How High Can Gold Go in 2020?

How High Can Gold Go in 2020? by Sam Laakso for Voima Gold

Gold has had a great run over the past year. Gold prices have risen in every single currency on earth and in many currencies gold prices are up well over 30 percent from last summer.

In early January, I published an article (in Finnish) in a local financial newspaper where I articulated why gold would rise to $1800 per ounce during the first half of the year – a rise of 20 percent in just six months. As it turns out, gold did just that on the last day of June meaning that in the end my estimation was correct.

Although more volatile than expected, gold price in New York reached my target of $1800 per ounce during the first half of 2020 on the very last day.

So, what is my forecast for gold for the rest of 2020? How high can gold go this year?

My estimation

I see that there is an extremely optimistic atmosphere around gold at the moment. Investment banks are upping their target prices for gold left and right and my favorite sentiment metric, Twitter, has exploded after gold breached $1800.

I am known as a cycles analyst. In the past I have written rather extensively about how cycles work in the financial markets. You can read more about this topic at SKAL Capital and in myThesis.

The cycles theory revolves around the thought that, as nature in itself, human nature cyclical cycling between optimism and pessimism. This transmits to the way people buy and sell financial assets and thus the prices of stocks, bonds, commodities, and gold also rise and fall in identifiable cycles.

Right now, the markets are telling me that the gold market is excessively optimistic due to the rise in gold prices over the past three months and that the cycle in gold is mature and thus ready to start the declining phase of the cycle. Once optimism reaches an extreme, prices tend to start the declining phase of the cycle.

Gold has risen strongly over the first half of the year. As you can see, strong uptrends are often followed by falling prices highlighted in yellow and I think we are close to one of those declines.

So how exactly I think that the second half of the year is going to play out for gold?

I think that we are close to a short-term top in the price of gold. We have not seen a long and exhausting multi-week decline in the price of gold, which would wash out the highest optimism in gold, for six months.

We did see a short lived and sizable correction in March during the global coronavirus selloff, but since the sharp decline (buying opportunity) was erased just as quickly as it came, I argue that the mental damage to gold market sentiment was not big enough.

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