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Gold and Silver 2019 - What to Expect

Commentaries & Views

Editor's Note: Kitco News has officially launched Outlook 2019 - Rush To Safety - the definitive reference for precious metals investors for the new year. We chose this year's theme as financial markets face growing uncertainty. With volatility on the rise, how do you protect yourself? Click here daily to see updated content.

(Kitco News) - 2018 was a challenge for investors in metals. After peaking in April and making yearly lows in August, gold and silver appeared to stabilize, and with new money coming in, these metals made a strong finish for the year. Looking back to the last two years, we can see that the metals market consolidated in a range between 1200 and 1350.

Silver was weaker than gold, showing a downward trend over the last two years. Pundits continue to look for reasons for this weakness and point to the stronger dollar, although the dollar was weaker than both gold and silver. Others will point to the FED and rate hikes, but neither the Fed nor the dollar were to blame.

Like any other asset class, gold and silver move up and down, and for the last couple of years the sellers have been in control, putting downward pressure on these metals. All markets cycle through strong and weak phases for many reasons. Investors and traders love to find things to blame for adverse movement, but the real reason is simply movement of money in and out of this asset class.

While the equity rally continued there was no reason to believe that new money would flow into the metals, and when combined with competition from the crypto world, less money was available for precious metals. There are only so many investment dollars which will typically chase the hot markets, and metals were not the hot assets.

2019 looks like it is going to be the year of gold and silver: Both appear to have bottomed and are attracting new money while holding every new level of support. The weakness in metals seems to be gone and new money has been cautiously buying.

Commodities and hard assets like gold and silver should lead the way in 2019. After peaking in 2011 and subsequently collapsing, gold and silver have found their footing and spent over 5 years consolidating. Over the last five years, the range has been 1000 – 1400 and has resisted a breakout in either direction. Silver has shown similar restraint, but has been slightly weaker than gold over the same period.

We expect both gold and silver to breakout to the upside in 2019, with our first targets of 1400 for gold and 20.00 for silver. The ridiculous ratio of 82 gold to 1 silver should fall to a more reasonable ratio. Based on our projections the gold to silver ratio should fall to 70:1.

Many will worry about the FED, interest rates, and the U.S. Dollar, but none of those should have an affect on the price of gold and silver. Traders, investors, and pundits try to make too many correlations between those asset classes when the simple facts is that money will flow to the lucrative asset classes. Nobody knows what the correct relationship between all these asset classes should be.

We have been bullish on gold for months and many firms are now joining the bullish sentiment. Commodities also look like a strong buy after prices were slashed and beaten down last year. Commodities were pressured before the fourth quarter for no reason except for the incorrect excuse of a link to the trade wars. 

The good news for metals is that the Fed continues to make all the wrong decisions. For 105 years the Fed has never made the right decision, and with Chair Powell displaying his weakness and inability to follow his original plan, we can expect further erosion of equities and money seeking safe harbor in commodities.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.