Could 2020 be Golden?

Alan Penny

1 January 2020

3 min read

Gold bars on a bird's nest

  • Gold markets rally into the new year
  • Recent breakout
  • Confirmed retest of support
  • International atmosphere major influencer

During 2019, there has been a “two-speed market” when it comes to the gold markets. There was an initial shot straight up in the air, reaching towards the $1550 level before pulling back for several months, forming a down trending channel. This put the market back to sleep but eventually, it reached towards the 38.2% Fibonacci retracement level, at the crucial $1450 level. That level was previously the highs from an ascending triangle and forms the future picture for Gold in 2020.

Plenty of reasons for gold to rally

The gold markets should get a boost for plenty of reasons going into 2020. This is a market that has a lot of different possible catalysts for moving. On the one hand, gold does rally due to a softer US dollar, but it also could be due to people running toward safety. In this sense, there are a couple of different scenarios that should continue to benefit gold going forward.

with softer than usual economic numbers coming out of the United States, there is the possibility that the Federal Reserve will have to loosen monetary policy

The US dollar has lost a bit of steam against the major currencies such as the Euro and the Aussie. It should give a boost towards the gold market, as it is priced in US dollars, at least in the most liquid forms. If the US dollar continues to soften, that should provide a little push for gold to go higher. The Federal Reserve continues to offer repo operations. With softer than usual economic numbers coming out of the United States, there is the possibility that the Federal Reserve will have to loosen monetary policy. If that is going to be the case, it’s very likely that the gold markets will react as well, moving higher.

Other Factors

Economic numbers aren’t the only thing that could move the gold markets. There is also the safety factor that is most certainly possible.

The Americans and the Chinese have suggested that a “Phase 1 deal” is getting ready to be signed on January 15, and that is bullish for risk appetite. However, if there will be some type of setback or if “Phase 2” is going to take more work, then gold is likely to rally as well. There are also plenty of other concerns when it comes to various hot spots around the world, such as Turkey, Venezuela, North Korea, and of course any tensions in the Middle East. In other words, there are plenty of actors out there that could cause issues.

Going forward

Gold daily chart

Going forward, it’s very likely that the market is ready to go higher into 2020, and longer-term investors will more than likely not only hold onto gold but look at dips as buying opportunities. At this point, gold looks as if it is very likely to continue gaining strength in the new year, and therefore could be one of the better-performing assets. Gold will continue to move right along with the plethora of headlines that are sure to cross the wires.

Written By
Alan Penny

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