December 10, 2019
Though we're still three weeks away from flipping the calendar, let's begin to look forward to 2020 and attempt to decipher whether or not the precious metals can build upon their 2019 gains.
For precious metals enthusiasts, this time of year is always difficult. Often, holdings in mining shares get beaten backward due to tax loss selling. Mainstream "analysts" and investment houses begin to publish forecasts that invariably predict lower prices for gold but higher prices for just about everything else. And then, of course, there's this guy...who seems to consistently predict a drop to $700 every year!
On the other hand, at TFMR we've done a decent job of seeing through the analytical haze and deciphering a reasonably clear path forward for the precious metals.
• Heading into 2017, the mainstream analysts were predicting a new Trumpian age of economic growth, a strong dollar, and a bursting of the bond bubble. We knew this was nonsense and wrote about it in our 2017 forecast, "The Generally Accepted Narrative of 2017": https://www.tfmetalsreport.com/blog/8103/questioni...
• The bearishness was still palpable as we headed into 2018, too. This all seemed misplaced at the time, so we instead focused upon the three themes that would support precious metals prices through the year: https://www.tfmetalsreport.com/blog/8755/three-the...
• And for 2019, we expected the year to play out much as 2010 did...with precious metals prices reacting to the same stimuli that prevailed in 2010. A slowing economy, lower interest rates, and renewed QE were all forecasted back in January, and all of this was expected to drive gold to a target of $1480-1520. And here we are. https://www.tfmetalsreport.com/blog/9151/2010-9
So, with all of this in mind, what can we expect in 2020? While we won't type up a formal forecast until January, here are a few of the factors that will support precious metal prices and drive them higher.
First of all, the U.S. and global economies are clearly slipping into contraction/recession. Economic growth continues to slow, with many expectations for the U.S. economy in Q4 of 2019 hovering around just 1.0%. The global debt structure, both public and private, cannot tolerate the lower revenue levels that economic contraction brings, and this creates a major issue for the central banks.
Additionally, deficit spending and total government debt continues to soar. Thus the overall supply of sovereign debt in 2020 will soar, too. With higher interest rates not allowed within this Ponzi scheme of debt, it will be incumbent upon the global central banks to pick up the slack through direct monetization.
Therefore—and regardless of all their proclamations and denials—the central bankers WILL restart formal and overt quantitative easing in 2020. Of course, the ECB has already surrendered to this reality in 2019, and the Fed has clearly reversed course, too. However, the sycophant U.S. media allows The Fed to maintain that the current $60B/month in debt monetization is somehow NOT quantitative easing. In 2020, this charade will collapse.
In 2019, we've seen gold make new all-time highs when measured in over seventy national fiat currencies. As you can see in the chart below, courtesy of GoldChartsRUs, gold recently made new all-time highs versus an index of the Top 20 fiat currencies as ranked by GDP.
In the chart above, you should be sure to note the underperformance of dollar-priced gold. Expect this gap to close in 2020.
So what price targets will we be watching as the new year begins? As stated above, our goal for 2019 was to see gold trade up toward the initial chart resistance of $1480-1520. Though gold traded as high as $1565 in early September, it has since fallen back in a period of price consolidation. A late year rally should return price to our $1480-1520 target.
From there, the key first level to watch will be $1550 on a weekly closing basis. From September 2011 to April 2013, this area offered key support for price. It is now key resistance, as evidenced by the inability for COMEX gold to close above this level back in late August and early September.
However, price will eventually close above $1550...though it may take the entire first quarter to make it happen. From there, the next target is $1650. A move to this level alone would represent a 10+% gain in 2020, and that may be all we get. Fortunately, another 10+% would be sufficient to support significantly higher mining share prices, and that would make for a lot of fun in its own right.
However, if we're right about the "direct and overt QE" stuff, the price of COMEX gold may not stop at $1650 next year. Once above that level, the obvious target becomes $1800 as the dollar price tags along with that trade-weighted currency index shown above. What would $1800 gold do for the mining shares? And not just the senior producers. What about the juniors and even the exploration companies? How would $1800 gold affect their prospects?
So now is the time to think ahead...and plan ahead...for 2020. Higher precious metal prices are very likely next year, due to the current global economic situation. Anyone wishing to stack physical metal and/or profit financially should prepare accordingly.