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Gold Price Forecast 2020
Will gold be a good investment in 2020? As 2019 draws to a close, we analyse the market's behaviour this year and forecast how gold bullion - and other precious metals - could perform in 2020. This gold price forecast for 2020 draws on past trends and current events to form a number of possible scenarios, with updates to be added as the year progresses.
After an impressive nine months, gold has already increased from £972 per ounce in March to an all-time Sterling high of £1,282.69 per ounce. The gold price has since come down from this peak as the Pound has strengthened, with an ounce valued at £1,156.06 today (24/10/19).
At BullionByPost we want to remind you that a forecast is just that. No one can be certain what will happen in the future, and the volatility in the world means that geopolitical and economic circumstances can change significantly and rapidly.
Unsurprisingly, the increase in gold prices this year has been matched with an increase in demand; with the World Gold Council reporting that demand in Q2 2019 was up 8% year-on-year.
The question for many investors is can the gold price keep climbing? Many of the drivers behind gold's recent rally are still ongoing issues. Most have no resolution in sight, and the way in which they end will likely have a significant impact on the gold price. As detailed in our update below, the coronavirus outbreak has caused significant revisions for the gold price in the months ahead.
Updated June 2020: 2020 has seen a world-changing event that no one could have predicted even at the start of the year, and has become one of the most impactful events of modern history.
The Covid-19 outbreak has caused an unprecedented loss of life, and an economic shutdown never before seen. Leading economic figures have warned that the global economy is expected to be starting one of the worst recessions since the Second World War, and that we could be facing a severe economic depression.
Governments have pumped billions into their respective economies in an effort to keep them going, while wage paying schemes have seen government spending reach record levels, with national debt climbing accordingly. With these schemes unable to continue indefinitely, unemployment is expected to soar in the coming months.
As a result of the economic damage of the pandemic and the lockdowns, many analysts are now forecasting significant gains to come in 2020 and beyond for the gold price. Given gold’s performance during the previous financial crisis in 2008 – which saw gold climb to its current all-time Dollar record of $1,896.50 in 2011 – many believe gold will surpass this figure by the end of the year.
Gold is already at $1,770 per ounce, after making steady gains for the past 3 months (up 13% since March). If the gains continue at that pace, then gold would reach $2,010 per ounce by Autumn. In Sterling, gold already set a new record in May of £1,459.52 and is only slightly under this now. Barring any significant currency fluctuations, gold would therefore hit £1,600 per ounce based on a Dollar price of $2,000.
If coronavirus has shown anything, it is how quickly and how significantly, an unexpected event can see previous forecasts thrown out. With fears of a second wave growing in Europe and America the immediate issue of the pandemic is far from over, and the economic damage is worsened for every day of restrictions. With these issues still far from clear, forecasting is difficult to do, but the stage looks set for a bull run that will see gold reach new records in 2020.
Updated January 2020:
Following the Conservative Party's victory in December's general election, the first
phase of Brexit is now guaranteed. The deadlock has been broken, and MPs have agreed to the UK leaving
the EU on January 31st, 2020.
Now that the Withdrawal Agreement Bill has gained initial assent in Parliament, Brexit moves on to the second
phase. This will see the UK and EU negotiate over the trade arrangements between the two countries, and will
cover the huge range of regulations and tariffs that will need to be agreed.
These negotiations currently have a deadline for the end of 2020; and if a trade deal is not agreed by that time,
then the UK would default to World Trade Organisation rules. A no-deal Brexit has long been feared by businesses,
and it is widely accepted this would cause significant damage to the UK's economy.
Boris Johnson has once again ruled out any extension to this negotiation period, despite many EU officials - including new EU President Ursual von der Leyen - calling the timeframe 'impossible'. This then has put a no-deal Brexit back in forefront of many investors minds.
After an initial burst of optimism, which saw the Pound climb following the general election, it has since steadily dropped off. News that the Bank of England may be forced to cut interest rates, and increase quantitative easing, has also pushed the pound down lower. If the Pound lowers further as a result of the negotiations then this will push the price up domestically towards the Dollar value.
Global economic slowdown
The global economic outlook has been worsening this year, with several countries facing recession. Germany
and the UK particularly have released worrying data in the past few months. Both saw contraction in the second
quarter, and narrowly escaped recession with minimal growth in Q3.
The US-China trade war has been blamed by many for the lack of growth. Manufacturing especially has been
hit hard, with orders dropping and prices rising on the back of increasing tariffs imposed by the two countries.
Negotiations are due to start again in October, but hostile language from Donald Trump has dampened hopes
of progress. Talks have stalled repeatedly, and the IMF believes this has already cost the global economy $455
billion. Should October’s talks fail yet again, then investors will turn to safe haven assets like gold over stocks,
with the increased demand driving up prices.
With economic data beginning to echo that of the financial crisis from 2008/09, investors are being cautious,
and any further sign of weakening could see demand for gold increase rapidly. In the words of Commerzbank:
“We see the ongoing steep rise in the gold price as an expression of the high-risk aversion among market
participants. Gold is quite clearly still in demand as a safe haven in the current market environment.”
Tensions between Iran and 'The West' grew this summer. The abandonment of nuclear treaties, attacks on oil
tankers in the Strait of Hormuz, and a more recent attack on Saudi Arabian oil refineries have all put Iran squarely
in the crosshairs of the United States.
Saudi Arabia, the US, the UK, Germany, and France have all pointed the finger of blame at Iran, despite the
latter’s rejection of these claims. News that America is deploying troops near Iran has only heightened the
rhetoric between the countries.
Conflict breeds uncertainty, and uncertainty is loathed by stock markets. Iran's proximity to major oil supply
routes worries many investors; Brent crude is essential to world industry and disruption to that is disruption
to all. When the first skirmish occurred, oil and gold prices rose. If a full blown conflict were to break out, prices
of both could rapidly escalate.
Updated January 2020: As discussed above, tensions between the US and Iran have continued to deteriorate in the beginning of the year. A US air-strike targeted top Iranian general Qasem Soleimani, in a move called an act of war by Iran. Retaliatory missile strikes by the Iranians resulted in no casualties, and things seem to have calmed down for the present.
With Iran saying they will push their enemy out of the Middle East however, many analysts fear that tensions could boil over again with only minor provocation. The threat of conflict already served to push the price up to a seven-year high of $1,611.25, so any signs of further aggression will likely push gold higher.
Gold forecast 2020
The above factors are the known quantities, but surprise developments could see prices move further. Analysts
at TD Securities already predict that gold could reach $1,600 per ounce by the end of the year, while Goldman
Sachs predicted $1,650 and others see $1,700 as well within reach.
Updated January 2020:
If the US and Iran draw a line under recent tensions, and the US-China trade war reaches
a positive resolution, then the gold price could drop back below $1,500 per ounce. If Boris Johnson pulls off
another unexpected victory, and agrees a full trade deal with the EU, then the Pound will strengthen against the
Dollar. This could see the domestic gold price drop back below £1,000 for the first time since May 2019.
With $1,600 now having been reached in just the first few days of the year however, any more conflict could see gold testing the all-time Dollar high of $1,896.50. If this coincides with a weakening of the Pound then, domestically, 2019's all-time Sterling record could easily be beaten and see the gold price testing £1,500 per ounce in 2020.