Exploring the correlation between gold prices and economic downturns

Gold and Economic Weakness

The rise of new investors in gold and the shift towards physical gold

New Investors and Gold

The impact of geopolitical events on central bank gold reserves

Central Banks and Gold Reserves

The growing interest in gold among retail investors worldwide

Global Interest in Gold

The role of gold as a diversification asset in uncertain times

Gold as a Diversification Asset

The impact of Costco's gold sales on the market

Costco's Gold Sales

The changing trends in gold prices and investor sentiment

Gold's Shift in Trend

**The Mysterious Rally of Gold: What's Driving the Interest in Physical Gold?**

*Gold's Historic High Despite Economic Strength*

The recent surge in the price of gold has left many people scratching their heads. Traditionally, gold prices tend to rise during periods of economic weakness, such as recessions, low interest rates, and falling stock markets. However, the current economic situation in the U.S. seems to be doing pretty well. So, what's driving this mysterious rally and why are new investors diving into gold?

**Shift from ETFs to Physical Gold**

In the past, investments in gold were split between ETFs (Exchange-Traded Funds) and physical gold. ETFs were more accessible to the average person, allowing them to buy and sell shares of gold just like stocks. However, there has been a shift towards physical gold as investors are now scooping up bars, coins, and jewelry. This rising interest in physical gold started with central banks piling up on gold bars as a way to diversify their assets.

**Global Interest in Gold**

The interest in physical gold has not been limited to central banks. Individual investors, especially in countries like China, have also ramped up their buying. In fact, more retail investors bought gold in China than in any other country over the last 4 years. This growing interest in gold has also been reflected in the U.S., where a Gallup poll in 2023 showed that Americans now prefer gold over stocks as an ideal long-term investment.

**Costco's Role in Gold Sales**

One surprising indicator of the growing interest in gold is the retail giant Costco. The company began selling gold bars online and in-store in 2023, and the bars consistently sell out with customers spending an estimated 200 million on them per month. This reveals the significant interest that regular people have in owning physical gold.

**Gold's Future Outlook**

While gold prices are often driven by emotion and can fluctuate at any time, some analysts are bullish on its value continuing to stay high. The underlying factors causing worry and driving people to gold, such as global turmoil and economic uncertainty, do not seem to be going away anytime soon. This has led many experts to believe that the street is bullish on gold's future.

**Conclusion**

The interest in physical gold has defied traditional trends, with investors turning to it as a hedge against global uncertainties. Whether the current economic strength will continue or not, the growing interest in physical gold suggests that it may remain a valuable asset in the foreseeable future.

Unraveling the Mystery: The Surging Interest in Physical Gold

7 stories high and about 5,000 square feet

10 stories high and about 7,000 square feet

5 stories high and about 3,000 square feet

8 stories high and about 6,000 square feet

Costco selling gold bars online and in store

- Gold prices are at a historic high despite a strong economy
- Central banks and individual investors are buying up physical gold
- Demand for gold has increased globally, with Americans preferring gold over stocks
- Costco has begun selling gold bars and they consistently sell out
- Uncertainty in the global economy is driving people to invest in gold as a tangible asset
- Analysts are bullish on gold's value continuing to stay high

Gold is hitting record highs. But this new rally is bucking long held trends for the commodity, and bringing in a new class of investors. Typically, gold prices peak in periods of economic weakness and recessions; but by most measures, the U.S. economy is doing pretty well. 

WSJ breaks down the factors driving gold’s historic rise, and what makes it different from previous rallies.

Chapters: 
0:00 Gold’s rally
0:48 What’s driving gold’s rally
3:51 What makes this different?
5:04 What this means for investors

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They coincide with periods of economic weakness.

We decided to keep the target range for the federal funds rate at 0 to 1 fourth percent.

The Dow just had its biggest point drop in history, falling 1190 points.

But take a look at what's happening right now.

But by most measures in the U.S., The economy is doing pretty well.

