We’re not even two-thirds of the way through the year and gold and silver have already taken out the price targets that Wall Street analysts set for them at the beginning of the year. Back in January the analyst average for gold was a little over $1,300 an ounce and the average for silver was a little over $16 an ounce. Even the most bullish gold analysts saw gold topping out at $1,475. Yet just last week gold broke through the $1,500 barrier and silver topped $17. Where will they go from here?
Many analysts have updated their price forecasts, expecting gold to hit $1,600 by the end of the year, but even that may be a conservative estimate. Both gold and silver benefited last week from the drop in stock markets that resulted from the yuan’s devaluation, President Trump’s tariffs on Chinese imports, and the labeling of China as a currency manipulator. But the Dow is still hovering around 26,000 points, a historically high level. Where will gold and silver go if the Dow really starts to tank?
With all indications pointing to a further breakdown in the relationship between the US and China, the trade war won’t end anytime soon. And with unrest in Hong Kong and saber rattling over Taiwan, the prospect of even further deepening of tensions can’t be ruled out. China has also expressed its anger with India over the occupation of Kashmir, which will bring India into conflict with both China and Pakistan. If that powder keg gets lit then all bets are off.
With a slowing economy, worsening trade war, and growing geopolitical conflict, where will gold and silver be if the Dow drops below 25,000 points, 22,000 points, or 20,000 points? If gold gained over $60 an ounce on just 1,000 points or so of drop in the Dow, imagine where it would be if the Dow truly entered correction territory. Last year the Dow performed miserably in the fourth quarter, and we’re very likely to see a repeat of that this year.
But last year investors at least still held out hope that the trade war would end in a deal, and that the economy would still be going strong. Those same investors now realize that hope was misplaced, so you can expect gold and silver to keep climbing as stock markets fall. With a Dow drop into the low 20,000 range, expect gold to climb well above $1,600, maybe even above $1,750 or $1,800. Expect silver to get above $20, which would still make it underpriced against gold.
In a worst-case scenario, with the Dow losing 50% or more of its value by next year, don’t be surprised to see gold over $2,000 and silver over $30. While that would be an all-time high for gold, it has already reached all-time highs in the UK, Japan, and Australia, and is approaching its all-time highs in Europe.
Full realization of the weakness of the US economy will drive the gold price up even further in the US. Don’t be left out when that happens. Invest in gold today and watch your investment portfolio soar even as stocks crash all around you.