Broader society wealth often equals greater gold and silver consumption.
Watch the video commentary to “Why an Economic Boom May be Great For Gold and Silver”
Tax cuts and/or debt creation can create temporary liquidity and a “wealth effect”. China’s wealth and increased gold consumption are based on an improved economy and broader societal wealth. A wealth effect could drive gold and silver demand – but not necessarily investment gold and silver sales. Here is how:
The conventional wisdom is that the prices of gold and silver will rise when there is hyperinflation, political uncertainty or a financial crisis. These are all scenarios in which historically the prices of gold and silver have risen.
There is, however, another scenario in which demand for gold and silver rise as well as the price – during an economic boom.
The number one segment for demand for gold is jewelry- over one half of annual gold demand comes from jewelry. Jewelry demand is twice the size as investment demand for gold.
Industrial demand for silver is the number one segment for demand. Silver demand for jewelry and silverware, however is twice the size as demand for investment silver (260moz a year vs 130moz in 2017 according to the Silver Institute). The purchase of lower end silver jewelry requires disposable income and higher end gold jewelry a certain level of wealth.
China and India
The increases in demand for physical gold and silver that are providing a floor on the price are coming from China and India. These countries have rising wages and rising numbers of people that can afford gold and silver today. Twenty five years ago, the consumer demand in China and India was far lower due to their economies still being far from emerging.
U.S. and the West
According to U.S. Mint American Gold and Silver Eagles sales, physical precious metals investment demand in the west is down 80%+ since 2015. Part of the reason for decline may be:
-fear of economic collapse has subsided
-wages are not rising, so stackers don’t have disposable income to buy.
If however, the economy were to take off (potential catalysts are detailed in the video) and wages were to rise, we may see an increase in demand for gold and silver jewelry in the United States.
That demand may be far greater than the elevated gold and silver demand we saw from 2009 -2015. Rising physical jewelry demand in the U.S., coupled with increased demand in China and Indian could push prices higher. In addition, a growing economy will use more silver (and gold) for industry further fueling demand. If gold and silver stackers also see an increase in wages, they may start adding to their stacks again, adding to demand.
It’s Happened Before!
Gold rose from $300 an ounce in 1985 to $500 an ounce in 1988.
US GDP during Reagan boom years:
1984 7.3%
1985 4.2%
1986 3.5%
1987 3.5%
1988 4.2%
Gold also rose from $340 an ounce in 2003 to $830 an ounce in 2007
US GDP during Bush years
2003 2.8%
2004 3.8%
2005 3.3%
2006 2.7%
2007 1.8%
An example today
A boom in crypto values has lead to higher crypto transactions than credit card transactions at a high end silver jewelry store in Silicon Valey: Cryptocurrency Transactions Surpass Credit Card Sales at Silicon Valley Jewelry Retailer
Menlo Park High-End Jewelry Store First In World To Accept Cryptocurrency
Buyers save 1.5% when paying with crypto.
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You can compare pricing and shipping charges on American Gold Eagles coins of all sizes at these web sites:
Golden Eagle Coins
SD Bullion
Money Metals Exchange
Check out all the Smaulgld podcasts here.
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Donate To Smaulgld.com via paypal
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Compare American Silver Eagles for sale at:
Golden Eagle Coins
SD Bullion
Money Metals Exchange
Donate To Smaulgld.com via paypal
You can compare pricing and shipping charges on American Gold Eagles coins of all sizes at these web sites:
Golden Eagle Coins
SD Bullion
Money Metals Exchange
Compare American Silver Eagles for sale at:
Golden Eagle Coins
SD Bullion
Money Metals Exchange
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