The first week of January of the new 2020 kicked off with a 330-point rise in the Dow Jones industrial average. The S&P 500 climbed nearly 0.7%, while the Nasdaq gained 0.8%. The Toronto Stock Exchange's TSX rises 0.39 percent to 17,235.57.
Investors and analysts have been closely monitoring the stock market as both gold and oil are skyrocketing higher on account of the building global tension. The sudden rally of gold stocks and gold futures follows news of the U.S. military killing two high-profile commanders of Iran's secretive Quds Force.
Gold is gaining momentum on the volatility and the potential for a violent confrontation in the Middle East with gold prices up nearly 4% in just the first few weeks of 2020. As prices spiked in the beginning of this year, gold futures for February delivery are up $5.5 or 0.4% to close at $1,574.30 per ounce. This marks a winning streak for gold for the 10th consecutive day on Jan 7, marking its longest period of gains after 11 days of steady gains from December 2017 to January 2018. This is a welcome development for bullion investors.
The result of gold stocks and gold prices climbing up is a firm buying pressure as investors will focus on precious metals as a store of wealth and hedge against market turmoil. Central banks are also buying gold for rapid balance sheet expansion, contributing to the gold price rally.
A recent report by Goldman Sachs explored the buying patterns of wealthy people and how they were stocking up on physical gold, as in bullion, coins and bars. The research firm raised its target price for gold to $1,600 per ounce in 2020. Heritage Capital shares similar projections of gold prices in the range of $2,500, $3,000 an ounce in 2020, citing recession concerns and political uncertainty. Altavest came out with a projection for a rally in the $1,650 to $1,750 per ounce range in the months ahead.
Underlying demand for gold has already spiked prices higher in 2019, most especially among investors in the Eurozone. Negative interest rates drove savers and investors to find better homes for their money than bank accounts or debt investments. Now, the latest spike in gold prices is being driven by the sudden escalation in US-Iran tensions.
Gold stocks of Canadian senior and junior gold miners are benefiting from this rally as well. Agnico Eagle Mines Ltd. (NYSE: AEM) - a senior Canadian gold mining company – had its gold stock close Thursday at $60.81. Lundin Gold (TSX:LUG), is also entering a pivotal year having gained 61% since the start of 2019.
The sentiment towards investing in gold is really positive right now. And with the growing number of junior mining success stories in Canada, 2020 is expected to be a pivotal year for junior mining.