(Mises)—Why is the price of gold rising if the global economy is not in recession and inflation is allegedly under control? This is a question often heard in investment circles, and I will try to answer it.
We must begin by clarifying the question. It is true that inflation is slowly decreasing, but we cannot say that it is under control. Let us remember that the latest CPI data in the United States was 3% annualized and that in the eurozone it is 2.6%, with eight countries publishing data above 3%, including Spain.
This is why central banks need to give the impression of hawkishness and maintain rates or lower them very cautiously. However, monetary policy is far from being restrictive. Money supply growth is picking up, the ECB maintains its “anti-fragmentation mechanism,” and the Federal Reserve continues to inject money through the liquidity window. We can say, without a doubt, that monetary policy is beyond accommodative.
At the end of this article, the price of gold is above $2,400 an ounce, up 16.5% between January and July 19, 2024. In the same period, gold has performed better than the S&P 500, the Stoxx 600 in Europe, and the MSCI Global. In fact, over the past five years, gold has outperformed not only the European and global stock markets, but also the S&P 500, with only the Nasdaq surpassing the precious metal. This is a period of alleged recovery and strong expansion of the stock markets. On the one hand, the market is discounting the central banks’ continued accommodative and expansionary policies, even possible high debt monetization, given the unsustainable deficits in the United States and developed countries. That is, the market assumes that the Federal Reserve and the ECB will not be able to maintain the reduction of their balance sheets in the face of rising debt and public spending in many economies. As a result, gold protects many investors against the erosion of the currency’s purchasing power, i.e., inflation, without the extreme volatility of Bitcoin. If the market discounts further monetary expansion to cover the accumulated deficits, it is normal for the investor to seek protection with gold, which has centuries of history as an alternative to fiduciary money and offers a low-volatility hedge against currency debasement.
Another important factor is the central bank’s purchase of gold. JP Morgan is credited with the phrase “gold is money and everything else is credit.” All the world’s central banks include treasury bonds from countries that serve as global reserve currencies in their asset base. This allows central banks around the world to try to stabilize their currencies. When we read that a central bank buys or sells dollars or euros, it is not making transactions with physical currency but with government bonds. Hence, as the market price of government bonds has fallen 7% between 2019 and 2024, many of these central banks are facing latent losses from a slump in the value of their assets. What is the best way to strengthen a central bank’s balance sheet, thereby diversifying and reducing exposure to fiat currencies? Purchase gold.
The rising purchases of gold by central banks are an essential factor justifying the recent increase in demand for the precious metal. Central banks, especially in China and India, are trying to reduce their dependence on the dollar or the euro to diversify their reserves. However, this does not mean full de-dollarization. Far from it.
According to the World Gold Council, central banks have accelerated their gold purchases to more than 1,000 tonnes per year in 2022 and 2023. This means that monetary authorities account for almost a quarter of the annual demand for gold during a period when supply and production have not grown significantly. The ratio of output to demand stands at 0.9 in June 2024, according to Morgan Stanley.
Global official gold reserves have increased by 290 net tonnes in the first quarter of 2024, the highest since 2000, according to the World Gold Council, 69% higher than the five-year quarterly average (171 metric tonnes).
The People’s Bank of China and the Central Bank of India are the biggest buyers as they aim to balance their reserves, adding more gold to reduce loss-making exposure to government securities. According to Metals Focus, Refinitiv GFMS, and the World Gold Council, China has been increasing its gold purchases for seventeen months, and since 2022, it has shot up its reserves by 16%, coinciding with the increase in global polarization and the trade wars.
That does not mean full de-dollarization, as the People’s Bank of China has 4.6% of its total reserves in gold. US Treasury bonds are the most important asset, accounting for more than 50% of the Chinese central bank’s assets. However, its goal is to raise gold reserves to at least 14%, according to local media. Thus, it would imply a significant annual purchase of gold for years.
India’s central bank increased its gold reserves by 19 metric tonnes during the first quarter. Other central banks that are diversifying and buying more gold than ever are the National Bank of Kazakhstan, the Monetary Authority of Singapore, the Central Bank of Qatar, the Central Bank of Turkey, and the Central Bank of Oman, according to the sources cited above. During this period, both the Czech National Bank and the National Bank of Poland increased their gold reserves in Europe, reaching the highest level since 2021. In these cases, the aim is to balance the exposure in the asset base with more gold and less eurozone government bonds.
The goal of this central bank trend is to increase the weight of an asset that does not fluctuate with the price of government bonds. It is not about de-dollarization but about balancing the balance sheet from the volatility created by their own misguided expansionary policies. For years, the policy of central banks has been to reduce their gold holdings, and now they must come back to logic and rebalance after suffering years of latent losses on their government bond holdings. In fact, one could say that the world’s central banks anticipate their own widespread erosion of the purchasing power of reserve currencies due to the saturation of fiscal and monetary policies, and for that reason, they need more gold.
After years of thinking that money can be printed without limits and without creating inflation, monetary authorities are trying to return to logic and have more gold on their balance sheets. At the same time, many expected that the trade war between China and the United States and global polarisation would be reversed in the Biden years, and the opposite has happened. It has accelerated. Now, the latent losses in the sovereign bond asset portfolio are leading all these central banks to buy more gold and try to protect themselves from new bursts of inflationary pressures.
In an era of high correlation between assets and perpetual monetary destruction, gold serves as a low volatility, low correlation, and strong long-term return addition to any prudent portfolio.
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.
