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It was a historic week for gold. The price of the precious metal broke through significant euro and dollar thresholds this week. In this weekly selection, we cover the news behind the price increase. Additionally, we see that nuclear energy is currently booming in the stock market. What's behind this trend shift? We also take a look at the upcoming BRICS summit next week—is this the beginning of the end for the dollar’s dominance? Finally, we briefly examine the price surge of bitcoin.
Yesterday, the gold price broke through €80,000 per kilogram, and today, through $2,700 per ounce. You can best view the current gold price live, as it is rising so fast that writing down the exact price is futile. The gold price is now more than 30% higher than at the start of this year.
Development of the gold price over the past month (source: Holland Gold)
Earlier this year, we wrote an article on the main causes behind the rise in the gold price. Due to geopolitical uncertainty, declining trust in fiat money, and Russian sanctions, there has been increased demand for gold from central banks, BRICS countries, and investors. Interest rate cuts are also playing a role. Bloomberg reported this week that the U.S. elections are also having an impact: "With both candidates posing different risks to the economy, gold will likely see further support—whether Donald Trump or Vice President Kamala Harris wins."
Central bankers from Mexico, Mongolia, and the Czech Republic also made rare pro-gold statements this week. At a conference in Miami, they praised the benefits of larger gold reserves, suggesting that the percentage of gold in their countries' reserves will likely increase in the coming years. And it’s not just central banks.
This week, Bank of America (BofA) named gold the last safe haven as government debts continue to rise and become an increasing risk. Interest payments are consuming a larger portion of the economy, and there are still no serious plans to reduce national debts. A BofA analyst wrote: "Eventually, something will have to give: if markets become hesitant to absorb the debt load and volatility rises, gold could become the preferred asset. Central banks, in particular, may further diversify their currency reserves."
In the Netherlands, we are also seeing a shift. In an article from the Financial Times on the rising gold price, we read that the multi-asset team at Robeco has now taken a tactical allocation to gold. They write: "The Dutch investment house Robeco suggests that it’s time for gold skeptics to show more respect."
The Dutch pension fund DSM (PDN) has also invested in gold, as reported by the FD. In 2020, they observed that governments and central banks were creating a lot of money and decided to reduce their bond holdings and add gold to their portfolio. That decision has paid off, as we can see in the chart below. Read the full article here.
Gold Rush DSM Pension Fund pays off (source: FD)
After all these price increases, one might wonder whether it’s time for a correction. Jeroen Blokland wrote on X that this could happen in the short term but that it’s very likely gold will continue to rise significantly in the long term. "The simple reason is that gold must increase in value to restore confidence in the financial system and the ‘value’ that supports our money and debt," said Jeroen Blokland.
Bloomberg seems to agree with him. In a brief article on price expectations from the bullion industry, they noted an average price forecast of $2,917.40 per ounce for October next year. Perhaps even more striking is the sector’s forecast for silver. They predict that the silver price will rise by 43% over the same period, reaching $45 per ounce.
Not only has gold seen significant gains recently, but shareholders of companies in the uranium and nuclear energy sectors have also benefited substantially. For example, the euro-denominated VanEck Uranium and Nuclear Technologies ETF rose more than 35 percent over the past month. The Global Uranium ETF also saw a strong increase, rising 10 percent in the last week. There seems to be a real trend shift occurring around nuclear energy.
Last Wednesday, Amazon announced an investment of more than $500 million in the development of small modular reactors (SMRs). They are doing this to support the growing energy demands of their data centers, which are expected to surge with the expansion of services like generative AI. SMRs are advanced nuclear reactors with a smaller design and faster construction times than traditional nuclear reactors. They can be built closer to the power grid and provide a stable energy source without carbon emissions. Earlier this week, Google made a similar announcement.
Three Mile Island nuclear power plant, where Microsoft is investing (source: Constellation Energy)
In September, Microsoft announced plans to reopen an old nuclear power plant to meet the energy needs of its data centers. The U.S. government also allocated $900 million for SMR development. In Europe, led by France, a gradual shift toward nuclear energy is also underway. We discussed nuclear energy in the Netherlands in this week’s podcast, which you can listen to here (Dutch).
Next week, the BRICS Summit will begin in Kazan, Russia. According to Reuters, Russian President Vladimir Putin will push to end the dominance of the U.S. dollar. Russia is trying to convince the BRICS countries to create an alternative platform for international payments that is immune to Western sanctions.
According to a document from the Russian Ministry of Finance and central bank, the new payment system will be based on a network of commercial banks connected through the central banks of the BRICS nations. The system will use blockchain technology with digital tokens backed by national currencies. There is also a persistent rumor about a new payment system with 40 percent gold backing, which we discussed at Reinvent Money and the Holland Gold Monthly Update (Dutch). The United States Institute of Peace writes that a BRICS currency alternative is unlikely for now, suggesting that decision-making within BRICS has become more difficult due to its expansion and conflicting interests.
A new payment system independent of the West is not the only thing the Russians want to discuss during the BRICS summit. They are also calling for an alternative to the International Monetary Fund (IMF), claiming that the IMF primarily serves Western interests. Russia is also proposing the creation of a BRICS Clear platform to settle securities trades. There are plenty of reasons to follow next week’s summit with great interest!
The price of "digital gold" continues to rise as well, increasing by more than 10 percent this week relative to the dollar. The world-famous Dutch bitcoin analyst PlanB wrote on X: "It looks like the bottom of miners' revenue has been reached... you know what that means."
Of course, it’s not surprising if you don’t exactly know what this means. After the halving, miners face pressure as bitcoin issuance halves, and exchange rates have not yet adjusted. This forces them to sell their bitcoin. Less competitive miners drop out, allowing the remaining miners to earn more rewards and sell less. Once they begin accumulating again, the impact of the bitcoin issuance becomes visible, and the market price rises rapidly.
Our own Paul Buitink gave a speech last week at the bitcoin conference in Amsterdam titled: “Gold & Bitcoin: Friends, Not Enemies.” In the speech, he explains why it is wise to hold both gold and bitcoin. Watch the speech here.
Cover photo: BRICS leaders at the 2018 summit (source: GovernmentZA)
*This article was originally written in Dutch and has been automatically translated.
