Gold Flips Commodity Buying From Just In Time To Just In Case

Gold is not defying gravity with its relentless run towards $4000 an ounce but it is reflecting a fundamental change in global economics and politics which means it could continue rising, as could other metals.
That’s the view of career gold trader and commentator Ross Norman who believes the politization of all commodities has elevated their importance beyond pure supply and demand.
“We are witnessing record prices despite slowing global growth,” he wrote in the latest edition of his Metals Daily newsletter with the key point being that the world really has changed.
"Commodities are no longer just cyclical assets but tools of statecraft.
“The mindset of purchasing managers at industrial companies, where this trend is most apparent has shifted from just in time to just in case.”
At central banks, where the gold boom started three years ago managers have recognized that commodities are reasserting their role as strategic portfolio hedges, against both inflation and geopolitical risk.
Precious metals, primarily gold, are at the crossroads of economic and political tension thanks to the fading of a “unipolar” financial world dominated by the U.S. dollar and U.S. treasury bonds and the globalisation of trade.
Weaponised Monetary Systems
“Today we live in a bipolar world where The West has weaponized access to its markets, payment channels and monetary systems against those who do not align with it,” said London-based Norman.
“Irrespective of which side you support, the fact remains that a new iron curtain has emerged and the more The West asserts its influence the more others seek alternatives," he said.
Just as access to western markets and systems has been weaponised so too is access to certain commodities and while Norman did not name rare earths, they are a perfect example in the way China is rationing supply of metals essential in modern technologies.
“In my view, the price gains (of gold and other commodities) are not simply the result of shifts in reserve management but are compounded by supply chain constraints and increased hoarding,” he said.
"In that context, a doubling of the gold price in two years, a 58% rise in the silver price so far this year, 74% in platinum and 39% in palladium start to make sense.
“The illiquidity, tightness and high borrowing costs (leasing) of these precious metals only confirm this perspective.”
Gold, according to Norman, has risen consistently since mid-2023 with only short periods of consolidation and very little profit taking.
“This shows that buyers are high conviction and high quality, such as central banks, which means these buyers have a multi-generational perspective, unlike speculators who perhaps have a short, disinterested view of underlying assets," he said.
Signs Of Change
At some point in the future, gold will hit a peak but knowing when that might happen is hard to predict, though there is a sign which might guide investor, according to Norman.
Watch for an easing of Asian (gold) premiums as a temporary pause signal, he said, with the premium being the price paid in certain markets above the commodity price.
An alternative guide would be a return to governments coexisting amicably, an event which Norman considers unlikely, or in his words, “fat chance”.