The gold price started the year quite bullish only to turn bearish around summer time. What does this mean for 2019? We look at our leading indicators in this article for our gold price forecast for 2019. We also quickly touch up top gold stocks for 2019 as part of gold investments to consider in 2019. This setup is confirmed in our top 3 long term gold charts.
[Ed. note: This gold price forecast 2019 article was originally published on September 16th, last year. Readers can verify this by checking the dates on the charts. Throughout 2019 we will continuously update this gold price forecast, every 4 to 8 weeks. The new updates will appear at the bottom. This way our followers can track how this market evolves, and how performant our initial gold price forecast has been. With every major update in 2019 we will also update the publish date. Last update of this gold price forecast: February 17th, 2019.]
Gold price forecast 2019: leading indicators
Note that any gold (GOLD) price forecast is a challenging task because there are plenty of variables that might play a role. Moreover, gold has traditionally done well under a variety of conditions.
For instance, the 2002 to 2007 rise was primarily due to falling interest rates and a rising real inflation rate combined with a ‘risk on’ market sentiment. That’s opposed to the 90ies when there was ‘risk on’ but interest rates were essentially flat on an annual basis.
On the other hand early in 2016 there was a strong temporary rise in precious metals which was triggered by the fear trade.
Sometimes gold can rise because of fear, but for gold to rise on the gold long term there must be some rising real rates. That makes our gold price forecast somehow more specific.
In sum, we do not recommend to get caught up in the endless stream of headlines. It will only confuse investors. Some recent examples include this imaginary correlation between retail sales and the gold price, physical demand in India vs the gold price or even gold miners influencing the gold price. That’s really not how it works, and we urge serious investors to stay away from the clutter!
Leading indicator #1 real rates
So the first leading indicator is real rates. As seen on the long term rates chart (see here, not embedded in this article) 20 year Yields in the U.S. are clearly rising after a giant rounding bottom was set starting in 2012. This suggests inflation has to rise stronger than rates in order to have an inflationary environment.
Looking at inflation, in both government data as well as shadowstats, we see a similar trend: higher. Inflation stats here. It is the trend that is interesting to us, not the absolute data.
Real rates and inflation will likely be rising in 2019. Real rates may be rising but it will likely not be significant unless something unexpected takes place which changes the current trends.
Leading indicator #2 Commitment of Traders (COT)
The second leading indicator in our gold price forecast for 2019 is gold’s Commitment of Traders report, in short COT.
Based on the COT report we see that the downside in the gold price is extremely limited. How can we know? Look at the positions of the largest market participants (middle pane). The number of long contracts of non-commercials is at the lowest point in 9 years (red bars). This is not only historically low, it is even exceptional. It suggests that the downside in the gold price is extremely limited. Note this is a medium term forecast, it cannot be take for granted for the full year 2019.
Leading indicator #3 Euro
Our third leading indicator in our gold price forecast for 2019 is the Euro.
The next chart shows the correlation between the gold price (light grey) and the Euro (black). Moreover, important turning points in the gold price are indicated with light grey circles, and how they map to the Euro is visible in green circles.
What’s clear is that the gold price breakdown of 2013 was a game changer. Before that point, the correlation between both was neutral to weak. Since then, however, there is a very strong correlation between both assets.
More importantly, in recent years, the Euro has been leading the price of gold. Every time the Euro tested secular support or resistance, or broke out or down, it preceded an important top or bottom in the gold price.
For 2019 it seems that the Euro is moving in no man’s land, at least based on the current trend. The Euro has a track record of moving fast once it breaks out or down. Also, near secular support or resistance it tends to stay there for a while. Currently, though, we don’t see any of this.
Note that the Euro chart must be watched closely in 2019 as it may determine major trend changes in the price of gold, impacting directly our gold price forecast for 2019!
Gold price forecast 2019: price targets
Our leading indicator analysis above suggests the following for our gold price forecast for 2019: the COT report says gold is near a major bottom and that gold will not dip below $1200 in the next few months going into 2019, the real inflation rate is mildly bullish, the Euro is not showing signs of wild moves.
We combine this with major chart structures on gold’s chart in order to do an educated gold price forecast for 2019.
The gold price weekly chart shows this triangle pattern in recent years which is part of the major corrective channel since 2011. Visibly, there was a failed breakout from the correction in 2018. The recent breakdown might also be failed because there is a clear rounding bottom which likely is the result of extreme readings in the COT report.
We tend to believe that the price of gold will go up to the $1300 area in 2019.
Moreover, it is clear from this chart that gold is setting a range, and it will be an important point in 2019: the $1200 to $1375 range. Below $1200 is bearish, we can hardly believe gold will stay below $1200. Between $1200 and $1275 is more or less neutral. Above $1275 is mildly bullish. Above $1375 is wildly bullish.
As part of our gold price forecast for 2019 we believe that gold is setting a major cup-and-handle on its chart. The recent breakdown marked the start of the handle. We believe that gold, in this formation, will go back up in 2019 to test the $1300 to $1375 area. As that will be the 3d attempt for gold to break out of its strong resistance (red line on the chart) there is a fair chance gold will succeed.
That’s why our most bullish gold price forecast for 2019 is that gold will hit $1550 in 2019 (20% probability), but only if it succeeds breaking through the $1375. The $1375 test is a base case scenario (75% probability).As part of our #gold price forecast for 2019 we see gold moving to the $1300 to $1375 area. As this will be the 3d breakout attempt there is a fair chance it will succeed: our bullish target for 2019 is $1550. $GLD Click To Tweet
On the flipside, any failed attempt to stay above $1200 will be the bearish scenario, and it might take gold to $1050, though the least likely in our opinion (less than 5% probability).
The gold price monthly chart does not reveal any new insight. It confirms the weekly. As long as there is no divergence between timeframes we consider it a good thing. All comments are annotated on the chart below.
Gold stocks in 2019: a once-in-a-decade buy opportunity
That said, we believe that gold stocks are near a once-in-a-decade buy opportunity. We wrote about this at length in our Top Gold Stocks for 2019 update.
Look at the gold miners index, monthly chart. It shows how peak to trough gold stocks have corrected 79% since their peak in 2012. This clearly is a buy area. The time gold stocks will trade near their secular support is unknown, it may vary from a couple of weeks to a couple of months, depending on how fast the gold price moves back above $1300. But, one thing is clear, if gold surges above $1300, and, ultimately, above $1375, we will see wild moves higher in 2019 in the oversold gold stocks market. Stay tuned, as we will publish our gold stocks forecast for 2019 anytime soon.
** Update on January 3d, 2019 **
Risk-on in the gold market about to accelerate, gold forecast 2019 materializing
We wrote many updates in recent weeks on the gold market, closely following how our gold price forecast 2019 is materializing.
There is this one indicator in the gold market rarely featured which is looking extremely interesting at the time of writing (January 3d, 2019): the junior gold stocks to gold price ratio. This ratio tells us something about the willingness of market participants to take risk in the gold market.
- If the junior gold stocks to gold price ratio rises it points to risk sentiment dominating the gold market, also in 2019.
- If the junior gold stocks to gold price ratio breaks out from a consolidation or a falling trend it means risk sentiment entering the gold market.
Below cart shows that this ratio is breaking out, after a long and vicious bear market which is reflected in the 7-year falling trend of this ratio.
A tiny push higher in the gold stocks sector compared to the gold price will create a breakout on this indicator, which, as said, will lead to a strong appetite for risk in the gold market in 2019.
The GDXJ to gold price ratio is a gauge for risk sentiment in the precious metals market. We closely watch the 0.0245 level for a giant breakout, and want to see at a minimum 5 consecutive trading days above this level in order to confirm this breakout.
** Update on February 17th, 2019 **
A giant breakout in precious metals about to take place, suggesting our gold price forecast for 2019 is underway
Massive breakouts in the precious metals place are taking place now. One of them is the junior gold miners to gold price ratio featured below. More on that later.
First, though, the one chart that needs to break out is the price of gold.
