Sometimes, big changes are like supertankers, they take forever to get from one place to another and sometimes there are obstacles and delays on the way. It may take time for the movement to gain momentum and you never really know what lies ahead at the end. But they get to where they need to get to. Gold like supertankers filled with oil has been slow in gaining momentum. Everyone expects good returns but the price seems to be stuck between $1,750 and $1,850. This is not new. The last time the markets in the U.S and in AUstralia were as excited about the gold price per gram as they were in 2021 was in 2011. Gold reached record highs and somehow got stuck around the same price range.
What happened in 2011?
The global economy, the financial environment and geopolitical issues were in flux in 2011. The markets were as volatile as 2020-2021 has been. The headlines back then we’re about the Eurozone debt problems and the subsequent financial packages Greek, Irish an Portuguese governments had to take. Back then, the countries that formed the European Union were scrambling to find solutions to the problems that these countries were facing. They were afraid that if they couldn’t stop what was happening in these countries then the rest of the European Union would topple over like dominoes.
The powers that constitute the European Union as well as bankers met and agreed on plans to write down bonds and recapitalise banking institutions. This move was worth just over 1 trillion Euros. These were the first steps that led to the central bank balance sheet that we have seen over the last decade until now. Central banks seemed to have taken the stance that they support the European Union’s economy no matter what.
The world was in turmoil with civil society co-opting social media to drive political campaigns to like “Occupy Wall Street”.
As that was going on, England experienced it’s worst riots which lasted 6 days and left thousands injured, 5 dead and 3000 arrested.
Within that same space of time, the Indian Arab spring had managed to spread to other countries like Bahrain, Syria, Yemen, Egypt and Libya. Muammar Gaddafi was unceremoniously toppled and brutally killed, Egypt was forced to look at reforming it’s constitution and government. For a while, it seemed like the reign of terror that leaders of these governments held over their own people would end. Even Bin Laden was found and killed. All this happened in a matter of months.
Fast forward to 2019…
An outbreak of some deadly respiratory virus comes out of China. Once again the world was thrown into chaos as lockdowns were instituted globally. Gold has its moment to shine peaking at levels above $2,000.
As Britain dealt with Brexit, America was plagued by riots over police brutality. The US government was also in turmoil following a presidential election marred by Trump and his supporters claiming the election was rigged.
Where are we now and why should more people be buying gold?
The difference between 2011 and 2021 is that the money that has just been created to fund the trillions in government support is going to households that are putting it back into the financial market.
Equity markets find themselves at new highs and the printing of new money the growing central bank balance sheets and debt levels are exploding giving gold more room to gain momentum.
Going back to that analogy about supertankers needing more time to gain momentum, this could be the case with gold. Gold might not have exploded to $3,000 and even $5,000 as some analysts predicted but given time the gold market will grow.
Although, some people may not talk as much about being in a recession, there is no doubt that we have dug ourselves even deeper into trouble. We are not out of the woods yet and it might take some time for the economy to stabilize and in that time the gold price per gram will rise.