New Year's Eve 2024 marked twenty-five years since Millennium Eve. How have gold, silver and the PGMs performed over that quarter-century? December's annual pre-dinner LBMA seminars found 20th Century kids Adrian Ash (now at BullionVault), Suki Cooper (now at Standard Chartered) and Matt Turner (now at Anglo American Platinum) looking back, taking stock and daring to look forward. Here's what they explored.
Unless you were pedantic enough to stay home and wait another 12 months, midnight on 1st January 2000 saw the dawn of a new century and ushered in a new millennium on the Christian calendar. The party to end all parties, it also marked "the end of history", at least among Western bien pensants, because Capitalism had defeated Communism, resolving the violence and division of the 20th Century with blue jeans and the ballot box.
As peace broke out worldwide (other than in Chechnya, Eritrea, Kosovo and the Pakistan-India border among many other conflicts), the victory of Western rules-based democracy also meant the end of gold as well. Because "Who needs gold," as the New York Times asked in May 1999, "when you have Alan Greenspan" running US Central Bank the Federal Reserve?
Left to right: Matt Turner (Anglo American Platinum), Suki Cooper (Standard Chartered) and Adrian Ash (BullionVault).
The sky was all purple
Central banks kept selling, mining producers sold their own product short, and investors shunned the barbarous relic in favour of go-go internet stock amid chatter of Dow 36,000, the title of one 1999 bestseller (the index was then at 10,800).
"The twilight of gold [has] appeared to have arrived," wrote Oxford (and now Harvard) historian Niall Ferguson. "Total blackout is still some way off, and gold has a future of course. But mainly as jewellery." History, however, had other ideas.
Gold has beaten all other asset classes so far in the 21st Century, rising over 795% in price and defying all expectations except those of stopped-clock goldbugs. While the other precious metals took a different path, the 'safe haven' of gold outperformed even the US stock market (535% including dividends), crushing real estate, bonds, commodities and cash, and far out-running inflation (the US CPI index has risen 90%).
Tryin' to run from the destruction
Lots of factors matter, of course. But gun to head, here are the key drivers named by our panel:
Central banks
Back in 1999, when a young(er) Matt Turner began his career as a bullion-market analyst at the World Gold Council, the talk was all about which central banks had sold gold and which were going to sell next. It was ingrained, Matt recalls, that any speaker from the more pro-gold central banks was asked not to say "We have no plans to sell gold", because the market took that to mean the opposite, hitting the price yet again.
In those years Switzerland sold 1,300 tonnes of gold, and the Bank of England shocked the market when it joined Australia, Belgium and many others in unloading gold at a rate of around 500 tonnes per year. But fast forward a quarter-century and now central banks are buying 500 tonnes a year on the official data – a swing of 1,000 tonnes – with WGC estimates running twice as high. Putting a strong political bid into our market, this turnaround is so dramatic that now one might question any central bank which says "We have no plans to buy".
Market structure
A cocktail of market structure changes aligned for gold ranging from short covering activity to producers closing out hedge books, but notably the advent of a new channel for exposure was perhaps the most significant. While gold is both a commodity and a currency, market participants had limited avenues for exposure to gold, often opting for stock exposure instead. ETFs allowed easy, direct and liquid access to the gold market such that in some years fresh inflows were the equivalent of 10% of annual demand or net redemptions made up 17% to annual supply. From the launch of ETFs in 2003 until 2021, prices rose in years of inflows and fell during the years of net outflows.
Central bank demand became the most significant driver since 2022, but the ETFs at their peak holdings in 2020 surpassed 3,900 tonnes, which would be the equivalent of the second largest central bank. Market accessibility for a larger audience allowed gold to trade and respond to macro factors as well as mop up demand weakness elsewhere.
Loss of trust
The DotCom Crash, 9/11, Iraq, Katrina, 7/7, subprime, Northern Rock, Lehmans, the Mumbai attacks and Eurozone debt crisis: the first decade of the 21st Century destroyed public confidence in government and markets. Doubt and fear only worsened further during COVID-19, inflation, Russia's all-out invasion of Ukraine, the dreadful Middle East conflict, and the ever-growing sense that Western government debts (and therefore spending) have become unsustainable.
Instead of enjoying 'the end of history', says Adrian Ash, the world has been living through what feels more like millennial end times, an "epoch of chaotic polycrisis" to quote historian - and specialist in the genuine cataclysm of World War One - Christopher Clark. Little wonder that gold's unique appeal as an unchanging, uninflatable physical asset with zero default risk has stood out above all other assets since the year 2000.
So sue me if I go too fast
On top of those three factors, we cannot ignore China. Joining the World Trade Organization in 2001, the Communist state at the same time deregulated its domestic gold industry and markets, allowing China's deep cultural affinity with gold to explode as its economic output rose 16-fold across the first quarter of the 21st Century.
