"Golden Opportunity: Navigating a Multipolar World and Potential Recession with Precious Metals"
A recent report by the World Gold Council reveals that central banks purchased a net 125 tonnes of gold in January and February 2023, marking the highest year-to-date amount since 2010. The largest buyers were Singapore, Turkey, China, Russia, and India. Notably, three of these countries are members of the BRICS group, which now surpasses the G7 nations in global economic share on a purchasing parity basis. This shift suggests the emergence of a multipolar world, with gold playing a crucial role in supporting BRICS currencies and reducing reliance on the US Dollar.
Gold-backed ETFs have experienced net inflows for the first time in 10 months, with investors adding nearly 1 million ounces in March. As of March 31, total gold holdings reached 93.2 million ounces. Amid weak economic news, inflation, rising rates, and geopolitical tensions, gold prices are approaching a new all-time high.
The Federal Reserve's actions to slow economic growth seem to be working, potentially signalling the end of an aggressive rate hike cycle. In the past 70 years, 75% of Fed pauses led to a recession within six months. Analysts predict a possible recession in late Q4 2023, with the Fed's rate hike cycle ending by July.
Given these factors, investors are encouraged to increase their exposure to gold and gold miners. Accumulating gold and gold stocks is considered prudent, particularly as recession signals emerge. A recommended investment strategy includes a 10% weighting in gold, with 5% in physical gold and 5% in high-quality gold mining stocks, mutual funds, and ETFs. This approach may help investors navigate potential economic downturns while benefiting from gold's growing importance in the global economy.