I wrote my first article on this website advocating for holding some precious metals like gold and silver over four years and four months ago on 19 March 2016. At that time gold was trading around $1,250 per ounce.
Now for the first time since September of 2011 gold is trading northwards of $1,900 per ounce. This is a 52% increase in price.
So with gold trading near the September 2011 high of $1,924 I’d like to look back at some of the previous statements I made about gold.
In November of 2019 Gold was trading in the $1,520 to $1,445 range. It had suffered a large interday drop and I predicted gold would reach $1,600 in 2020, which it did just a couple monthly later in January.
While the recent price action looks rather bearish over the next 3-6 months I think gold will reach $1600 in 2020.
From "Gold Receives a Severe Drubbing" 9 November 2019
Back in 2017, a few days after President Trump was sworn in, I predicted gold would reach $1,920 during his first (and probably only) four years.
I also think the dollar will lose a great deal of value and the price of gold will outperform and reclaim the 2011 high of $1,920.
From "Trumped Up Economy" 22 January 2017
Gold has not hit $1,920 yet but it is within an Andrew Jackson (or Harriet Tubman?) of that price.
Back in 2016 I predicted gold would reach $2,000 or higher.
I would have preferred to have bought gold at the lows of $1,040, but as yet I don’t have a crystal ball that allows me to perfectly time the bottom of markets and I firmly believe that based on the fundamentals gold will make new highs in excess of $2,000.
From "Inflation Destroys Dollars" 19 March 2016
Gold isn’t at $2,000 yet but it seems increasingly likely. I of course can’t predict the future, just make educated guesses on price and time. But so far gold has been a solid investment. The technical damage after the 2011 high has been filled in and the chart is looking strong.
Silver has done well in the very short term. It’s previous high was almost $50 in April of 2011. It’s been steadily trending downward since then, making a low of $11.64 in March of 2020. Since then it has rocketed back up to $22.82 in a 96% increase in just a handful of months. It is still well shy of the $50 high but silver could provide a better value and more upside potential than gold. However, it tends to be more volatile.
As of writing this article spot gold is trading at $1,783. August gold futures are trading at $1,800. Gold hasn’t been at the $1,800 level since November of 2011, although it came close in October 2012.
August Gold Futures
Silver is up to $18.19.
I’ve been bullish on gold since 2013. I think gold has more legs to go higher. There is a lot of uncertainly right now in the short term. The November election, Covid-19, social unrest, and of course the national debt. Gold is often used as a safe haven to park money amidst uncertainty.
Inflation Pressures
With many people unemployed, that will put downward pressure on consumer spending. However, between credits cards, stimulus checks and unemployment benefits, people will still be able to spend. So in categories like food and other essentials, I think there will be price inflation. And even the CPI, which historically under-represents actual price increases, shows food prices increasing by 4.8%.
While the COVID-19 recession is undoubtably be deflationary, the government’s response will surely be to print and inflate. Gold should continue to do well in this environment.
Gold reclaimed the $1,500 level just a couple months ago over Christmas. Now the yellow metal has topped $1,600 and is trading north of $1,610. Gold also reached this level earlier this year on January 8. However, long term Gold has not been at this level since March of 2013.
With a US stock market that is 11 years in a bull market, profligate government spending, artificially low interest rates and geopolitical uncertainty in Iran and China, gold will likely remain a safe haven place to park capital.
However, for those over allocated gold, this is also an opportunity for some profit taking.
The S&P 500 made fresh and new all time highs Friday. Bonds were down, the dollar index was modestly higher and gold was on the receiving end of a severe drubbing.
On the day the S&P 500 was up 0.33%, the dollar index was up 0.26%, 10-year treasury down 0.36% and gold bring up the rear down 0.62%
On the year gold is still up over 13%. But the over the course of the fall the S&P 500 has surpassed gold’s performance and is up 23%.
