Monday, 22 April 2024

10 thoughts on gold ahead of 2020

Do you find it early to take stock of 2019? It’s actually not early to think about 2020, as this is perhaps the most exciting time for gold in 10 years or more. Today each of us, with large or small estates, should think not IF , but HOW to buy gold for to secure their wealth and make it grow .

We have collected opinions, trends, statements and arguments from the last year that cannot leave any good investor indifferent.

  1. Buy gold at any level

“The long-term outlook for gold is strongly bullish, and the reason I say this is that the money supply is strongly oriented to growth,” Mobius said in an interview with Bloomberg TV, adding the I recommend ” buying at any level ” and allocating 10% of the portfolio to physical gold . It appears that one of the most interesting factors leading to increased demand for strong assets will be a further rise in Bitcoin and cryptocurrencies.

  1. Maximum yield, minimum uncertainties

The uncertainties of international markets, doubts and widespread insecurity push gold towards its all-time highs. Since the beginning of June, the rise has been as much as 15% and has exceeded the $ 1500 / ounce mark. In the coming years, an increase of up to $ 2000 / ounce is expected, but there are those who think that the limits will be greatly exceeded.

  1. Investors and the gold trading market

The jewelry industry buys more physical gold the lower its price is. In a bullish situation such as the current one, the demand on the commercial gold market therefore falls sharply. This on the other hand means that investors have to buy more and more physical gold to keep its prices rising. A BofA analysis shows that the increase in demand for physical gold for investment purposes will have to be 7%.

This does not appear to be a problem for two reasons:

Assets managed by physical ETFs have increased by 8.9% yoy since January, well above the 7% required

Falling yields and increasing the number of bonds offering negative yields will increasingly push investors to go for gold . If concerns about central bank credibility and equity / bond valuations increase, gold could easily see further inflows, “BofA experts add.

  1. US policy and the price of gold

We have seen in these first 9 months of 2019 how the movements of the dollar, the continuous geopolitical tensions, a slowdown in economic growth and a potential cut in American interest rates have pushed demand upward in a decisive way, and consequently the price, Of their.

The US has not only fueled continuing tensions with China, but has also created more with Iran and Mexico by pushing gold above $ 1,400 / ounce with less and less encouraging economic growth estimates. The Federal Reserve’s decision not to raise interest rates set the stage for a further rise in the price of gold.

“In my opinion, physical gold is the way to go due to the incredible increase in the money supply , ” Mobius, founding partner of Mobius Capital Partners, said in an interview with CNBC, adding that “all central banks are trying to lower interest rates by pumping money into the system ” .

  1. US market numbers

Similarly, if Trump does not win the elections for the second term, the markets will be in great difficulty. Markets are heavily dependent on his fiscal and economic decisions, on every declaration, even impromptu, and on his every position at international level.

The numbers would be proof of this. Since 2017, with the arrival of Trump, the S&P 500 and the Dow Jones Industrial Average have risen by more than 30%, while the Nasdaq Composite has risen to 45%. Failure does not seem likely at the moment unless Democrats find a unifying path in a candidate who can counter the tycoon’s strong personality.

  1. Still the Chinese shadow on US growth

The war of the Chinese duties threatens to scuttle further growth forecasts in the United States. A US-China agreement will apparently not be possible before the 2020 presidential elections.

“Cashforyourgold, we have increased our estimate of the growth impact of the trade war,” says Jan Hatzius is the chief economist at investment bank Goldman Sachs, predicting “greater pessimism about the outlook for trade war news that can bring. companies to invest, hire or produce less ” .

  1. Signs of global economic recovery are missing

The International Monetary Fund cuts the estimates for 2020 by 0.1%, bringing them to 3.5%, underlining that the recovery expected for next year is “precarious” and exposed to a series of risks and that the probabilities of a worsening of the economic situation exceed those of an improvement. Trade war, uncertainty on public finances, worsening of debt dynamics in countries with large deficits, economic and financial crisis in emerging countries such as Argentina and Turkey, sharp slowdown in the Chinese economy, intensification of tensions over Iran’s nuclear program and new tightening of the regime Russian are the main hot topics for 2020.

