For 2020, intelligence experts are predicting continued global tensions on many levels: country-to-country, country to citizens, elites to the have-nots. In the U.S., economic improvements aren’t sufficient to overcome public distrust of leaders and institutions that create a highly-polarized political and social environment. Technological advances will further disrupt labor markets and reshape the meaning of the American Dream.
The gold market in 2020 will face many of the same pressures as the previous years. A few points of uncertainty, such as Brexit and the U.S. political situation, should come to a head during the year. Other tensions may continue unresolved well into the decade.
Global Tensions that May Affect the Market in 2020
When there is uncertainty in global markets, savvy investors look for alternatives to volatile equities. This usually leads to strong prices for gold. The focus right now in the global market is on U.S.-China trade tensions and the risk of tariffs on billions of dollars in goods, which could drive equities down as global supply chains are thrown into turmoil. If international trade declines, the economic interdependence that has helped keep the peace for the past few decades may not be strong enough to stave off open conflict.
All good things must come to an end. The U.S. economy is in the midst of an 11-year economic expansion, the longest in history. The odds of a recession increase each year, and buying gold is a prime hedge strategy. An inverted yield curve like the one in mid-2019 has been a key indicator of recessions in the past.
If there is economic weakness in 2020, the Fed will likely lower interest rates, leading to lower yields for bonds and equities. Demand will shift to alternate, safe haven investments like gold where prices are not weighed down by low interest rates. Rather, gold prices correlate inversely to low interest rates, and gold usually gains. Worldwide, central banks have turned to monetary easing to support growth, leading to lower returns in the marketplace for interest-bearing assets.
Ongoing uncertainty around Brexit has led to a weak Pound Sterling and rising gold prices in the UK. Prices have spiked at developments over the past several months. At the end of 2019, a no-deal Brexit seemed the most likely scenario, which could curtail British trading activity and negatively impact equity values. The rest of the EU will have to reshuffle its relationships as well. Demand for gold as a safe haven could rise as a consequence.
U.S. Presidential Election
While incumbents look for ways to juice the economy in an election year, global pressures could render that tactic unsuccessful in 2020. Uncertainty is always the gold investor’s best friend, and the 2020 election year will be rife with it amid one of the most contentious elections in recent memory.
From China to Iran, and even to the U.S., protests against institutional and economic imbalance have led to unrest and uprisings. As the gap between rich and poor becomes a focus of outrage and action, governments will be forced to deal with their unruly populations in ways that could impact their economies.
Governments seeking to diversify from the dollar are investing in bullion, consuming global supply and strengthening prices. Gold hit a high point in 2019 when central banks increased their gold positions, and the relative strength of the dollar could lead to additional investments that push the pricing envelope.
Gold Price Forecast 2020
With gold at around $1,450 at the end of 2019, forecasts are mixed but positive overall. Predictions for 2020 range from $1,500 to $1,600 per ounce, which would be a return to 2013 levels. Some investment managers are predicting a 5% to 8% gain for gold during 2020. Long term, prices in the $3,000 to $5,000 range are not impossible to contemplate.
Uncertainty in political and trade tensions are prime opportunities for gold to shine, and 2020 is shaping up to be another year in which investors will seek alternatives to growth-and interest-dependent equities. Start planning for gold profits and wealth preservation today. At Republic Monetary Exchange we’ll set you up with a personal Account Executive to help you expertly navigate the gold and precious metals markets. Call 602-955-6500 today.