FXEMPIRE
All

Setting Gold Market Expectations for 2020 Right

Hooray, the twenties are here! But what will the 2020 bring for the gold market? Shall we see the beginning of the Belle Époque for the yellow metal?
Arkadiusz Sieroń
Setting Gold Market Expectations for 2020 Right

Gold at the End of 2019

The last year was a very good one for the gold bulls, as one can clearly see in the chart below. Despite the soaring equities, the price of the yellow metal rose from $1279 to around $1520, or more than 18 percent. Bravo!

Chart 1: Gold prices in 2019.

In particular, gold managed to jump again above $1,500 at the very end of December, which confirms that the turn of the year is usually positive for gold prices. In the last few years, gold rallied in the beginning of year. So, looking at gold’s seasonality, January could be positive for the price of the yellow metal. But what about the rest of the year? Below I offer a few key insight. The more detailed fundamental outlook for gold in 2020, I provide in January edition of the Gold Market Overview.

Fundamental Outlook for Gold in 2020

From the fundamental point of view, 2020 may be worse for the yellow metal than in 2019. This is because the dovish central bank pivot that drove precious market in 2019 is largely behind us. The impact of existing accommodative U.S. fiscal policy is fading. The fears of recession are receding. The risks of the full blown U.S.-China trade war and a hard Brexit have diminished.

In other words, the monetary policy will be more hawkish than in 2019, while the fiscal policy will be similarly easy, supporting the U.S. dollar. The geopolitical headwinds have softened, which should help the risky assets and bond yields. So, we could see strong dollar, higher real interest rates and lower risk aversion – a very bad combination for the price of gold.

On the other hand, the next Fed move will be an interest rate cut, which can happen as early as this year. The expectation of a dovish move could support gold prices. Moreover, the U.S. GDP growth is expected to slow down, while inflation may finally rise. Meanwhile, growth may accelerate in other countries – if that happens, the greenback may weaken. Flatter U.S. growth with higher inflation and weakening dollar seems to be a positive combination for the gold prices.

However, the dovish expectations are already priced in to some extent, while inflation will not soar, but edge up, if at all. Given the dovish stance of the ECB and Bank of Japan, the U.S. dollar may remain relatively strong. This is why our base case is that fundamental outlook has deteriorated somewhat and after possibly pleasant beginning of the year, gold may struggle further down the road.

But black swans are flying just above the market surface. So, investors should be aware that they could be hit at some point with the harsh reality of economic slowdown in China and other countries, debt saturation, declining corporate profits, and uncertainty about the outcomes of the U.S. elections. In such an environment, gold will continue to be seen as an important safe-haven asset.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

Arkadiusz Sieron, PhD
Sunshine Profits – Effective Investments Through Diligence and Care

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Trading Alerts.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US