Keeping the gold outlook in balance
There are good reasons to be bullish on gold. A strong seasonal pattern for January with gold rising 7 years in a row during that month and low interest rates around the world are generally supportive of gold heading into year end. On top of this the catalyst of potential safe haven demand on a US-China trade deal breaking down is the trigger that will send gold soaring into year end and the month of January. I hope it doesn't happen, for global growth's sake, but it would be a bullish case for gold. I also expect a tweet from President Trump to throw the whole trade deal into question. That is the US President's pattern.
However, it is good to keep things in balance , so what about the bearish reasons for gold? Here are a few factors that will weigh on gold going forward into 2020, so you can keep the mainnarratives in your mind.
1. The mantra around the world has been, to simplify, monetary policy is dead; long live fiscal policy. This means support for the economy is moving from the central bank's domain into the Government's remit. Fiscal policy is expected to lead to higher interest rates (and this will weigh on gold's appeal in a low interest rate world)
2. If the US-China phase 1 trade deal picks up speed and we head towards phase 2 with, dare I say it, gusto and enthusiasm then gold's risk appeal weakens.
So, there we have it - the bearish case for gold which is just the flips side of the bullish case really. Worth bearing in mind for your gold playbook as we approach January 2020. A stop underneath $1440 for gold longs will be an obvious choice for those positioning themselves for any further gold strength from here.
