Metals Market Annual Recap – 2019 Was Bullish
In this year’s recap, we’ll look at gold, silver, platinum, palladium, and copper – I’ll discuss their trends and any underlying factors that may influence prices in 2020.
Gold Market Recap
I’ll start with gold as it is the cyclical driver behind the metals. Gold benefitted greatly in 2019 from the Federal Reserve’s sudden reversal on interest rates. Their tactical retreat sent Treasury yields spinning and launched gold to multi-year highs.
Prices broke out of the 6-year basing pattern in June 2019 when gold surged above $1400 on record volume. The intermediate trend corrected after the initial surge, and we are in a similar setup to early 2003. Prices will finish the year 18% higher.
For 2020, we expect gold to continue to advance the larger pattern and challenge key resistance between $1750 – $1800. Our current forecast calls for a pattern breakout above $2000 in 2021 or 2022. However, that timeframe could be expedited depending on the results of the 2020 election.
Near-term, gold just confirmed a 6-month low, and prices have broken free of the cycle break line – fresh highs are expected.
Record Low Gold Eagle Coin Sales
Investment demand for physical gold was low, especially in the US. In its 33-year history, the US mint produced the least amount of gold eagle coins ever – just 152,000 ounces. That’s a decrease of about 85% from the 985,000 ounces created in 2016. Note: I view this as an incredibly bullish (contrary) indicator. Despite gold’s obvious breakout – the average investor remains oblivious.
The 2019 breakout in gold supports a new bull market that should carry well into the next decade as governments realize the consequences of loose monetary policy and negative interest rates. Eventually, the public will wake up, but by then, it may be too late.
Silver Market Recap
Cyclically speaking, silver follows gold. Prices lagged slightly but should finish the year 15% higher. Industrial demand remains strong, and prices should rise in 2020.
The surge from $14.27 to the $19.75 September high suggests speculative interest could be returning to the silver market. Prices formed a 6-month low on December 9th, 2019, and the trend is just now breaking out. A test of the $21.15 high set in 2016 seems reasonable, with the potential to reach $26.00+ in 2020.
Platinum Market Recap
Platinum prices will finish the year 19% higher, and like gold, achieved a bullish breakout. After a long, drawn-out bear market, prices finally bottomed in 2018.
Platinum has been unloved and undervalued for several years. Mostly, due to oversupply and lower industrial demand. That trend appears to be reversing. In 2019, the platinum to gold ratio set a record low of 0.546 – the lowest platinum has ever traded in relationship to gold. To put that into dollar terms, on August 15th, 2019, platinum ($842) closed $689.20 below the price of gold ($1531.20). Traders quickly realized the mispricing and platinum jumped to fresh highs 2-weeks later.
In 2019, the trend maintained a pattern of higher highs and higher lows breaking out on record volume in late August. Prices came back to test the trendline (a throwback) and successfully held the 200-day MA in November. The next advance is underway, and we could see fireworks once prices get above the $1000 – $1050 resistance level.
Palladium Market Recap
Palladium prices are up 57% on the year as supply remains tight and as emission standards in Europe expand. Palladium is primarily used as a catalyst to scrub pollutants from the exhaust of internal combustion engines.
Palladium reached new all-time highs in 2019 and surpassed the price of gold. With palladium prices elevated, how long will it be before catalytic converter manufacturers switch to the more abundant and 50% cheaper sister metal (platinum)?
Prices are up over 300% since the 2016 low. The trend is losing momentum depicted by negative divergences in the MACD and RSI. Prices could go higher, but the upside is likely limited when compared to platinum and silver.
Copper Market Recap
Copper prices fluctuated in 2019 as the US-China trade war placed a dark cloud over economic growth expectations. Prices have rallied since September and are on pace to finish the year 7% higher.
Longer-term, demand is increasing as electric vehicles (EV’s) gain momentum against internal combustion engines (ICE). Something like 130 – 180 pounds of copper goes into each electric vehicle — an electric bus contains over 800-lbs.
Near-term, prices have been correcting after forming a double top in 2018. The correction may be complete if copper maintains the $2.70 level during the next pullback.
In summary, gold, palladium, and platinum set several records in 2019 — some likely never to be repeated in our lifetimes. Precious metals have likely started new bull markets that should last well into the next decade. For 2020, I see explosive potential in Silver and Platinum as they play catchup. Gold miners are positioned well and should exceed their 2016 highs.
AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit https://goldpredict.com/