The monthly gold price chart has a gorgeous setup. Look at those 3 higher lows over the last 3 years. Also, look at the 3d touch of this green resistance bar. This is momentum building up, this is a proverbial pressure cooker.
By far the most important price point, as said many times in this article, is $1375. A break above $1375, and 5 consecutive days closing above it, ideally combined with 3 consecutive weekly closes above it, would confirm a giant brakout.
We expect this ‘event’ to take place any time soon! Yes, after almost 8 years, the precious metals market may turn bullish now. This is major news, and it goes under the radar.
As we check major media outlets we only see some fluffy news items. MarketWatch suggests gold rising because of trade talks, Barron’s simply described gold’s price rise, Yahoo! Finance observed some nice technicals, Bloomberg notices that large investors are increasingly getting bullish on gold. So what?
Nowhere do we see any relevant point about a gold price forecast for 2019. InvestingHaven, however, has quality materials in this article forecasting what is about to happen in the gold market, and why!
As said a couple of times in the past one of our favorite indicators in the gold markets is the junior gold miners index (GDXJ) to the price of gold. It is a ratio that tells something about risk sentiment in the precious metals market. This ratio goes up when investors feel that they should take risk in gold assets. This ratio goes down when they do not like gold assets, and maybe only hedge their global market risk with the gold price (not the rest of the gold market)!
This ratio is in a falling channel since 2011. This makes sense of course as that’s when the precious metals bear market started.
However, a spectacular breakout is now in the making, after an 8-year bear market!
This breakout started a couple of months ago, but a small push higher is needed to confirm it.
We keep a very, very close eye on this ratio combined with the gold price chart shown above. Both combined willl determine a confirmation of gold’s giant breakout, and with that the whole precious metals market turning bullish!
** Update on March 2nd, 2019 **
Panic among gold investors after a gold price drop! Is our gold forecast invalid now?
The gold price dropped to $1299 yesterday after peaking at $1350 on Feb 20th, 2019. That’s a $51 drop in 7 trading day, or just 3.7 pct.
Admittedly, this is a drop, but it’s not to the extent that this is concerning in any way. Still, several followers reached out to us, asking how concerned they should be.
The big problem we see for investors is their continuous focus on the very short term price changes combined with the endless stream of news in financial media and social media. It is creating such a blurry view for investors that they cannot think clearly any longer.
Let’s look at some examples of today.
Marketwatch says in their headline that gold drops as U.S. GDP data come out better than expected. So what? As if there is a correlation between both. Gold investors may overreact if they take this too literally.
Similarly, Reuters says that gold is on its way for the worst week since May 2017. Again, so what? Does it mean there is more downside, and if so how much? Unclear!
And then here is our favorite topic, also by Reuters. Venezuela’s central bank is moving 8 tons of gold … so … Indeed, so what? Supply of physical gold really says nothing, absolutely nothing, on gold’s price.
We urge gold investors not to over react, and take a step back.
If we review our gold price chart, the monthly chart, we see how gold indeed failed to get back above the important $1375 after its attempt to break $1350 got rejected. Gold is now moving between this giant wall (green bar) which is the bear market wall. It is still trading ABOVE its falling support line.
Let’s give the gold market the time it needs to do its magic. We feel it’s coming, and there is a good reason why we tipped silver miner as a major candidate for one of the TOP 3 investing opportunities of 2019.
Expect later in 2019 an ‘exit plan’ once our gold forecast 2019 is achieved
An exit plan is imperative. As our gold forecast 2019 is well underway, the key question is whether and when to take profits off the table. Depending on how our leading indicators evolve in the first week and months of 2019 we will update this article if and once insights about an exit plan become clear to us. Follow us for updates on when and how to exit the gold market.
How to play the gold trend, and invest in gold?
How to invest in gold? Very simple, there are 2 options to get exposure to gold. One solution is to buy GLD ETF: very easy to buy on any exchange but it is a ‘paper based’ investment. The other solution is to open an account with GoldMoney and buy/store physical gold for you in a couple of simple steps. GoldMoney is one of those online precious metals services that is very reliable.
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