[For professional investors only.]
During December, the economic data including U.S., Europe and China showed stabilization, the Fed statement left rates unchanged as expected with the dotplot reflecting a flat path of policy in 2020, the ECB also left key policy settings on hold as expected. The financial market was continued driven by the US-China phase-one trade deal status, the Dow, S&P and Nasdaq were having its best run in six years, ending off the record high. Also Asia’s stock rallied the most since the trade war. The pound surged after exit polls and early returns indicated a big win by Boris in U.K. polls. Gold price moved up to $1500/oz by the end of 2019.
The precious metals stocks climbed up with gold and silver price in December. For 2019, the US gold equity ETF- GDX finds itself on the leader board in terms of precious metals equity performance, the TSX, LSE, ASX and HKG underperforming especially LSE and HKG. The junior exploration projects equities showed negative performance with even worse liquidity.
For the outlook on global economy in 2020, some economists predict a slow but steady growth based on assumptions that the US-China trade tensions would ease off. But the asset managers and institutions are concerned that current debt based growth is not sustainable given the political tensions globally, easier central bank policy, and current US corporate market metrics indicating a similar degree of corporate excess that could precipitate recession in the event of a loss of consumer confidence. On the supply side, we see gold production peaking in 2020 and falling by up to 6% by 2024. The silver also will benefit from a continued recovery in industrial demand over the coming years, which should lead to some reversal in the gold: silver ratio drift. In the meantime, the compelling valuation metrics and improving shareholder returns make precious metals stocks attractive. In our view, 2020 is more likely to be a year of upside for precious metals.