China's annual GDP per capita has jumped from US$875 to around US$13,000 today. While that remains far below the rich Western nations, it contrasts with US output per head rising only 125% in nominal terms while Germany and the UK's failed to double.
Driven by massive manufacturing, export and infrastructure growth, China's economic boom has released hundreds of millions of people from poverty, and it's been key to the rise of base metal prices since New Year 2000 (copper +380%, iron ore +500%). But while this was, perhaps, forecastable at the turn of the millennium (thanks to deregulation and its wider economic momentum), many predictions proved wrong for India's gold demand.
Life is just a party
The world's number one gold consumer at the turn of the century, India was widely expected to see demand drop in the early 2000s as its banking industry expanded, offering people alternative ways to save and invest. Yet India's household gold demand has held firm in tonnage terms and leapt in value. Like China, that's partly due to strong GDP growth (+650%) but India's affinity for gold - and its faith in gold as a hedge against inflation and the Rupee's relentless devaluation - has offset growth in financial services inclusion and adoption.
What about the other precious metals?
Silver
Rising 460% since Millennium Eve, silver peaked in 2011 close to its 1980 high of US$50 per Troy ounce. Central banks don't explain this rise, at least not directly. Indeed, the fact that silver lacks demand from sovereign wealth managers looks a key reason for it lagging the gains in gold. But they most likely helped, because of the grey metal's close price correlation with the safe-haven asset.
That said, the rising gold/silver ratio (one ounce of gold now buys 90 ounces of silver, up from 54 twenty-five years ago) suggests the world has put an increasing premium on safety over industrial use. But silver's tech stories remain vital to its gains, with the rise of PV solar cells, electric vehicles and now AI adding to demand from defence, brazing and chemicals production to set fresh record highs in the weight of industrial use throughout the 2020s to date.
Silver's role in electricals and electronics mean industrial demand also looks strong for the next 25 years, too. But it's worth noting how, since the turn of the century, silver's then-biggest use has collapsed. Photographic demand peaked in 1999, halved by 2007, was overtaken by PV in 2011, and has now dropped 90% by weight. Which brings us to the industrially-useful platinum group metals and the ‘death of the internal combustion engine’ (ICE).
PGMs
Primarily used in autocatalysts to reduce harmful emissions from ICEs, platinum rose 105% over the first quarter of the 21st Century, peaking in 2007. Palladium rose by almost exactly the same (starting and ending at the same price, too) but with a higher peak 15 years later, when rhodium also peaked before cutting its rise to 360%.
Looking at the platinum/silver ratio lets us track the relationship between the ‘industrial golds’, and it has fallen from 100 to 30 since 1999. That suggests silver has become relatively more useful to the world. But the death of the ICE has been exaggerated, as Mark Twain would say, and the PGM's auto-sector demand has held resilient across the past quarter century even through large swings in price. Autocats remain the metals' number one demand use, because they are perfect for the job.
There's a lesson here for silver and its use in solar-energy tech. While the industry has worked to thrift and reduce the quantity of metal needed to produce each Watt, silver remains vital and has not (yet) been replaced.
Platinum meanwhile enjoys lots of uses besides autocats, not least in hydrogen fuel cells (a promise as yet unfulfilled, which it's held since long before the Millennium). But jewellery demand for the white metal has fallen and changed, while palladium's outlook now seems as gloomy as did gold's in 1999, with negative sentiment creating a huge speculative short in the derivatives market.
Could that change as dramatically? Lower prices certainly make research into new use cases far more likely at US$1,000 per ounce than at 2022's peak of US$3,400.
Parties weren't meant to last
Given how far precious metals and gold in particular have come since Millennium Eve, it's impossible to guess where the next quarter-century might take us. But it's also worth recalling how grim things looked for our markets 25 years ago, and also how quickly that outlook changed.
Instead of reaching 36,000 in 2002 as Dow 36,000 predicted, the US stock index took two decades to hit that level. Today, gold US$36,000 would need more than a repeat of the past 25 years, and after outrunning all other asset classes since the dawn of the 21st Century, a repeat might sensibly be expected to struggle.
Either way, the biggest factors ahead look likely to be the size and depth of China's private demand (its ageing demographic contrasts with India's and could prove a headwind for jewellery consumption, as John Reade – now at the World Gold Council – noted during the seminar's Q&A), plus the pace and extent of deglobalisation (already begun but now worsening under the new Trump administration), as well as the long-term dominance of the US Dollar in global trade and reserves, and – perhaps most importantly – the sustainability of government deficits and debt.
Replay
You can watch the seminar here, and you can find out more about upcoming LBMA events here.
