and silver vault, just like central bankers are doing, and let it safely grow in the years ahead.
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: 79 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.
