A renewed risk-on sentiment in stocks put gold gains on the backburner near the end of 2019, but the precious metal’s fortunes could turn in 2020, according to City Index technical analyst Fawad Razaqzada.
Razaqzada said in a Kitco News report that “he is looking for gold to hit a new all-time high in 2020, with prices pushing to $2,000 an ounce.” Furthermore, the U.S. Federal Reserve stood pat at its last interest rate policy meeting after three consecutive rate cuts, and that looser monetary policy could continue in 2020, according to Razaqzada.
Even if gold doesn’t push past the $2,000 mark, Razaqzada feels the investment landscape for gold tilts towards bullishness.
“Gold’s technical outlook remains bullish given that breakout in the summer from a 6-year-old consolidation at $1,350 and the subsequent bullish consolidation we have seen in recent months,” he said in a recent report. “So long as gold holds the breakout above $1350, the long-term technical bias would remain bullish.”
With looser monetary policy by the central bank, Razaqzada foresees lower bond yields, which investors saw this year, especially when market volatility spurred a flight to safe haven assets like bonds this summer. Thus, that should translate into a weaker dollar and in turn, increase demand for gold.
“Bond yields are likely to remain depressed as global central banks try to combat slowing economic growth and subdued inflationary pressures with extraordinary loose monetary policy,” he said.
Additionally, many market experts foresee more modest gains ahead in 2020 after a 2019 replete with outperformance as evidenced by record highs in the major indexes. In a worst case scenario, a market correction in 2020 could certainly boost demand for gold.
“If U.S. stocks were to correct themselves in 2020, then this surely could lead to elevated levels of safe-haven demand for gold,” said Razaqzada. “As the U.S. equity market bubble finally bursts, safe-haven demand could nudge gold past its 2011 peak of $1920, before tagging the $2,000 psychological hurdle.”
Gold Exposure via ETFs
For many investors, gold is the standard in precious metal investing, which has become more accessible than ever thanks to options via an exchange-traded fund (ETF) wrapper like the SPDR Gold MiniShares (NYSEArca: GLDM). Gold ETFs can be bought and sold freely via an exchange when compared to physical gold, allowing investors to utilize the hedging properties of gold without having to endure the costs of actually owning and storing the asset like they would with physical gold.
Traders looking to use leverage can look at the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), which makes an indirect play on the precious metal via gold miners. NUGT seeks daily investment results, before fees and expenses, of either 300%, or 300% of the inverse (or opposite), of the performance of the NYSE Arca Gold Miners Index.
For more market trends, visit ETF Trends.