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LAWRIE WILLIAMS: Gold still trending downwards – keep calm and carry on!

The gold price has started the week moving ever weaker in European trade,  This morning it dropped below $1,820 an ounce before showing a marginal improvement, but who knows what the rest of the day will bring?  Writing here almost a year ago, on December 17th 2019, I predicted a 2020 year-end gold price of $1,625 being a nicely positive advance on the gold price at the time.  It looks like this level will be comfortably exceeded demonstrating that precious metals have done far better than I expected a year ago.  For the record I predicted end-2020 silver at $19, platinum at $1,150 and palladium at $2,100, so silver and palladium look like outperforming my year ago predictions, while platinum – despite being one of the best performing precious metals over the past couple of months, has still not quite achieved my predicted levels.  I was obviously over-optimistic here, but give the metal time.  Its fundamentals have improved substantially over the past year, even if its price has not advanced accordingly.

However, the point of all this is that a year ago all my price predictions were for decently positive advances in precious metals prices over the year, and barring an absolutely disastrous drop in the final couple of weeks of the year, all these predictions, with the exception of platinum, have been comfortably exceeded.  Even platinum is over 8% higher than it was a year ago.  So, for the precious metals investor 2020 has been a pretty positive year and, as pointed out in my last article, the gold miners in particular have been reaping the benefits of precious metals price advances, with more to come.

Obviously we couldn’t have predicted the COVID-19 virus pandemic effects back in December a year ago, and without it my forecasts back then might have been much closer to the eventual mark.  Indeed in retrospect perhaps precious metals have nor performed as well as might have been expected under the pandemic scenario as it developed – particularly in the U.S. and European context.  Arguably precautions to stop the virus pandemic spread may have been too little too late, but the economic effects on some sectors of the respective economies have been disastrous, while on others – notably the tech sector – it may have been beneficial which has meant the tech-heavy equities markets have done rather better than we might have expected. 

Politicians – particularly President Trump – may have hugely downplayed the seriousness of the virus spread, but as mitigation they will have been doing the best they could to protect their countries’ economies.  Not wholly successfully as it has worked out, and the U.S. in particular now seems to be reaping the adverse effects of exceedingly diverse messaging from the top regarding taking serious precautions against the spread of the pandemic.  The spread will almost certainly get worse before vaccines kick in materially and things start to get better.

Looking at this from a European angle the huge incidence of conspiracy theories in the U.S. in particular, about the deep state and the great reset and the virus just being a massive plot by the powers that be to control us all, is frightening in the extreme.  Yet this conspiracy theory incidence is hardly surprising given the Trump-promoted disputes over Presidential poll fraud and the Democrats, supported by the media, ‘stealing’ the election.  The Nazi-type propaganda being spewed out (if you repeat a falsehood often and adamantly enough, a large proportion of people will believe it) is hugely disturbing in being promoted, as it is, by the sitting President in a seeming attempt to hang on to power.  There seems to be no evidence of voting fraud sufficient to affect the election result and I despair at some of the people trying to give credence to the ‘election steal’ theory.  So far the courts – even though they may be seemingly biased politically towards the Republican cause – have thrown out these allegations which seem to have been put forward without any credible evidence. 

I will no doubt be castigated by those who believe the conspiracy theories, as being a tool of the deep state, but this is my personal opinion looking at things with a hopefully unbiased viewpoint.  My own political leanings are probably to the right, but I just cannot believe some of the seemingly outlandish theories being promulgated, and believed, by a significant proportion of the U.S. population.  Hopefully this will all blow over under a perhaps more consensual Biden Presidency, but I fear it is too deep set to do so!

Any continued dissension over the election result and the virus pandemic in the U.S. in particular should be positive for precious metals prices, which are currently depressed, as they are, by somewhat undue optimism over the vaccine effect bringing a rapid end to the spread of COVID-19.  Once the realisation sets in that the adverse effects on the U.S. and global economies will not be shortlived we warn that equities – except perhaps the tech and gold stocks – will weaken and gold and silver in particular will rise.  We are not so sure about the pgms which are very much industrial metals nowadays, but we still view platinum as a better prospect than palladium, particularly as a Biden Presidency may well downplay fossil fuels in favour of renewables.

Thus we think gold and silver in particular have some good potential for further increases through the end of the current year, and certainly in the first half of 2021.  Beyond that we will have to wait and see how quickly the availability of an effective vaccine starts to bring down the virus spread and whether economies start to recover.  The prognosis remains positive for precious metals, but perhaps not as strong as predicted a little earler this year.  We thus remain cautiously optimistic.  Keep calm and carry on!

14 Dec 2020 | Categories: Gold

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