What Might Support the Gold Price in 2020?

Prices and Charts

NZD Gold Pulling Back After Sharp Rise

After an almost $200 per ounce jump since late December, gold in NZ Dollars has pulled back sharply this week. Down just over 3%. With the USA and Iran seemingly looking to de-escalate the tensions.

So we could see a pull back to the 50 day moving average (M.A.). Or even down to retest the upper blue trend line. So a good buying zone is approaching now that gold appears to have bottomed out at the end of 2019.

Remember the Iran tensions only occurred after New Year. So gold has merely retraced that late surge. Gold was already rising prior to the killing of the Iranian General.

Silver Also Dipping

Silver has already corrected further than gold. Now retesting the upper trendline in the bullish flag formation. Silver is back to neutral on the RSI already though. So given it didn’t rise as strongly as gold due to the Iran conflict, perhaps silver won’t pull back much further?

NZ Dollar May Be About to Rise Again

The NZ dollar may be levelling out now after falling sharply for the last 2 weeks or so. The Kiwi dollar looks to be in an uptrend in the medium term at least. How will this affect gold and silver prices in New Zealand in 2020? This is the subject of this week’s feature article below.

Need Help Understanding the Charts?

Check out this post if any of the terms we use when discussing the gold, silver and NZ Dollar charts are unknown to you:

Gold and Silver Technical Analysis: The Ultimate Beginners Guide

Continues below

If the NZD Rises Against the USD in 2020 How Will This Affect Gold and Silver Prices for New Zealanders?

The chart above shows that the NZ Dollar has been in an overall uptrend since October of last year. In our 2019 review and Guesses for what 2020 has in store for us, we also said we thought the NZ Dollar would strengthen against the US Dollar in 2020.

So what does this mean for New Zealand precious metals buyers?

Last week we received a question from a reader on just this very thing:

If you’ve wondered the same thing, then this weeks feature article has you covered.

We also look at whether it is guaranteed that the US Dollar will collapse faster than other fiat currencies? Is this so set in stone?

In a US Dollar Collapse Won’t The Rising NZ Dollar Cancel Out Any Gold/Silver Gains?

What Caused the Sharp Run Higher in Gold?

The run higher in gold from late December caught many people by surprise. The World Gold Council had a good summary of what the drivers behind this rally may have been:

Drivers behind the recent gold rally

• A technical breakout
• Bullish positioning in derivatives markets
• Light trading volumes
• Portfolio rebalancing at the end of 2019 especially as investors hedged risk asset allocations
• Federal Reserve (Fed) repo activity
• Increased geopolitical risk

See full article: Source.

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What Else Might Support the Gold Price in 2020?

Here are some of the many other factors that could be accommodative to the gold price in 2020:

A Loose US Central Bank: After reversing course on its interest rate rises in 2019, the Fed’s balance sheet has been increasing at the fastest pace since the height of the 2008 financial crisis. Interestingly gold jumped when the Fed reversed course.

Negative “Real” Interest Rates: Real (after inflation) interest rates remain negative. This is historically good for the gold price.  See: Real Interest Rates vs Gold Prices – What Can They Tell Us About When to Buy Gold in New Zealand?

Recession?: Here in New Zealand and across the globe economic growth remains sluggish. It looks like central banks are intending to pump new money into the system in response to any downturn. This is likely to be positive for gold.

Central Banks to Continue to Buy: 2018 was a 50 year high for central bank gold purchases. The World Gold Council expect the final 2019 data to be even higher. With what’s going on across the globe it’s likely central banks will continue to buy heavily.

Share Markets: Generally if share markets are going well gold doesn’t. However last year we saw both shares and gold rise. This also occurred for a number of years in the mid 2000’s. Our guess is with the Fed pumping more liquidity into the system we could see both shares and gold rising in 2020 too. But if we see a share market correction or even just heightened volatility this could be even more supportive of gold.

Negative Yielding Debt: The total of global negative yielding bonds has fallen from the 2019 peak. However, there is still reason for concern with the likes of German government bonds currently all negative. As we reported last year gold prices have been moving in tandem with negative yielding debt. So a further increase in negative yielding would be bullish for gold.

A Heightened Conflict with Iran?: Last week the tensions between the US and Iran heightened. However since then both sides have dialed things back a notch. But if an escalation or conflict were to occur, this could further boost gold.

Even without any “black swans” gold looks set to have a solid year in 2020.

The sharp jump in price following the US drone strike on the Iranian general shows how unexpected events can sharply impact the gold price.

This highlights the importance of having your insurance in place before it is actually needed. So get in touch today for a quote or to have any queries answered.

1. Email: orders@goldsurvivalguide.co.nz
2. Phone: 0800 888 GOLD ( 0800 888 465 ) (or +64 9 2813898)
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