The last few months have seen an absolute avalanche of activity around gold with news stories breaking at the speed of light, records being smashed and a non-stop influx of major political and economic events from around the world sending shockwaves through markets globally.
This summer we saw an unprecedented bull run and experts are now predicting very impressive things for gold over the next 12-24 months. We know that keeping up with it all can be a challenge when there is so much going on but likewise, you also want all of the facts, market news, trends and predictions to hand so you can buy now with the utmost confidence.
With the end of the year almost upon us but lots of key geopolitical stories still rumbling on, we’ve prepared a very special bulletin for you this week. We’re rounding up all the major stories and key events from the last few months so you have a very clear handle on the market, investment opportunities and reasons to buy now. It’s our mission to put you fully in the picture so read on for your very special bulletin, packed with all of the most important data, stats, figures and expectations you need to arm yourself with as we approach the end of one of the most exciting 12 months gold has seen in years.
The US-China trade war and its impact on gold prices
America and China have been embroiled in a trade war for months now but the sparring really kicked up a notch over the summer months. At the beginning of August, after failed talks, US President Donald Trump announced that he planned to impose a further $300 billion worth of tariffs on Chinese goods arriving at US ports. The threat came after a particularly strained week, with American officials accusing China of manipulating its currency.
The Yuan was surprisingly devalued 0.7% against the dollar by Beijing, which left many analysts worrying that China had no intention of returning to the negotiating table. All of this uncertainty led gold to one of its high points of an impressive bull run, with the precious metal trading at an impressive $1522.70 for a short period on 08 August. Just a few days later on 13 August, gold futures hit a higher $1546.10 as the US-China dispute threatened to bubble over.
By September, China had logged an official complaint against the USA with the World Trade Organisation but, it appeared tempers had cooled as both sides agreed that they would work towards a resumption in talks – if you’d heeded our advice, you would have known this was a golden moment to invest.
The ongoing war of words and threats of import duties traded between two of the world’s largest economies took its toll elsewhere too, provoking a Federal Reserve rate cut (more on that next) which favoured gold, unsettling markets and leading some other nations to feel the after affects as worries of a global recession gathered speed.
One other thing worth noting is that while the US was at odds with China, President Trump also took aim at Europe, announcing in late September that $7.5 billion of tariffs would be imposed on certain goods, including agricultural items (a thorn in the US-China division) arriving Stateside from Europe.
Rate cuts plagued markets, dominated headlines and favour gold
For much of the last four months or so, there have been persistent whispers of an impending recession. Those whispers picked up volume in July when a slowing economy led the Federal Reserve to cut interest rates for the first time in 11 years. In just one day, the Dow Jones industrial average lost 333 points, or 1.2 percent. At the time, Chairman Powell said that there were three key concerns which needed to be addressed, “weak global growth, trade policy uncertainty and muted inflation.” Those three issues are still lingering today – which is good news for gold if you buy now.
A second rate cut followed in September and a third at the end of October, taking them to historically low levels. The rate cuts come as business investment continues to wane, consumer confidence levels drop and the manufacturing sector contracts. In the week beginning 28 October, manufacturing fell to its lowest share of the US economy for 72 years.
The US isn’t the only nation cutting rates however, as 54 central banks worldwide have also taken the same course of action this year. This points to a global economic slowdown, a situation which favours gold – as markets struggle, gold comes into its own as a safe haven for investors.
Global investment bank Goldman Sachs stays firm on gold
The global investment bank, Goldman Sachs has been a champion for gold investment this summer. In several statements, it has urged investors to buy and doubled down on its predictions that there is much more to come for those who act now.
At the end of September, analyst Mikhail Sprogis said that gold still has more to show us this year and the current price lull makes an opportune moment to snap up the precious metal. In a statement, he cited a laundry list of reasons that we haven’t yet seen the best of gold in 2019, pointing that the economic and political tensions which have been driving market change and boosting gold aren’t going anywhere yet – meaning now is the time to capitalise.
“What’s important for the gold market is not whether there are actual risks but what the market’s perceived risks are. We noticed that the market’s fear of recession tends to go up with lower employment rate and slower growth.
“Given that this year we were moving into lower employment rate and debate over the economy … We thought that this warrants more defensive allocation.
“Going long-term depends on what is going to happen to global growth. The further out you go, the higher the probability that the U.S. is going to hit a recession. We have $1,600 holding out through 2021. This is a scenario where things are not that bad. What we like to highlight is that in an environment where things do go much worse, we see much more upside in gold.”
Scotia Bank concurs with this forecast, advising investors in a September briefing, “…a structural driver (geopolitical escalation) has been renewed which puts the target back on $1,600 gold.”
All the signs point to an ‘ideal year’ on the horizon for gold
It’s not just Goldman Sachs championing gold and advising investors to act now to build a portfolio around the precious metal. A whole host of experts have also spoken out with a bounty of forecasts for 2020, amongst them is the Canadian investment bank, TD Securities which said, “Next year [will be] an ideal time for gold … where monetary authorities … will see policy head straight towards unconventional mode when the economy slows.
“Central banks purchases have grown dramatically, with over 640 tonnes of purchases in 2018. TD expects well over 1,000 tonnes of gold entering government vaults over the next two years as well. Portfolio weightings have already started to tilt aggressively into gold, as the pieces necessary for an extension of the recent bull run are indeed falling into place.”
In a separate briefing, TD Securities advised even those estimates may be underplaying the hand with strategist Daniel Ghali saying “…standing in front of this runaway train may still be a fool’s game.”