It is well known that the economic uncertainties lead to steady increase of gold price. As the consumer stock markets become volatile, many investors turn to precious metals for it involves less risk. Global economy hasn't been so insecure like this since 2008 recession: Adding the Covid-19 pandemic economy impact to the pre-existing issues such as central banks’ national debts (specially in euro zone), overpriced high-tech stock market and the tariff war between two biggest economies of China and United States, the global economy did not have a bright situation to begin with in 2019.
Starting from US$1200USD/oz in January 2019, the gold ended up to 1519USD/oz on the last day of 2019. “Gold’s bullish run after the 2008 financial crisis seems to be repeating itself; precious metals now represent 10.5% of the S&P/TSX Composite Index”; as,Anita Soni, an analyst of CIBC bank said in a note, who has recently raised her gold price forecast to $1,725 for 2020 and $1,800 in 2021, from previous forecasts of $1,600 per ounce in each year.
According to the investinghaven.com gold prediction for 2020 and 2021, (1) a new bull market in gold and silver has started with the June 2019 breakout in gold (2) this bull market is here to stay for several years. All this implies that ‘buy the dip’ is the best strategy going forward, both for playing the gold as well as the silver market, says the same note; There will be one or two rallies per year going forward. Those are the ones investor would want to catch!
InvestingHaven’s research team strongly believes that gold’s dominant trend is this last 8-year rounding formation after hitting all-time highs. The bottom of this rounding pattern was reached end of 2015, 5 years after all time high, so they expect some 4 to 5 years before gold is able to break out to all-time highs. Consequently we will see a formation of higher lows in 2020 and 2021.
Certainly too much of bullish market will cause in a short sell offs periods, similar to the march plunge, however for the long time period, the moving average of the gold price will have uprising trend. According to Christopher Lewis from FX Empire, $1800 level will be crucial, so we can break above there, then the market is likely to go looking towards the $2000 level over the longer term.
A future price for the rest of the year will also depend on the re-opening the economies around the world and also the possible second wave of the Covid-19, which can happen during coming flu season. Even with a potential vaccine production near end of 2020 by most optimistic scenarios, still the impacts and stigma of the pandemic on the global economy will be around for a few years, keeping the gold price high, which provides gold producers a few years opportunity for higher profit of their products.
Below is a monthly gold price suggestion from longforecast.com, however with the pandemic situation it would be a bold move to have detailed predictions.
As s conclusion to our research:
1. Gold has reached the bottom 5 years ago and even before the pandemic, with the unhealthy global economic, gold had attracted investors.
2. There might be some short spike or sell off, however most analyst consider a US$1700/oz for 2020 and US$1800 for 2021.
3. US$1800 is a crucial price, if we pass this price, a US$2000/oz would not be unexpected.
4. This trend will be around for 2-3 years at least, which can give a good time for producers, so hurry up!
5. For investors, it is a good opportunity to trade gold miners stock.
We will consider a fresh price forecast for post-pandemic near end of the year.
Stay Safe!
Nordwest Team.
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