CHANGSHA, Jul 24 (SMM) – Monetary policies by the US Federal Reserve and eurozone, as well as geopolitical issues will be the major determinants of precious metals prices, such as gold and silver in 2020, said Han Xiao, senior analyst from Zhishui Investment Management & Consulting Team.
Han shared his insights on precious metals prices and investment strategies at the 2020 SMM Precious & Minor Metals Summit in Changsha, Hunan province on July 24.
Han believed that the key points to watch include whether the US economy will continue to slow down, the trend of monetary policy, geopoliticals factors, demand and supply of precious metals, and the open interests for precious metal futures.
The price trends of gold and silver tend to be on the same direction in most cases. According to the data over the past decade, the correlation coefficient between their prices can reach 0.939, said Han.
He also forecasted that prices of precious metals are likely to rise and then hover in a broad range in H2 2020, based on both fundamentals and technical factors. Prices may continue to increase in Q3, and fluctuate or retreat slightly in Q4.
The bullish market of precious metals may end next year, Han estimated. The resistance for gold prices will be at around $1,900/ounce, with support at around $1,450/ounce in H2 2020. In 2020, silver prices may face pressure above from $20/ounce, with support from $14/ounce. The SHFE June silver contract will likely trade between 3,400 yuan/kg–4,800 yuan/kg.
The price of precious metals in 2020 will increase after trading rangebound at low levels.
Adpoting the hedging strategy
For upstream enterprises of precious metals, lead and zinc, plants that need to purchase raw materials for smelting and processing can build inventory by long hedging.
Han suggested traders and enterprises in the midstream to avoid the risk brought by the price fluctuation by buying high and selling low so as to lock in profits.
For downstream enterprises, when the raw materials cannot keep up with sales orders or if the enterprise has a fixed sales order, Han also suggested firms to avoid losses from an increase in prices by long hedging. Medium and long-term speculators can build positions at low prices, while short-term investors can trade according to the resistance situation.