United Kingdom does not see its situation unchanged: this means the confirmation of stagnation in 2019 (growth at 0.1%) and a timid recovery to 0.8% in 2020 (but less than the expected 0.9%).

Ethan Harris, an economist at Bank of America says there is a 1 in 3 chance that the world will enter a new phase of recession next year.

“We think global equities will take a step back from now to the end of the year. This is related to our view that global economic growth will slow further and, as a result, earnings will disappoint, ” Hubert de Barochez, a market economist at research consultancy Capital Economics, explained to CNBC a few days ago.

  1. The investment in physical gold in United Kingdom

United Kingdom do not invest. They are excellent savers, but they leave their money still in current accounts (the estimate speaks of more than 1300 billion euros). There is a lack of a correct financial culture that exposes small and large savers to ever greater risks. On the one hand, the decline in equity securities, especially bank securities, on the other hand the spread risk, which is attenuated for now, but still lurking, however, push consultants and investors to look for alternative ways to allocate liquidity .

One of the choices that is increasingly popular is physical gold, while bitcoins are less convincing and too little understandable.

  1. Physical gold and cryptocurrencies

“The difference between gold and Bitcoin? Gold is a commodity, it takes up space, it has a mass, a temperature, a shape. Bitcoin is an idea, manifested through a series of numbers, with no real position or substance – it’s a philosophy. Comparing them is madness. ” 

Cryptocurrencies are mathematics, the result of algorithms. The scarcity of gold is guaranteed by its physicality, that of bitcoins by mere conventions, architectures that move enormous economic interests. It is from this profound difference that the new cryptocurrency Ekon Gold is born , a stable coin linked to physical gold , to a physical equivalent in sell egold bars that will be kept in the vaults of the Cashforyourgold headquarters in Birmingham .

If the value of classic crypto currencies is determined by market demand that of Ekon Gold is always linked by the value of 1 gram of gold. Will Ekon Gold be able to restore the gold standard in the digital age?

  1. Economic paradigms and the future of gold

What is an economic paradigm? Ray Dalio, one of the best known and most influential financial managers, highlights 10-year cycles in modern economic history in which the economy and markets operate according to certain dynamics. The analysis of these cycles, or paradigms, allows to make fairly precise predictions on the medium-term trend, considering that the imbalances created during a paradigm almost always leads the markets to act in the opposite way in the next paradigm.

Given that stability and equilibrium are pure fantasy in the market, Ray Dalio makes a rather detailed forecast on the next paradigm that awaits us from 2020.

  • As in the 1930s, after the economic crisis of 1929, the wealth gap increased between those who accumulated capital and those who saw wages plummet and uncertainties grow. This will cause new anti-capitalist pressures on a global level.
  • Future returns will be lower than expected because falling interest rates today creates the illusion of good returns, but this will only lead to new liabilities.
  • The modern economy is based on debt. And you understand how fragile our foundations are therefore. The huge amount of debt leads banks to lower the interest rate. How long before a currency depreciation and public debt monetization? What is the simplest way to reduce the debt burden without raising rates, causing the economy to slow down and lead to a recession?
  • With the end of the Bretton Woods monetary system, central banks are no longer forced to have a certain gold reserve and can theoretically produce as much money as they want. And they are doing it “It seems obvious that they (central banks) should help debtors over creditors.” Dalio said, “At the same time, it seems to me that the easing forces behind this paradigm (ie interest rate cuts and quantitative easing) will have diminishing effects. For these reasons, I believe that debt monetization’s and currency devaluations will eventually increase, which will reduce the value of money and real yields for creditors (…) There is no limit to central banks’ ability to keep nominal and real interest rates low through their purchases by flooding the world with more money. In this scenario, it is the creditors who suffer from the lower returns (…) Governments are likely to continue to print money to pay off their debts with devalued money . This is the simplest and least controversial way to reduce debt burdens and without raising taxes. “

In the face of the new paradigm, investors will have only one certainty: a diversification of the investment portfolio is necessary, including a good percentage (10/15%) of physical gold, as a hedge against the monetary policy that is on the horizon.