In 2023, there is a shining star in the financial world: gold is shimmering and bright. Since the start of the year, gold climbed as much as 10% higher, traded above $2,000 an ounce, and approached the all-time record high price for the precious metal.
You may be wondering – what’s going on with gold? To uncover what’s driving the big move higher in gold this year, David Zanca, Senior Portfolio Manager at Blanchard, and a 30-year veteran of the precious metals industry generously shared his insights on recent gold market developments.
Gold has been steadily rising since the start of 2023. What’s driving gold higher?
David Zanca: There is a lack of trust in the U.S. dollar, paper money, and in banks. We have now seen three of the four largest U.S. bank failures in history unfold in the last three months.
My clients are very concerned about the shaky banking system and about storing their wealth in a bank. They are taking action and feel strongly about the importance of owning something real – a tangible asset like gold. With all the questions swirling around the health of the banking system, they believe it is essential to own something real rather than paper – now more than ever.
Essentially, my clients are seeking the safety and peace of mind of owning gold, which is a private investment that can be held completely outside of the world financial system.
Another factor driving gold higher is simply that it’s gone mainstream. When I started my career in the precious metals industry 30 years ago and began professionally trading gold for my clients, gold and silver were fringe investments that very few people in the United States understood or invested in.
Fast forward to today and it’s tough to find anyone with any amount of wealth who isn’t open to investing in physical gold and silver. It’s become an essential hedge for high-net-worth clients to allocate a portion of their wealth to tangible assets like physical gold. Gold ownership has gone mainstream.
What currently is motivating your clients to acquire gold and silver?
David Zanca: There is a recognition among my clients that gold and silver are not just jewelry, silverware, or a nice shiny object – gold and silver are money. Gold has served as money for tens of thousands of years and has an incredible track record as a store of wealth and a medium of exchange and commerce. Gold is money.
Another realization that many clients are having is a reckoning about our governing system and our currency – the U.S. dollar. In the U.S., we’ve had a relatively stable government and currency for many years. That’s changing. What we are seeing among U.S. investors turning to gold now is something that the rest of the world has been doing for centuries – protecting, growing, and storing their wealth in physical gold.
I do consulting calls with large investment firms that, believe it or not, understand very little about the physical gold and silver markets. A few weeks ago, I conducted a call with a group in Germany. They very clearly explained to me that people outside of the U.S., in many countries around the globe, understand what an unstable government and unstable currency feel like and how that impacts paper currency valuations.
A large portion of the German population owns physical gold and silver for investment. As the recognition continues to grow here in America that gold and silver are money and that becomes more mainstream – it naturally shortens the supply, increases the demand for gold and pushes prices higher. That’s why we’ve been seeing this year.
How is this impacting the supply side of the gold and silver market?
David Zanca: The strong demand for physical precious metals is causing shipment delays and supply shortages in both the gold and silver bullion markets.
The shortages are even more dramatic in the rare coin market. In my 30-year career, I’ve never seen such difficulty in finding quality rare coins as we are seeing today.
This is an important market indicator. The rare coin market provides insights and shows what the wealthy and ultra-wealthy are doing now. This group of people are shedding U.S. dollars in exchange for real tangible assets. They won’t sell coins they own at any price – because the question becomes what do you do with the dollars they get back? We’ve seen some ultra-rare coin valuations jump 300-400% in the past three and four years. The lack of supply in the coin market is an important indication of what the ultra-wealthy see coming down the road and where they want to store their wealth. They are holding onto the rarities they own and they aren’t selling.
What type of gold and silver are your clients acquiring?
David Zanca: Blanchard is placing record levels of transactional gold and silver—small spendable forms of gold and silver. Let me explain what that means.
My clients are accumulating fractional coins like British Gold Sovereigns, (just under 1/4 an ounce), Swiss francs (just under 1/5 an ounce), Italian lira, and silver dollars. The reason clients are gravitating toward these coins is the recognition that gold is money. These small coins could be used in a pinch as money, as a functional currency.
Even though gold has climbed a lot this year – is there potential for it to go higher?
David Zanca: Yes. Absolutely. There is no question about it. The key going forward will be the value of the U.S. dollar. Many believe that at some point, the Federal Reserve will have to reverse course and lower interest rates. When they do that, the U.S. dollar could rapidly lose value, which would push gold much higher.
Why is now a good time to increase your allocation to precious metals?
David Zanca: There are many risks right now for paper assets and the U.S. dollar. A banking crisis could be developing. Also, many of my clients are concerned about a national digital currency and what that could mean to their existing balances that they hold in a bank.
What is your advice to investors who are looking to grow and protect their wealth now?
David Zanca: Remember banks can fail. They are failing. When the U.S. dollar falls, when markets change – it all happens very quickly. Once the crisis hits, it’s too late to make a move into the safety of gold.
It’s important for everyone to stop right now and take a look at what’s going on in the big picture. Take the time now and make sure you’ve made the changes you want to make to your portfolio, to your investments –so you can protect your wealth for you and future generations.
There is so much information out there, it’s essential to talk to professionals like Blanchard who have decades of industry experience, so you can get specific recommendations tailored to your particular needs. Gold is a proven solution to protect and grow your wealth. If you’d like to discuss your unique situation, call Blanchard at 1-800-880-4653 and ask for me. Thank you for your time. I look forward to the opportunity to help you.
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