Five Reasons to Be Bullish on Gold in 2019
Gold has rallied through the last weeks of 2019 and has pushed back above the $1,500 per ounce mark. The yellow metal is on pace to finish the year up close to 18%. And there is a lot of optimism that gold will continue to shine in 2020.
As we look ahead to the new year, here are five reasons gold may well skyrocket in 2020.
This bullish sentiment for gold comes from an interesting source — CCN.com — a Norwegian news site that focuses primarily on cryptocurrency news.
1. Gold is set to break through key psychological resistance — In fact, it already has. The yellow metal pushed above $1,500 per ounce last week. The $1500-$1550 area is a long-term resistance and the gold price peaked at around $1557 in 2019. A decisive breakout above this level could send the price soaring.
2. The trade war — Despite the reported phase-one trade deal, the trade war is a long way from over. As Peter Schiff has said, the recent deal isn’t really a deal. He called it more of a “truce.” It remains unclear if the US and China will ever reach a comprehensive deal and even more unclear if it will substantively change the economic relationship between the two countries. If nothing else, we can expect more wrangling and uncertainty on the trade front in the upcoming year. The CCN article added another layer of uncertainty — the upcoming presidential election. “It’s the Chinese who are more likely to wait for the election in the hopes that President Trump doesn’t retake the White House before they finalize a long-term trade deal.”
3. The weakening US Economy — CCN highlights a lot of the same problems in the US economy Peter Schiff has been harping on — particularly weakening manufacturing. It also points out that consumer spending is being driven by debt. As we have put it, American consumers are propping up the economy with money they don’t have. This isn’t exactly a sustainable economic model. As CCN puts it, “The Federal Reserve keeps making credit cheaper to blow air into the debt-fueled economic bubble, but it can’t last forever. Things will eventually take a turn for the worse in the form of a recession, which will be a tailwind for gold.”
4. De-Dollarization — After the recent Islamic Summit in Malaysia, Iran, Malaysia, Turkey and Qatar announced they are exploring trading in gold. This is part of a larger push toward de-dollarization by countries like China and Russia. We see this in the growing number of central banks buying gold to diversify away from the greenback. There is a good reason for countries like Russia and China to want to de-dollarize. The US has been known to weaponize the dollar and used it as a foreign policy tool. And it’s not just countries that have rocky relationships with the US that are looking for dollar alternatives. In 2019, the EU announced an alternate payment system that would allow European countries to circumvent US sanctions on Iran. As CCN noted, “The dollar has been the world’s reserve currency since 1944 but the number of countries ditching dollar is on the rise. Gold, on the other hand, has been the de facto reserve currency for thousands of years. Its demand will only go up if the trend of ditching the dollar continues.”