The GoldSilver Team
AUG 18, 2023
In a world where the cost of living is skyrocketing and financial security feels like a distant dream, gold is catching eyes as a beacon of stability.
Many experts now expect gold to break record highs soon...
Let’s dig into why...
U.S. Consumers Spend $709 More Per Month Than In 2021 — Moody’s Analytics reports that in July, the average American household spent an extra $709 compared to two years ago for the same items. This spike is largely due to rising housing costs, but also includes higher expenses on groceries, vehicles, and services like cable.
Credit Card Delinquency Rates On The Rise — In Q2 of 2023, credit card delinquency rates climbed to 7.2%, up from 6.5% in Q1. This marks the highest rate since Q1 of 2012, as per the Federal Reserve. Meanwhile, according to Bankrate, the average credit card interest rate hovers near a record at 20.53%.
Global Oil Demand Surges — Global oil demand surged to a record high, threatening to push prices higher, the International Energy Agency recently reported. World fuel use averaged 103 million barrels a day for the first time in June and may soar even higher in July and August.
Banks Struggle As Moody’s Cuts Ratings — Moody's Analytics announced the downgrade of ratings for ten different U.S. banks last week, due to higher funding costs, potential regulatory capital weaknesses, and increasing risks associated with commercial real estate. Moody's has also issued a warning that further downgrades may be on the horizon.
Americans Are Tapping Into Their 401(k)s Early — According to data released by Bank of America, a growing number of Americans are dipping into their 401(k) accounts due to financial strain. In Q2, the number of people making hardship withdrawals jumped to 15,950, marking a significant 36% increase to the same period in 2022.
For the first time since the 2008 financial crisis, global household wealth took a dip. Inflation and a stronger U.S. dollar teamed up to wipe a whopping $11.3 trillion off assets worldwide.
According to Credit Suisse’s latest global wealth report, total net private wealth across the globe shrunk by 2.4%. That puts the total at $454.4 trillion.
And guess where the biggest chunk of that decline was felt? Right in the wallets of North American and European households, which together lost a combined $10.9 trillion. Sweden, New Zealand, Australia, and Canada found themselves posting the largest declines.
Nannette Hechler-Fayd’herbe, the big brain in economics and research at Credit Suisse, summed it up like this: Wealth around the world grew at a record pace in 2021, but then 2022 came along with its rising interest rates, inflation, and currency woes, and turned the tide.
But it wasn't all doom and gloom everywhere. Despite all the sanctions it's facing, Russia managed to buck the trend and recorded a significant wealth increase last year, even adding 56 new millionaires to its tally. And in Latin America, wealth grew by $2.4 trillion, thanks in part to currencies in the region strengthening an average of 6% against the U.S. dollar.
Thinking about buying a home? Brace yourself because it's gotten quite a bit pricier. According to major real estate firm Redfin, the typical monthly mortgage payment for a U.S. homebuyer recently was $2,605, up 19% from last year.
And the price tag on homes? The median sale price hit $380,250. That’s a 3.2% climb from a year ago, and it's the biggest increase we've seen since last November. Redfin’s report points out that this price hike is mainly because there are fewer homes up for grabs – 19% fewer, to be exact – as homeowners are clinging to their lower mortgage rates.
Now, you might think high rates would scare off potential buyers, but it seems they're actually making would-be sellers think twice. Redfin’s data shows that early-stage demand from buyers is down just a smidge – 4% from last year.
So, what's the deal with mortgage rates? Last week, the average rate for a 30-year fixed mortgage moved up to 6.9%, just above the 6.8% reported the week before, says Freddie Mac. Freddie Mac's Chief Economist, Sam Khater, points to a mix of positive economic data and the U.S. government credit rating downgrade as the reason for the uptick.
Despite these higher rates and a bit of a chill in purchase demand, home prices aren't budging—they're still on the rise, thanks to a super low supply of unsold homes.
At the end of June, there were only 1.08 million units left, which is a 13.6% drop from last year, according to the National Association of Realtors.
In August of 2020, the spot gold price hit an intraday record high of $2,072.50. Analysts who spoke to CNBC last week are saying we may soon surpass that.
Bart Melek from TD Securities thinks gold could climb above $2,100 by early 2024, thanks to a potential pause in the Fed’s tightening cycle. Other analysts, like David Neuhauser from Livermore Partners, are even more bullish. He’s set a target of $2,500 by the end of 2024 — a 26% leap higher than current levels. He reasons that recessionary forces might start creeping in later this year and really pick up steam in 2024.
Gold is often seen as a safe bet during economic uncertainty, like recessions and stagflation, because it holds its value. So, with inflation expected to simmer down to 3% to 5%, gold is looking attractive as a hedge.
Central banks have been consistently strong buyers, and consumer demand is bouncing back too. Especially in China and India, where people are starting to splurge on gold jewelry again as their economies stabilize.
But that’s not all. The BRICS countries (that’s Brazil, Russia, India, China, and South Africa) are reportedly considering a move away from the U.S. dollar to a new currency backed by gold.
Now, wouldn't that be something? Imagine what would happen to the price of gold if suddenly 43% of the world's population began trading in a brand-new currency backed by real gold.
With tapering interest rates, looming recession fears, and strong demand from central banks and consumers alike, many analysts and investors are expecting the price of gold to rise soon.
If you want to add to your precious metals portfolio, now could be a great time.
Stay tuned for next week's edition of GoldSilver Nuggets!