Going forward, there are – and will continue to be – three primary drivers of global physical gold (and silver) demand.

During certain times in the past only one or two of these elements provided most of the momentum.

However, as we move into 2019, and for possibly the next 5-10 years, all three will be in play. They will operate synergistically to consistently motivate increased precious metals' buying around the globe. This will happen, even as meeting that demand with sufficient new supply becomes problematic.

The term "synergistic" is used here on purpose. By definition, it relates to "the interaction or cooperation of two or more organizations, substances or other agents to produce a combined effect greater than the sum of their separate effects."

The Three Demand Drivers for Precious Metals

Fear: Not just about social and economic unrest, but also – as prices begin to move up and away – fear of missing out!

People buy gold (and silver) as insurance, as an easily saleable for cash when needed option, and as a last ditch "get out of Dodge" ticket when the local currency has been "burned" due to government mismanagement and corruption.

Ask Vietnamese in the 1970's or Zimbabweans, now in their second currency-destroying hyperinflation in recent memory. Ask Argentines facing their 9th currency-extinction event in modern history, or Venezuelans today.

Fear manifests itself today in the current roller-coaster ride of the larger stock markets (DOW/S&P, etc.), the student debt trigger (at almost $1.5t, much of which is in arrears), liquidity draining by the Federal Reserve, and record levels of overall U.S. debt.

Love: The Chinese New Year celebrations are coming into view... Gold demand from China and India (Chindia) has been consistently higher for the last decade – with no signs of tapering.

This is taking place because history and custom pretty much ordain it. With incomes rising in both countries, this solidly entrenched demand trend is set to continue for the foreseeable future.

Hindia Gold Demand

Chindia - the 800 Pound Demand Gorilla

Inflation: For a number of years, an inflation vs. deflation debate has raged. Deflationary analysts believe that the coming massive debt repudiation, at some point inevitably taking place as the misguided, unpaid-for-spending is unwound, will take asset prices – including precious metals – down with it.
 

But this perspective fails to consider that central banks – foremost among them the Federal Reserve (simply a central bank by another name) will absolutely do everything in their power to avoid an asset crash.

Fed policymakers will print, literally and digitally, "as much as it takes" to keep this from happening.

They want and need inflation to keep their game going as long as possible. Not to mention that the government's massive deficits get paid off in worth-less money. Politicians can continue spending paper promises, get re-elected, and reward their political allies.

Stewart Thomson of Graceland Updates identifies the critical distinction which practically guarantees that inflation will become the desired outcome, for as long as humanly possible. He states:

When a financial crisis is related to the private sector, it generally takes a deflationary form. When it relates to the government, it generally takes an inflationary form. The next super-crisis in the West is vastly more likely to be a government crisis, not a private sector crisis, and the place that crisis is most likely to take place in is... America.

The Gold Demand Engine Is Heading Toward a Supply Wall

The trend, if going against you, becomes your enemy. In spite of increased exploratory spending, new large gold discoveries are becoming less common, more costly to find, and taking increasingly longer to develop to production stage when they are located.

The discovery trend for large gold deposits is decidedly down.
(Courtesy Katusa Research, sources listed.)

Silver production, marching to its own supply drummer, is not looking all that robust either. At current mining rates, only about 9 ounces of silver are being mined for every mined ounce of gold. Yet the silver gold ratio is running around 85:1. Is something seriously out of whack?

Seven years after a major, but most likely not the major top in gold prices at around $1,900 the ounce, gold still shines brightly in the protect your assets department. Liquid, easily storable, fungible, easily divisible, and historically reliable.


Gold Price

Over 20 years, Gold has outpaced stocks... and inflation.

In 2001, at the tail end of a 20-year silver bear market, Doug Casey said: At the top, people don’t look at fundamentals because they think they’re no longer relevant... At the bottom, they’re not looking because they just don’t care.

Sound familiar today?

What have the global 'financial wizards' learned since 2008?

In 2008, global debt totals were in the area of $170 trillion, to the tune of 275% of the world's gross domestic product (GDP). Today those figures are above $250 trillion and well over 300% of GDP. Look at how little the world's financial wizards seemed to have learned from the crises which literally came within hours of taking the entire global financial system down with it.

So if you haven't taken this opportunity into declining prices to either establish a position in physical gold and silver, or have yet to "top off" your holdings, consider answering the question Dirty Harry often posed to his opponents, "Do you feel lucky today?"
 

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD flat lines above mid-0.6700s ahead of Australian jobs data

AUD/USD flat lines above mid-0.6700s ahead of Australian jobs data

AUD/USD attracts some dip-buyers on Thursday, around the 0.6820 region. Against the backdrop of the RBA's hawkish stance, the upbeat market mood acts as a tailwind for the pair. That said, persistent concerns over an economic slowdown in China, along with a modest USD uptick, cap the upside as traders await Australian employment figures.

AUD/USD News
NZD/USD advances to near 0.6200 due to risk-on mood, Fed interest rate decision awaited

NZD/USD advances to near 0.6200 due to risk-on mood, Fed interest rate decision awaited

The NZD/USD pair edges lower to near 0.6200 during the early Asian session on Thursday. The recent GDP data revealed that New Zealand's economy shrank again in the second quarter, suggesting the depths of its economic malaise.

NZD/USD News
Gold price stalls post-FOMC pullback from all-time peak; lacks firm intraday direction

Gold price stalls post-FOMC pullback from all-time peak; lacks firm intraday direction

Gold price oscillates in a range on Thursday and consolidates the previous day's post-FOMC rejection slide from the $2,600 mark or a fresh record high. Persistent geopolitical risks, along with signs of economic trouble in the US and China, lend support to the safe-haven metal.

Gold News
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures