Over the course of 2018, gold prices hewed to a fairly tight trading range. Spot prices for the yellow metal lost about 3% for the year, but this was still a far better performance than the stock market.
Much of the momentum from December—when equities slumped and the precious metals rallied—has carried over into the New Year.
From an investing standpoint, this pattern is likely to continue throughout 2019.
Studying the price movements for the precious metals reveals that they have remained stuck in a rather narrow channel for the past two years. Such a range-bound trading pattern has frustrated many bullish investors who expected gold and silver to appreciate more against the dollar.
This technical view of prices suggests a rather neutral outlook for gold. Although gold has been trading above its 200-day moving average, a key technical indicator, it hasn't experienced a sustained climb higher.
To start the year, gold is hovering above $1,280 per ounce. This is well below its 2018 high of about $1,350/oz.
However, a number of the fundamental drivers of gold demand are now shifting in favor of the precious metal. Multiple macroeconomic factors are supportive of higher gold prices for the first time in years: the uncertainty over interest rates and monetary policy, the trade war with China, Brexit, and slowing global growth.
To put it bluntly, the macro picture is shifting. In what is likely a cyclical shift, the U.S. stock markets posted their worst performance since the financial crisis.
Even worse from a momentum perspective is the fact that the majority of these losses came at year-end. By contrast, gold shined during the fourth quarter of 2018, appreciating 7%.
So even coming off of major losses in December, it doesn't appear that that the smart money considers stocks to be "cheap" yet, either. That's a significant change from the previous nine-plus years of economic expansion, where each dip in the markets was met with enthusiastic buying activity.
2019 appears bullish for safe havens like gold and silver given this environment. The key levels to watch will be if—really a matter of when—gold breaks back above $1,300 per ounce and then its 2018 high of around $1,360/oz.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.