The Gold Market In 2019

Another year has passed! And we gave another accurate prediction. In the January 2019 edition of the Market Overview, we wrote:

All these factors make us to believe that 2019 fundamental outlook for the gold market is better than one year ago (...) Hence, we should see better price performance next year.

Fast forward to January 2020 - we line now in the twenties! - it turned out that we were right again. Just look at the chart below, which paints the gold prices over the last year. The yellow metal entered 2019 quoted at $1279 and finished the year at $1474 (as of December 18).

(Click on image to enlarge)

Chart 1: Gold prices (London P.M Fix, in $) from December 2018 to December 2019.

So, gold rose more than 15 percent last year (as of December 20), which was perfectly in line with my fundamental expectations! I did not expect a massive rally ("we are not saying that bullion will start to rally. What we are saying is that fundamental factors should become (...) more friendly toward gold"). And indeed, a 15-percent jump is impressive, but the yellow metal did not enter the full-blown bull market. Nevertheless, 2019 was definitely better for gold prices than 2018, when the yellow metal dropped slightly.

We can distinguish four phases in the gold market in 2019:

  • the bullish phase that lasted until mid-February, the price of gold increased from $1,279 to $1,344, or 5 percent;
  • the bearish period that ended at the end of May, when gold prices declined to $,1271, or more than 5 percent, erasing all previous gains;
  • the super bullish phase that lasted until early September, when the price of gold reached its peak of $1,546, soaring 21.6 percent in just three months; and
  • the bearish remainder of the year, during which the yellow metal declined to $1474, or 4.7 percent.

What were the drivers behind gold's behavior during these phases? One important factor was the monetary policy. Gold started to go up at the very end of November 2018, when Powell delivered speech considered as dovish. But the February minutes were perceived as more hawkish than expected, which sent gold prices down. Moreover, the ECB adopted a more dovish stance later, which strengthened the U.S. dollar, while weakening both the euro and gold.

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If you enjoyed the above analysis and would you like to know more about the most important macroeconomic factors influencing the U.S. dollar value and the price of gold, we invite you to read the ...

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