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2020 has been a good year for gold. Gold is up almost 18.93% in 2020 compared to the S&P 500 which is only up 12.42%. A new high of $2,089 was made in August. This took out the previous high of $1,923 that was made back in September of 2011.

Over the past five years gold has kept decent pace with the S&P 500. Although the S&P 500 has outperformed gold during that time 77.94% to 53.12%, there have been years in which gold outperformed. In 2018 gold was down 2.61% and the S&P 500 was down 7%. And so far in 2020 (as mentioned above) gold is up 18.93% compared to the S&P 500 being up 12.42%.

S&P 500 shown in purple above, compared with gold

It’s was a tough road to get to that new high. Five years ago gold was at a low of $1,045, in November of 2015 to be more precise.

I started buying gold in December of 2012 when gold was trading north of $1,660. I dollar cost averaged in and even bought some gold when it was trading around $1,100.

Gold since 2010. The green bar is the $1,790 price level

Gold is trading at about $1,815 as I write this. I believe this is a key price. While reading technicals could be akin to tea leaves, it is one of the few tools we have when evaluating gold price.

As you can see from the chart below, within about $10-20 of $1,800 there was resistance in 2011 and twice in 2012 when gold tried to rally but sold off again. In other words, buyers would bid the price of gold up to around the $1,800 level, but then sellers would come in and drive the price back down.

Fast forward to 2020. In March when things were going crazy everyone was selling. Gold went down along with stocks. But then around the $1,500 level buyers outnumbered sellers and gold proceeded to rally up to it’s latest high of $2,089.

During this time there was resistance more around the $1,750 level. It touched $1,800 in April and then in June. But instead of selling off considerably, it just bumped around between roughly $1,700 and $1,800 before a flurry of buyers sent the price to the new high in the last two weeks of July.

The move in July was fairly rapid and aggressive, moving nearly $300 in just a few of weeks. Since then gold has been trending downwards. Buyers seem rather squeamish at these prices and gold has sold off since August and currently is hovering around $1,815.

An analogy for markets and price movement are lungs. You can’t breath in (buying) or out (selling) constantly, you need to exhale in order to breathe more. With the rapid price rise we’ve seen in 2020, it makes sense gold would sell off and exhale some.

The question is wether gold will continue to rise in price in the remaining weeks of 2020 and beyond or if it will move down or sideways.

Future Price Guesses

Gold, like any other asset, can either move up down or sideways in price.

It has been trending down over the past few months. At the $1,800 level the resistance encountered in 2011 and 2012 could serve as support and gold could consolidate in price here and make another run at a new high.

Based on the nice rally up to $1,815 that could be the more likely case.

If gold does go back down to $1,750 or lower I think it will continue to go lower until there is another catalyst. I doubt gold would go lower than $1,450.

As I’ll discuss more in the last section, I think a Biden-Harris administration coupled with COVID-19 should be a great environment for gold.

Bitcoin Makes New Highs

Bitcoin has made new highs of $19,625 in November of 2020, taking out the previous high of $19,497 back in December of 2017. It is certainly possible that Bitcoin is taking some of the bidding away from gold as a save haven asset.

Opting Out

Alternative assets like gold are a way of opting out of the traditional financial system. Gold is also often considered an inflation hedge and safe haven asset.

I think it is more likely there will be a Biden-Harris administration in the White House. I think lockdowns are more likely throughout the United States and the world. Governments are paying people to stay home and seem intent on preventing even one more COVID-19 death regardless of other deaths or consequences.

I don’t think there is enough debate or discussion on what the consequences of the lockdowns are or if they are even effective.

Small businesses going out of business, unemployment rising, and other byproducts of lockdowns such as increased depression, suicide and substance abuse should be weighed against the effectiveness and results of lockdowns.

Regardless of their efficacy and consequences, lockdowns means more spending and stimulus. Not only that, but fewer people working means fewer goods and services that are available to buy.

I believe assets like gold and silver will do well in this environment and are an important part of my diversified investment holdings. I think it is important to have 10-20% of my portfolio in precious metals like gold and silver.

Disclaimer: None of the above is investment, health or legal advice.