TD Securities: Gold to Hit $1,650 in 2020

Even though gold prices have dipped in the past few months, analysts at TD Securities point to a number of reasons for why prices will rebound in 2020.

Gold prices have seen a slight pullback since their summer highs, a move that many are attributing to signs of a seeming improvement in trade relations between the U.S. and China. Yet, as TD Securities recently noted in their price outlook for 2020, the pullback should be viewed as an opportunity to buy low during what is an assured bullish run.

In the report, TD Securities’ analysts went over the various factors that have pushed and kept gold up this year, along with outlining some key price points to look out for. As the team noted, very little has changed when it comes to gold’s forecast, as the still-lingering U.S.-China trade tensions are just one of the many drivers that have brought the metal to six-year highs.

For starters, the strategists expect a minimum of two rate cuts by the Federal Reserve in 2020, with the European Central Bank once again mirroring the policy decisions. The multi-year hiking schedule that the Fed embarked on in 2015 acted as a significant hurdle for gold prices, and the abrupt shift to a dovish, more accommodative monetary policy was perhaps the biggest price driver this year.

The dovish turn by central banks around the world was interpreted by many as a way to stimulate the contracting global economy, and TD Securities is hardly optimistic when it comes to growth for the foreseeable future.

Likewise, the exceptionally strong physical demand from central banks is yet another persistent pillar of support. The official sector bought a record 651 tons of bullion last year, and early reports suggest that this year’s figure may very well be significantly higher. As TD Securities notes, individual investors will probably want to join in on the action by hedging their bets with the metal due to fears of a correction in the longest-running equity bull market in history.

Perhaps more than anything else, however, TD Securities believe that uncertainty will be the cornerstone that will push gold prices to $1,650 by the end of next year. The upcoming U.S. election, disputes over auto tariffs with Europe, the shakiness of USMCA and a Brexit debacle that appears to be reaching a boiling point are all ingredients that will make for an extremely tumultuous year. Adding to this, there is still no certainty in regards to trade between the U.S. and China, and the trillion dollar deficit continues to cast an ominous shadow over the domestic economy.

With so many tailwinds and very little downwards pressure, TD Securities’ strategists believe investors should make the most of price downturns along the way, as gold appears dead-set to reach new heights. The team listed $1,425 as the lowest support level that the metal could drop to over the coming months, while highlighting that going long gold is the best possible strategy at the moment.