Dear Reader,
Good morning.
This is Dylan Jovine with Behind the Markets.
Happy Monday.
Today is Monday, February 23rd.
Hard to believe this is already the last full week of the month. These short months can be a challenge.
We still have construction going on around the office — hammering, tar smells, the whole thing — so I wasn't able to get in on Friday.
But I did want to thank everyone who joined us for Thursday's webinar.
It was a great success.
What stood out to me most was how plugged in you are to the AI fuel story — natural gas, power generation, nuclear, geothermal.
The questions were thoughtful and serious. I'm grateful for that.
If you missed the webinar, it's not too late to watch the replay, so make sure to check it out here before we take it down.
Now, today I want to talk about something else.
JPMorgan recently put out a note asking whether we're entering a "golden era" for gold.
They're talking about $6,300 in the intermediate term. Bank of America has raised its targets as well. I've seen projections of $7,000 — even $8,000 — from credible firms.
So the real question is: what's driving this?
At the end of the day, gold is like any other commodity. It's driven by supply and demand.
But what makes gold unique is how stable its demand structure has been over time.
There are really three main drivers.
First, jewelry.
Roughly half of annual gold consumption goes into jewelry, particularly in Asia.
As societies grow wealthier — especially in places like India and China — gold becomes a visible store of prosperity.
That's not new. That's human nature.
Second, industrial and technological uses.
About 10% of demand comes from electronics, dentistry, aerospace applications — important, but relatively steady.
The third category is where things get interesting: investment and reserve management.
This is the major driver behind gold's recent move.
And I don't think it's going away.
If you look at gold's long-term rise, it tracks two major forces: expanding U.S. debt and a geopolitical shift that accelerated in 2022.
In 2000, central banks held roughly 22% of global gold.
By 2019, that number had risen to about 29%.
Today, it's around 46%.
That's a massive change in reserve behavior.
Even more telling is the pace of buying.
In 2021, central banks were purchasing around 400 metric tons of gold per year.
Since 2022, that pace has roughly doubled — averaging between 800 and 1,100 metric tons annually.
That shift didn't happen in a vacuum.
In 2022, after Russia invaded Ukraine, the U.S. froze Russia's dollar reserves.
I'm not making a partisan argument here. I don't care whether it was Biden or Trump.
But that decision sent a message to every central bank in the world: dollar reserves can become political instruments.
China understood that immediately.
They began pushing for more trade in yuan. Countries started diversifying settlement systems. Oil transactions began getting priced outside the traditional dollar framework.
The dollar is still dominant.
But central banks are hedging.
And gold is the neutral asset.
If you're managing reserves and you see persistent U.S. deficits under multiple administrations… and you see financial sanctions increasingly used as policy tools… you diversify.
That's exactly what's happening.
This wasn't a short-term trade.
It was a structural shift.
And it's still unfolding.
I believe the 2022 reserve freeze will eventually be viewed as a strategic turning point — one that gave competitors an opening in a world that is no longer unipolar.
Meanwhile, both political parties continue expanding federal debt.
There's enough blame to go around.
This isn't about red or blue.
It's about incentives and consequences.
And the consequence is this: central banks are reallocating reserves toward gold.
So when major institutions start talking about $6,000 or $7,000 gold, understand the framework.
This isn't retail speculation.
It's reserve management.
Until we see sustained fiscal discipline and greater policy certainty, I don't see that trend reversing.
Anyway, that's what's on my mind today.
Have a wonderful day.
I'll see you tomorrow.
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