Many believe that gold and commodities are part of one and the same asset class. Nothing is further from the truth. As said in our latest annual gold forecast precious metals are a separate asset class that stands on itself. We made that point by exhibiting the leading indicators for the gold price, and did the same with the silver price in our latest silver forecast. Moreover, the chart below which shows the gold price overlaid by commodities prices over the last 3 years has exactly the same conclusion. If anything this chart forecasts that gold will be the outperformer in 2020.
We believe there are 2 the major differences between commodities and precious metals.
First commodities are inflation assets. They tend to rise on inflationary pressure. Precious metals tend to rise on inflation expectations.
As seen in 2019 inflation expectations were rising while inflation was really low. Gold did very well in that environment.
Second commodities are pretty predictable. Precious metals are the hardest asset class to forecast. They sometimes rise on fear (safe haven asset), sometimes on inflation, sometimes on inflation expectations, sometimes on Dollar weakness. Go figure if you haven’t spent a decade analyzing the precious metals market.
This recent week gold performed extremely well while the Dollar was rising. Unusual? Not at all, gold has multiple faces, and that’s what makes it so interesting … at least for us, having spent a decade in this market.
Commodities are clearly in no man’s land right now, and we can reasonably expect they will continue to stay there for the largest part of 2020. Gold on the other hand is doing really well.
