In this article, Nugget’s News founder Alex Saunders details the three biggest trends he’ll be watching in the gold and silver markets for 2020.
I kicked off 2020 covering the state of the gold and silver markets. Because there was a lot to unpack, I decided to write a summary article on my three most important factors for gold and silver prices in 2020. View my full video: ‘Gold & Silver Market – 2020 Forecast & Predictions’.
#1 — Operation Repo
Since mid-September, the New York Fed has been stabilising the repurchase agreement, or repo, market. It has been doing this via so-called ‘overnight repo operations’, injecting hundreds of billions.
The Fed has also started organically growing its balance sheet again by buying shorter-term Treasury bills. Additionally, it is buying up to $20 billion per month in order to replace maturing securities.
There’s debate over whether these activities constitute quantitative easing. Irrespectively, the ongoing liquidity issues in the repo market, and how the Fed addresses them throughout 2020, appear likely to affect gold and silver prices. (That is because gold, and to a lesser extent silver, are traditionally perceived by investors as safe-haven assets.)
#2 — Cash Out, Gold In
Cash is disappearing. Financial systems are digitising. This global trend is all but certain to continue in 2020.
If the idea of cash was proposed to a government today, there’s every chance that it’d be rejected. Cash is hard to trace. Cash is costly to manage. Cash is (relatively) easy to steal.
As governments worldwide continue their efforts to restrict cash payments in 2020, expect demand for non-sovereign assets like gold and silver to increase. Ultimately, humans value their privacy—to varying extents, of course.
#3 — Silver to Ride Socioeconomic Trend
Relative to gold, silver has far more industrial applicability. For this reason, silver prices are typically more closely tied to global economic cycles. In 2020, the amount of people moving out of poverty will remain historically high.
Given that silver is used in almost all electrical appliances and other consumer goods, the rapidly expanding middle classes in emerging economies is a factor I believe will continue to place upward pressure on silver prices in 2020.
#4 — Historically High Stocks-to-Commodities Ratio
When compared to the share prices that make up the S&P 500 index, commodities like gold and silver have never been cheaper.
The ratio of the S&P GSCI—which serves as a benchmark for investment in the commodity markets and a measure of commodity performance over time—to the S&P 500 is tracking at record-low levels.
Below, I elaborate on the above three points. I also cover topics like the U.S.–Iran geopolitical tension; ongoing attempts to undermine U.S. dollar hegemony; and modern monetary theory. I also do technical analysis on gold and silver.
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