Here's what's driving this mysterious rally and why new investors are taking the dive into gold.

2 of the main ways to invest in gold are ETFs, essentially buying shares of gold, and physical gold itself.

In the past, investments have been split between the 2.

ETFs are typically more accessible to the average person.

You can just buy them and sell them just like a share of a stock.

Unlike a gold bar, you don't have to store it.

And then when you want to sell it again, it's just a click of a button.

But now they're being sold off and physical gold is riding high as investors scoop up bars, coins and jewelry.

This rising interest in physical gold started with central banks piling up on gold bars.

They're taking dollars and selling dollars and buying physical gold and storing it because you can't get to my vault.

Their buying nearly doubled after the start of the Ukraine-Russia war as a way to diversify their assets.

And some of its allies froze Russian assets, and that's got some countries worried.

Countries like China, Turkey, they don't want to see their central bank assets get frozen.

Some of these countries, China for example, hold large amounts of dollar-based assets like U.S.

Treasuries that the Fed would be able to freeze.

If you took all the gold that was ever mined, you could fit it into a building that's about 7 stories high and about 5, 000 square feet.

It has its value just due to its own properties, due to its own, you know, rarity.

And as central banks ramped up their buying, so did individual investors, especially in countries like China.

More retail investors bought gold there than in any other country over the last 4 years.

Many are young, buying assets like gold beans, small gold balls that are cheaper than buying a full bar.

And in other countries as well has become more skeptical of traditional financial assets.

And so they're grasping for something else.

And while China is the biggest buyer, demand for gold has increased globally.

A Gallup poll in 2023 showed Americans now prefer gold over stocks as an ideal long-term investment.

And 1 place to look at to see the growing interest?

I filled out the merchandise pickup slip, brought it to checkout, and then just waited anxiously until an employee brought it to me.

The company began selling gold bars online and in store in 2023.

You can do the dragon 1 and you can do the moon 1.

The bars consistently sell out and customers are spending an estimated 200 million on them per month.

People know Costco, they trust them, and they were eager to buy gold, so they feel comfortable.

Costco is a small fraction of the gold buying and selling that's out there, but it's revealing of the interest that regular people have.

All of this has caused gold to spin on its head, bucking decades-long trends.

Remember that gold price chart from earlier, showing how it tends to go up during economic downturns.

People buy physical gold in those circumstances because they have something tangible that they can hold on to.

It's not something that's just an image on a screen or a number on an account statement.

But some analysts say that right now people aren't necessarily worried about the current economy, but about its future.

We had the Ukraine, Russia invading Ukraine.

And on top of that, just political discord, international discord.

It's just a very turbulent, uncertain time.

And just because the economy is doing well in some places doesn't mean it's doing well everywhere.

For Chinese investors, The interest in gold has been driven by a recent stock market crash and turmoil in the housing market.

Traditionally, Chinese, just like here, bought property to store their wealth.

Since the real estate market there collapsed, gold has become an alternative, a hard asset that people can own to store value.

So what does all of this mean for investors?

Well, gold can still go up or down at any time, especially because it's often driven by emotion.

But some analysts are bullish on its value continuing to stay high.

The underlying things that are causing worry and driving people to gold, those don't seem to be going away anytime soon.


Speaker 0: This chart shows the price of gold. See these peaks? They coincide with periods of economic weakness. Recessions. The economy has slowed down.

Low interest rates. We decided to keep the target range for the federal funds rate at 0 to 1 fourth percent. And falling stock markets. The Dow just had its biggest point drop in history, falling 1190 points. But take a look at what's happening right now.

Gold just hit a historic high. But by most measures in the U.S., The economy is doing pretty well. People say gold

Speaker 1: is crazy. What's this move? People have called it curious. They've called it stealth. They've called it mysterious.

