Gold certainly lived up to its reputation as a safe haven in 2022.
On the other hand, “Stock Market Tumbles,” “Worst Year,” “Brutal 2022,” screamed some headlines about the stock market’s year.
It was no better in the bond market, as this CNBC headline from last week shows: “The bond market turned in its worst performance ever this year.”
In fact, together, the global stock and bond markets lost $30 trillion, according to the Financial Times.
Cryptocurrencies? Forget about it! Cryptos lost a little more than $2 trillion in 2022. Bitcoin alone was down 64%.
Here are some of the other heart-stopping numbers:
- The Dow Industrials fell 8.8%
- The S&P 500 was down 19.4% on the year
- The Nasdaq Composite was down 33%.
- Together, Tesla, Apple, and Amazon lost more than $2.5 trillion.
Market losses like that would have caused a veritable stampede of margin calls and client redemptions for Wall Street brokers, speculators, and hedge funds.
Under those circumstances, as we saw in the dot-com bust and the mortgage meltdown, they turn to gold for liquidity to try to keep their lights on and their doors open. Despite it all, and in a year characterized by carnage elsewhere, gold on the global spot market, which finished 2021 at $1,817.70, ended 2022 slightly up at $1,824.50.
Silver was even more resilient. It finished 2021 at $23.07 on the world spot market. It closed higher in 2022, at $23.98.
Both gold and silver made impressive moves higher in the last two months of the year, setting the stage for 2023.
There are important reasons to expect that gold will be an even more vital haven of safety, wealth preservation, and profit in the new year.
We have written with some alarm about U.S. debt in recent weeks and would like to give you a short synopsis that explains why funding that debt is likely to drive markets in 2023.
The U.S. government’s debt, which today is around $31.3 trillion, is borrowed money. Someone (or someones) has to loan Uncle Sam that money. They do that by purchasing U.S. government bonds.
For many years, the Federal Reserve has figured prominently among those loaning money to the government.
(That’s a pretty good trick, if you think about it. The Fed doesn’t make, produce, or sell anything. It has no money. So, the money it loans to the government is money it simply prints. Digitally. Computer keystrokes. Out of thin air. It calls making up money this way “quantitative easing.” And that is what is behind most of our monetary ills).
Now, with inflation out of hand and the Fed taking heat for it, it has begun “quantitative tightening.” That is the opposite of buying bonds. The Fed is reducing its government bond holdings. But there is a diminishing universe of buyers.
For example, China used to own $1.3 trillion in U.S. bonds. Now it is down to less than $1 trillion. Japan isn’t buying any more either.
So, buyers of U.S. debt are backing away. The Fed, instead of buying, is now unwinding its holdings of U.S. and U.S.-backed bonds at the rate of $95 billion a month, or $1.14 trillion a year. Others, who are unknown, will have to step up and fill that entire gap. Meanwhile, thanks to the big spenders in Washington, the need for additional borrowing is growing. The gap is growing wider. This is a major problem.
Q: Who is going to loan more money to Uncle Sam?
A: If you guessed the Fed money printers, you guessed right!
And that is why we expect gold to climb much higher this year. We caution that our friends and clients bear in mind as well that if either the growing faceoff between the U.S. and China or the U.S. proxy war with Russia in Ukraine escalates in 2023, the problem of funding U.S. debt will suddenly become much worse, and gold’s climb will be even more dramatic.
If you’re interested in investing in precious metals, let us provide you with a free one-on-one consultation.
The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment advice and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.