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The Stealth Bull Market

Jeffrey M.Christian, Managing Director, CPM


This past year, 2019, was a good year for precious metals prices. Gold and silver bulls were disappointed when prices did not sky rocket, based on their views that the world’s economy was falling apart. Of course, the world’s economy did not fall apart, which probably explains why precious metals prices did not sky rocket.


In the end, the annual average gold price rose nearly 10% to around $1,395, with daily prices rising even more sharply. Silver prices did not fare so well, but annual prices nonetheless rose roughly 3% to around $16.20. Again, daily prices rose more sharply from late 2018 to the end of 2019.


Looking toward 2020, CPM expects the annual average gold rise around 11% while annual average silver prices might rise around 9%. Gold could be close to US$1,600 per oz. by the end of 2020 while silver could be close to US$18.00 per oz. by the end of 2020.


These have been and would be solid gains. They are far less bullish than the True Believers or promoters espouse. Even so, prices are rising toward historically high levels, slowly and steadily


Real-world economic activity has been more vibrant than many financial market observers had expected at the start of 2019. Investor pessimism at the start of the year gave way to investors becoming pleasantly surprised when things did not fall apart.


In 2019 there were many who expected a recession. It did not happen. Economic activities slowed down but remained positive in most countries and most industries. Big, bad economic, financial, and political issues are building up around the world, but they many not arrive even in 2020. Things may bump along for a while longer.


As this was happening in 2018 and 2019, investors were buying less physical gold and silver, the lowest levels in many years.


There is a lot of activity in the futures and options market. Mainstream investors are buying exposure to gold and silver prices, while long-term insurance seekers are buying less physical metal. Investors are getting a good read that the world is not in a recession. The stock market has shown a lot of volatility and capacity to decline, but it is still rising and reaching record levels. Investors are not ready to pivot into physical precious metals yet, and some of these are short-term, opportunistic investors, rather than investors holding long-term positions. We have seen enormous futures and options positions established by mainstream investment management companies that are not interested in owning gold or silver but want hedges against their stocks and debt asset holdings.


Tight physical markets meanwhile could play into higher prices later.  If and when investors decide to come in and buy even small amounts of physical gold and silver the buying of physical metals could have a very powerful effect on pushing prices up. CPM does not think prices are going to skyrocket next year, however, reflecting our view that we do not think investors are going to come racing back into the market in 2020 either. That comes later, in our scenario.


Disclaimer: Views are personal and not the views of the publisher.