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Precious Metals 2019: Momentum Is Building

Jan 09, 2019 | Peter Christensen |

Precious Metals 2019: Momentum Is Building

2018 started out as—and seemed like it would become—a record-setting year for the stock market. On September 20, the S&P 500 continued its historic bull run and closed at its all-time high at 2,930 points, while the Dow Jones Industrial Average reached its record 26,828.39 on October 3. The rest of the year, however, would turn stock investors’ wide smiles into deep frowns. When 2018 reached its anti-climactic end, the S&P 500 had dropped 6.2% and the Dow 5.6% since the beginning of the year.

So, while 2018 proved to be the worst year for stocks since the Great Recession, things look much brighter for precious metals—as expected when stocks do badly—which have built promising momentum over the past weeks.

Gold

According to a survey by Bloomberg, gold traders and analysts have been bullish now for eight straight weeks. Gold has climbed around $100 over the past three months and is headed towards $1,300 per ounce. While equity markets remain highly volatile, investors are looking to gold as a safe-haven asset.

Gold finished 2018 with its best quarter since March 2017—a stark contrast to the S&P 500, which saw its worst fourth-quarter decline in ten years.

According to Edel Tully, global head of precious metals sales at UBS bank, current gold buying interest pales in comparison to gold buying from 10 years ago. Gold buying, she says, it is slowly widening, and momentum is building.

Merrill Lynch research analyst Michael Jalonen describes the outlook for gold in 2019 as very promising and says it has the potential to reach $1,400 per ounce by the end of 2019 due to US deficits and China’s easing of its monetary policy.

Silver

After a disappointing 2018, Silver recently hit its highest price in six months and is nearing the $16 marker. According to Naeem Aslam, chief market analyst at Think Markets U.K., it “looks like silver has gained momentum because of gold.”

Silver is expected to shine as a monetary metal and outperform gold in 2019 in terms of growth. One of the reasons is the high gold–silver ratio, which at around 84 is way above its historical average of around 50. Some banks, including French Natixis and Dutch ABN AMRO, anticipate that silver will reach $18 in 2019.

Platinum

The best-performing metal lately has been platinum, which recently hit a 5-week high and punctured through its 20-day moving average. Analysts are predicting that platinum is likely to follow in the footsteps of gold and silver and see further gains.

Looking at the historically high ratio between stocks and precious metals, 2019 looks like the year where the ratio will change:  stock prices will drop more as we will get closer to the beginning of a recession, and precious metal prices, especially the gold price, will go up.