My Updated Gold Forecast

I want to update my forecast on gold. I haven’t provided a formal prediction this year. That’s despite being positive about the yellow metal for several months now. Remember, I correctly warned that it would breakout in December.

Take a look at the chart below:


Source: DollarCollapse.com

Gold has bottomed and turned up in December each year since 2013. That’s why I was confident it would start rallying two months ago. Mind you, this forecast was made several months in advance. Here’s how it played out, as well:


Source: Metastock Trader

The yellow metal broke out in December on target. That said, while the yellow metal has dropped a little, there’s lots to like about the story….

Fresh highs

Bullion Vault wrote on Friday, 15 February (my emphasis added):

Gold prices rose to fresh multi-month highs for several major currencies on Friday, hitting £1030 for UK investors and breaking above €1170 per ounce in Euro terms as a senior politician in Italy called for the core European Union nation to “change the EU or leave”.

‘With the US gold price holding unchanged for the week at $1316 per ounce, the gold price adjusted by the Dollar’s trade-weighted currency value rose 0.9% from last Friday according to BullionVault analysis.

Rebased to the turn of the millennium, that put gold priced ex-USD ― effectively the gold price for everyone outside the Dollar ― above $1450 for the first time since December 2012.

Bullion Vault makes a good point. When adjusted by other currencies ­― particularly the dollar trade-weighted index ― the yellow metal is setting multi-year highs. Take a look at the chart below:


Source: Board of Governors, IBA

The green line shows the gold fixing price in the London Bullion Market. It’s adjusted by the Trade Weighted US dollar Index. The Trade Weighted US Dollar Index, also known as the broad index, compares the US dollar to 26 currencies of major trading partners. Put simply, the green line shows the world gold price.

The world gold price is trading at the highest level since 2012!

That sounds bullish. But, despite my confidence, we’re not in a gold bull market yet. A true bull market only happens when gold rises in all currencies. That includes the US gold dollar price. The US dollar gold price is lagging. You can see this by looking at the yellow line on the chart above. It remains below 2016 and 2017 highs, unlike the world gold price.

I’m not concerned, mind you.

My view hasn’t changed: I believe the final gold ‘bear market’ rally has started. In my opinion, the world gold price could hit US$1,550 per ounce by June.

The investment thesis hasn’t changed

Will my thesis work out?

I believe there’s a good chance.

Take a look at the chart below:


Source: Board of Governors, IBA

I believe the world gold price is about to take off by US$100 per ounce. It’s already broken out and looks like it wants to re-test old highs set in 2011 and 2012. That suggests gold in all currencies, outside the US, could perform far better than expected. There’s plenty of near-term political concerns that could send gold prices higher, mind you. Some of these include Brexit (March), EU Elections (May), and Spanish elections (May).

Bullion Vault reported on Friday, 15 February:

“Perhaps the environment would be less toxic if, instead of closing our eyes to Germany’s enormous trade surplus, it respected the rules,” said Claudio Borghi, chairman of the Italian Parliament’s budget committee and a member of the Lega Party – now in coalition with the anti-establishment M5s – at a trade-union meeting in Milan this morning.

“I think [this May’s EU election] is the last chance…I say we must change the European Union or leave it.”

Relations between Italy and France also remain “tense”, says DW.com, even as Paris today redeployed its ambassador to Rome after recalling him last week – the first such move since WWII – in shock at Italian coalition minister Luigi Di Maio of M5s expressing support for the gilets jaunes’ “revolution” against French President Emmanuel Macron.

With political concerns rising across Europe, it’s my view that gold prices could hit extremes in the months ahead. I think the world gold price could hit US$1,550 per ounce by June, with US dollar gold retesting major technical resistance at US$1,377. If that happens, expect the gold stocks to outperform in the months ahead.

Regards,

Jason Stevenson,
Resources Analyst, Markets & Money


Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:


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