D A N T E S O U T L O O K
Gold looks set to continue its long-term uptrend as the Federal Reserve vows to do whatever it takes to support the economy. Investors could benefit from the safe-haven appeal of gold given the rise of global uncertainty caused by the pandemic. From a technical perspective, the February 2019 breakout in gold futures should continue towards the 1,800 level. And if the dollar breaks below 94, gold could surge to new highs.
A rising gold price isn't all bad news for the global economy. It just means that lingering uncertainty could lead to more volatile market environments, which will benefit gold. As mentioned in our previous post, markets are pricing in an economic recovery, which is positive for commodities overall. This includes precious metals such as gold and industrial metals that are more tied to growth such as silver. In fact, silver has more runway to reach new highs given its long-term support going back to 2007.
The chart below shows that silver is undersold versus gold, similar to its relative low in the early 1990s. We expect silver to outperform gold as the dollar continues to weaken.
For investors, this could unlock opportunities in metals and mining stocks, which have underperformed over the past decade as shown below.