Gold and silver markets have been very volatile this year, both precious metals dropped sharply along with the stock market in March of this year and then skyrocketed to multi-year highs in August right before slipping back in September. The Gold futures price soared as high as $2089 (up 40% for 2020) before falling back to the $1900 level with Gold’s counterpart Silver, soaring over 140% to near $30 an ounce in the futures market before falling back to mid $20 level. The silver price came under pressure in the spring as industrial demand fell with the closure of manufacturing plants during lockdowns to slow the spread of the pandemic. Unlike gold, the majority of silver demand comes from its physical use in industrial products. But Silver’s decline did not last long as the price soared in July in response to significant buying interest from investors priced out of the gold market. Investment demand has outweighed consumer demand for both gold and silver, as jewellery sales have plummeted by roughly 70% this year due to the pandemic. Precious metal prices fell back in August as the US dollar strengthened and the US government failed to agree on a fresh round of economic stimulus. However, many metal analysts expect the macroeconomic environment to support further gains in both metals.
Our analysis on both precious metals are the exact opposite of the general consensus, we think GOLD and Silver is at the forefront of a significant decline that will draw Gold price to below $1,000 and the Silver price to below $10 respectively. Many analysts view higher inflation or potential weakness in the US Dollar will create more demand in GOLD and Silver, but in our opinion, it is neither inflation or the US dollar, we think proliferation of the “Other GOLD” more precisely DIgital GOLD called “Cryptocurrency” will be the precious metals replacement as the future store of value. The crypto market is still in its infancy but we are seeing sizable interest exhibited by institutional investors like Grayscale with the Bitcoin trust fund and other major players to follow, most notably fund giants like Fidelity and Vanguard. Even the biggest names in the hedge funds have joined in, most notably Paul Tudor Jones, considered one of the pioneers in the hedge fund business, thinks the digital currency market is a great hedge against inflation. We think as time progresses, investors will lose interest in GOLD and Silver as an investment vehicle. We also think it will lose a “Safe Haven” status as both metals have been very volatile due to the increased amount of derivative products in the market. Our Elliott Wave count supports our thesis with both precious metals looking very bearish. Also the investors sentiment on Gold is still registering extreme optimism which supports our view as a contrarian indicator that when the crowded trade is the long trade, we simply go the other way.