Speaker 0: Here's what's driving this mysterious rally and why new investors are taking the dive into gold. 2 of the main ways to invest in gold are ETFs, essentially buying shares of gold, and physical gold itself. In the past, investments have been split between the 2. ETFs are typically more accessible to the average person.

Speaker 1: You can just buy them and sell them just like a share of a stock. Unlike a gold bar, you don't have to store it. And then when you want to sell it again, it's just a click of a button.

Speaker 0: But now they're being sold off and physical gold is riding high as investors scoop up bars, coins and jewelry. This rising interest in physical gold started with central banks piling up on gold bars.

Speaker 1: They're taking dollars and selling dollars and buying physical gold and storing it because you can't get to my vault. Exactly.

Speaker 0: Their buying nearly doubled after the start of the Ukraine-Russia war as a way to diversify their assets.

Speaker 1: The U.S. And some of its allies froze Russian assets, and that's got some countries worried. Countries like China, Turkey, they don't want to see their central bank assets get frozen.

Speaker 0: Some of these countries, China for example, hold large amounts of dollar-based assets like U.S. Treasuries that the Fed would be able to freeze. But gold isn't reliant on the U.S. Or any other country in the same way.

Speaker 1: If you took all the gold that was ever mined, you could fit it into a building that's about 7 stories high and about 5, 000 square feet. That's it. There's no CEO of gold. Nobody can manipulate it. It has its value just due to its own properties, due to its own, you know, rarity.

Speaker 0: And as central banks ramped up their buying, so did individual investors, especially in countries like China. More retail investors bought gold there than in any other country over the last 4 years. Many are young, buying assets like gold beans, small gold balls that are cheaper than buying a full bar.

Speaker 1: Younger generation in China, in the U.S. And in other countries as well has become more skeptical of traditional financial assets. And so they're grasping for something else.

Speaker 0: And while China is the biggest buyer, demand for gold has increased globally. A Gallup poll in 2023 showed Americans now prefer gold over stocks as an ideal long-term investment. And 1 place to look at to see the growing interest? Costco. I filled out the merchandise pickup slip, brought it to checkout, and then just waited anxiously until an employee brought it to me.

The company began selling gold bars online and in store in 2023. Come look at this.

Speaker 1: Oh, I'm getting that for sure.

Speaker 0: And went viral on social media. You can do the dragon 1 and you can do the moon 1. The bars consistently sell out and customers are spending an estimated 200 million on them per month.

Speaker 1: People know Costco, they trust them, and they were eager to buy gold, so they feel comfortable. Costco is a small fraction of the gold buying and selling that's out there, but it's revealing of the interest that regular people have.

Speaker 0: All of this has caused gold to spin on its head, bucking decades-long trends. Remember that gold price chart from earlier, showing how it tends to go up during economic downturns.

Speaker 1: People buy physical gold in those circumstances because they have something tangible that they can hold on to. It's not something that's just an image on a screen or a number on an account statement.

Speaker 0: But some analysts say that right now people aren't necessarily worried about the current economy, but about its future.

Speaker 1: We had COVID in the pandemic. We had the Ukraine, Russia invading Ukraine. We now have the Middle East war. We have ballooning government debt. And on top of that, just political discord, international discord.

It's just a very turbulent, uncertain time.

Speaker 0: And just because the economy is doing well in some places doesn't mean it's doing well everywhere. For Chinese investors, The interest in gold has been driven by a recent stock market crash and turmoil in the housing market.

Speaker 1: Traditionally, Chinese, just like here, bought property to store their wealth. Since the real estate market there collapsed, gold has become an alternative, a hard asset that people can own to store value.

Speaker 0: So what does all of this mean for investors? Well, gold can still go up or down at any time, especially because it's often driven by emotion. But some analysts are bullish on its value continuing to stay high.

Speaker 1: The underlying things that are causing worry and driving people to gold, those don't seem to be going away anytime soon. So by and large, the street is bullish.

Speaker 0: You

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Why Gold Is Seeing Record High Demand Right Now | WSJ