Weekend Gold Forecast - Sunday, Jan. 3

We’ve had some very smart people working on the flu vaccines for over 20 years. On average, the flu vaccine is only about 60% effective, and some years just 40%. To create and distribute a new vaccine that is 95% effective…in less than 12-months would be game-changing if it works. And perhaps that’s what this is, a major scientific breakthrough, I don’t know. But, until I see long-term data supporting this, I remain skeptical.

In summary, the global economy has recovered significantly from the collapse. The stimulus provided by governments was massive, but it is wearing off. If the vaccines prove effective and the economy reopens, we could see above-average growth next year. However, there are significant hurdles to overcome. If the vaccines are less effective and the lockdowns remain, I believe we are at risk of a double-dip recession. 

GOLD OUTLOOK

Sentiment turned positive for precious metals in 2020 after the global pandemic. Fear and uncertainty will remain for the next several years. Governments are printing staggering amounts of money, and this will ultimately lead to inflation. Gold will benefit as currencies are devalued. Precious metals and commodities are entering a bull market that could last over a decade, in my opinion.

The only way I see gold NOT doing well in 2021 is if the vaccines prove 95% effective (as claimed), reach widespread adoption (at a record pace), and completely eradicate the coronavirus. I think the odds of that happening are pretty low.

The Gold Cycle Indicator finished at 97. I’m still looking for a finish above 100 to establish a cycle breakout.

US DOLLAR

As I mentioned in the recent dollar update: I think prices are experiencing a meaningful devaluation. The trend is overdue for a bounce, but prices keep pushing lower. The final area of support arrives at the 2018 low of 88.15. If that level fails, I believe the USD could collapse to 80 by April/May 2021.

GOLD

The 6-month cycle in gold likely bottomed at $1767.20 in November. Prices are climbing the “wall of worry,” and I expect a breakout above the intermediate trendline within the next 1 to 3 weeks. The trigger event to push gold through the trendline could arrive any day. The minimum target on a breakout is $2300 for the next leg higher.

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Disclosure: None.

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