Gold has fallen over $100 from the 4 September highs
Looking back: 2019 Gold
In June of 2019 Gold finally managed to break out of the monkey-hammer zone of the $1350s, consolidated between $1400 and $1450, made a second breakout and with a great run up as high as $1566.
However, starting in September, gold has been trending down again and has been drubbed down to the mid $1450s.
I think this is a temporary setback for the price of gold and a buying opportunity for someone who is under-allocated in gold.
2016 was indeed the start of a new gold bull market after gold bottomed out in December of 2015.
Finishing 2019 and Beyond
The price of gold ebbs and flows a great deal with news and sentiment. Right now the market seems to believe 1) the Fed is done easing and 2) the trade war is close to a peaceful resolution.
Certainly the Fed is not done easing as the balance sheet continues to grow. There are also certain core issues in which Trump and China are both unwilling to compromise on.
A limited trade deal is certainly possible, but I doubt China is going to relent on certain core demands the US is making.
To me the chart looks bearish in the short term. Some potential places gold can find support would be where it is currently trading, at around $1450. Below that perhaps $1400.
If traders become very optimistic about the stock market, could even go down to $1380 or retest the monkey-hammer zone in the $1360s.
Of course it is only my educated guess but I think gold will find support somewhere between $1400 and $1450.
While the recent price action looks rather bearish over the next 3-6 months I think gold will reach $1600 in 2020.
I previously wrote an article, “I Own Too Much Gold” and I’ve gotten several replies on twitter such as, “Impossible” and “No Such Thing”.
I strongly suspect (although I can’t prove it) these folks didn’t read the article. But in case they did and still aren’t convinced here are five reasons why you don’t want to own too much gold as a percentage of your asset allocation:
Reason 1: Lack of Tax Benefits
In the US, gains on physical gold are taxed as ordinary income, which could be a lot higher for you than the capital gains rate.
Even if you were an uber-gold bull and thought it was going to $100,000 per ounce would you really want to pay all your taxes on those gains as ordinary income?
Why not invest in some gold mining stocks (which would certainly go up as well if gold skyrocketed) and pay the capital gains tax rate? Why not hold some of those gold mining stocks in a Roth IRA so you pay zero capital gains taxes?
Reason 2: Diversification
Sometimes less is more
It’s important to be diversified in non-correlated assets. If I owned no gold, it would be important to own some, as gold tends to be less correlated with stocks and bonds. However, for the same reasons why you don’t want to be all in one asset class, you don’t want have too much of your assets tied up in gold.
If all you own is gold you don’t own any silver! Some speculate that silver will go up in value even higher than gold. If that’s the case you’ll want to diversity your precious metal holdings into the gray metal as well.
Reason 3: Liquidity
If you’re like most people, you need to buy food, clothing, energy, and the staples of living. You want to have some money in a more liquid format so you can pay for these things. If all your money was in gold, how are you going to pay your taxes or buy food?
Reason 4: No Cash Flow
If you invest in a business or a rental property or a dividend paying stock, there is cash-flow. If you own shares of a company, that company has employees trying to grow the business and increase shareholder value. Gold doesn’t do anything of those things. This is okay, gold doesn’t need to do those things (which come with their own set of risks), but if all your money is in gold then you are by definition missing out on opportunities to invest in cash-flow producing assets.
Reason 5: Charity
Wealth is a good servant but a terrible master. Ultimately you can’t take your gold with you and one of the great perks of having extra money (or wealth) is giving it away to those in need!
Do you want to gift your gold to a charity and have them have to deal with selling it?
If you keep some money in local currency it is easier to donate to a good cause. My favorite charitable organization is Children of Hope and Faith they help feed, clothe and educate orphans in Tanzania. I know the founder and board members personally and I know they have very low overhead which means it is efficient and there is more money going to the kids who need it. You can’t get any better than that!
This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish.AcceptRejectRead More
Cookie Policy
Privacy Overview
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
