By Mike Gleason
On this final week of trading for 2023, gold is set to put in its highest ever annual close.
The gold price has been capped at around the $2,100 level since trading just shy of it in May. Whenever prices threaten to break out, institutional sell orders on futures exchanges come rolling in. So, it comes as no surprise that the gold market ends the year right near that key resistance level.
The big question is whether the paper gold sellers will be able to hold the line in the New Year.
Contrarians are eyeing opportunities in palladium, platinum, as well as silver in 2024. Each of these white metals face chronic supply deficits as mines struggle to grow or even maintain production.
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The world’s number one producer of silver is Mexico. However, mining output there is falling precipitously. Silver production is down nearly 25% over the past two years.
Meanwhile, average all-in sustaining costs of production for silver miners is approaching $25 per ounce. They have little incentive to invest in new development in the absence of higher prices. They may instead prefer to hunker down and wait for market conditions to improve. That means silver supplies could be crimped in the coming year.
Platinum and palladium also face a precarious supply outlook.
The primary source of platinum group metals is South Africa. The country is turning into a basket case under a corrupt, socialist regime. South Africa’s electricity infrastructure is falling, and investors are bailing.
Consequently, the mining industry there is under duress. Platinum and palladium are each expected to post huge supply deficits in 2024.
As for gold, it will likely take its cues from interest rates and monetary policy. In recent weeks, expectations have risen for rate cuts in 2024. If the Fed follows through, that should pressure the U.S. dollar lower.
Of course, 2024 is a presidential election year. And the stakes could be even higher for America’s constitutional republic than they were in 2020.
Amid polling that shows President Joe Biden in poor shape, Democrat activists are using state legislatures and courts to try to disenfranchise Republican voters — supporters of Donald Trump in particular.
Another perceived effort to steal the election could ignite a Civil War. Even if it doesn’t come to that, the level of partisan acrimony in Washington will likely bring more budget brinkmanship and more dysfunction.
And regardless of who wins the election, the national debt will continue to grow unabated. As a consequence, the currency supply will have to keep growing as well. In other words, inflation pressures will remain in place and could accelerate.
All in all, some favorable forces appear to be lining up for metals in 2024.
