Gold Continuation, Silver Catch-Up in Loose-Money Election Year
Updated
In a year that will likely be mired with rate cuts, QE, and rising budget deficits - expect gold to continue its 2019 breakout. Fibonacci, trendline, and XAUJPY calculations give us a target range of 1711-1823 in the price of gold.
In achieving this target we expect silver to catch up at least to the low 20's. This move looks highly likely in 2020 and will result in significant repricing in silver junior miners. Keep accumulating ounces and company shares. Heading into the top of this move we will be taking defensive action as we expect a significant correction to occur. It won't be a straight move through $2,000 gold.
Given that:
1. The miners and silver have been severely lagging gold which has NEVER been a positive sign for a sustainable multi-year bull market
2. large resistance exists at the 1800-1900 level
3. Monetary policy lags the market, meaning the Fed rarely moves quickly in a straight line. there's a solid chance the Fed bluffs a hawkish stance, causing a temporary gold sell-off
It is likely we will correct and consolidate prior to breaking through 1900.
Other Thoughts:
Monetary policy operates with a lag, which means the rate hikes and QT from 2017-2018 is still creating headwinds for this market.
Although the market odds have not yet priced it in, it is almost certain the Fed will not hike in 2020, and it is increasingly likely they will cut rates at least 1-2 times. QE is likely here to stay and expand.
The Fed wants a weaker dollar, Trump wants a weaker dollar, and the global markets want a weaker dollar. Expect a weaker dollar unless the Fed wants a liquidity problem.
Monetary policy, more than ever, is the driver of this market. I could be wrong and gold could fall - but that would require a very tight monetary policy which would almost certainly cause problems in stocks and debt markets. So be watching the Fed, listening very closely, and watching how the markets respond.
Earnings have never mattered so little. All that matters now is central bank liquidity.
In achieving this target we expect silver to catch up at least to the low 20's. This move looks highly likely in 2020 and will result in significant repricing in silver junior miners. Keep accumulating ounces and company shares. Heading into the top of this move we will be taking defensive action as we expect a significant correction to occur. It won't be a straight move through $2,000 gold.
Given that:
1. The miners and silver have been severely lagging gold which has NEVER been a positive sign for a sustainable multi-year bull market
2. large resistance exists at the 1800-1900 level
3. Monetary policy lags the market, meaning the Fed rarely moves quickly in a straight line. there's a solid chance the Fed bluffs a hawkish stance, causing a temporary gold sell-off
It is likely we will correct and consolidate prior to breaking through 1900.
Other Thoughts:
Monetary policy operates with a lag, which means the rate hikes and QT from 2017-2018 is still creating headwinds for this market.
Although the market odds have not yet priced it in, it is almost certain the Fed will not hike in 2020, and it is increasingly likely they will cut rates at least 1-2 times. QE is likely here to stay and expand.
The Fed wants a weaker dollar, Trump wants a weaker dollar, and the global markets want a weaker dollar. Expect a weaker dollar unless the Fed wants a liquidity problem.
Monetary policy, more than ever, is the driver of this market. I could be wrong and gold could fall - but that would require a very tight monetary policy which would almost certainly cause problems in stocks and debt markets. So be watching the Fed, listening very closely, and watching how the markets respond.
Earnings have never mattered so little. All that matters now is central bank liquidity.
Note
Unless this global shutdown can be lifted, it appears that we just witnessed a major medium / long term top in the price of gold. Likely we get a major market crash. If I'm wrong, silver will regain their rising structures and continue advancing higher
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