Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Big Picture Backdrop for Precious Metals Outlook 2020

Commodities / Gold & Silver 2019 Jan 03, 2020 - 08:27 PM GMT

By: MoneyMetals

Commodities

The year ahead promises to be an eventful one. It will, of course, be dominated by political headlines leading up to the 2020 election. It could also be a big breakout year for precious metals.

In the second part of Money Metals' 2020 Outlook, we’ll drill down on the fundamental and technical setup for gold and silver…
However, in this first part, we’ll set the stage by digging into the macro forces at play in the economy, monetary policy, politics, and geopolitics.


Economy

Over the summer, the mainstream financial media ran hard with the “recession” angle. A manufacturing slowdown seemed to be afoot. But the main impetus for all the recession talk was an inversion of the yield curve – putting short-term bond yields below those of longer-term bonds.

Democrats were nearly gleeful at the prospect of a recession. But such thinking proved to be premature.

The economy does not appear to be headed into recession as we begin 2020. Official employment numbers continue to come in historically strong. And GDP growth, though modest at 2.1% as of Q3, is still indicating an overall expansion.

As for the yield curve inversion, the Fed got the message and drove short-term rates back below long-term rates. The inversion still serves as a possible precursor to a recession, but it may not actually hit until 2021 or later.

Continued global economic growth in 2020 could drive a late-cycle bull market in commodities, including the metals complex.

Leading up to a recession, the energy and materials sectors tend to outperform the broad market before rolling over. Gold and silver tend to peak later, with gold often rising counter-cyclically to economically sensitive assets.

Monetary Policy

In 2019, the Federal Reserve did a dramatic about-face on interest rates. Instead of hiking, as was widely expected by mainstream forecasters, the Fed paused… then cut rates three times.

By the fall, it was engaging in massive interventions to prop up the repo market and launching what is effectively a new Quantitative Easing program.

Nobody in the financial “mainstream” saw that coming at the beginning of the year!

The Fed is now back on pause for an unknown period. At his latest press conference Fed Chairman Jerome Powell indicated he would like to a see a significant and sustained rise in inflation before hiking rates again.

Higher inflation coupled with accommodative monetary policy would potentially be rocket fuel for precious metals markets.

A weaker Federal Reserve Note “dollar” versus foreign currencies isn’t necessary for hard assets to gain, but it certainly wouldn’t hurt. The U.S. Dollar Index peaked for 2019 in late September after a modest run-up. It has since retraced and will finish the year nearly flat.

The dollar has fallen in the fourth quarter along with the QE surge in the Fed’s balance sheet. The central bank’s net asset purchases are up by $400 billion already. Its balance sheet will likely rise to an all-time record by spring 2020, further cheapening the real value of the Federal Reserve Note in the process.

Politics

There is no shortage of opinion on who will, and who should, win the 2020 election. But we’ll stay out of the political “horse race” debate that fills the airtime on all of the cable news channels hour after hour, day after day.

We note only that political prediction markets currently give the upper hand to President Donald Trump. As long as the economy doesn’t dip into recession, the smart money seems to be on Trump to triumph over a weak Democrat field.

Should the economy falter or Trump get bogged down in a new controversy that erodes his support, the political dynamics could shift – and potentially roil markets.

Several outspoken billionaires – from Ray Dalio to Paul Tudor Jones to Stanley Druckenmiller to Leon Cooperman – have each warned that a Democrat victory over Trump could trigger a stock market meltdown (especially if the victorious Democrat is a Bernie Sanders or Elizabeth Warren-type anti-capitalist firebrand).

Such an event, in turn, would enhance the safe-haven appeal of precious metals.

So far during the Trump presidency, “fear trade” demand for physical precious metals has been mostly muted. The metals have made modest gains based on other factors. But before we see truly spectacular gains in gold and silver, we will likely need some sort of economic, political, or geopolitical black swan event to shake investors out of their complacency.

Geopolitics

The big geopolitical story of 2019 was the trade standoff between the United States and China. Every week, seemingly, brought us either one step closer or one step further behind a trade deal.

Much – perhaps too much – was made of the impact of trade wars on market trends. But a favorable outcome in 2020 would certainly go toward boosting manufacturing activity and demand for industrial metals.

Other geopolitical threats loom in 2020 as well.

As the U.S. continues to ramp up economic sanctions on Russia, the Russians continue to look for ways to retaliate. One if its long-term strategic aims is to secure international trade deals outside the Federal Reserve Note dollar system. It is finding willing partners in U.S. adversaries who have been hit or threatened with sanctions.

The U.S. has shown in the past that it is willing to go to war to defend its fiat dollar.

A possible war with Iran, North Korea, Russia, or China – or a shutdown of oil production from the Middle East – would be extremely disruptive to markets and could send safe-haven demand for precious metals skyrocketing.

Barring an unforeseen black swan event or crisis, the big picture backdrop for precious metals looks constructive for another year of significant but not necessarily spectacular gains.

At some point, though, whether next year or in future years, mounting risks will propel gold and silver higher with explosive force.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in