Gold price forecasts for 2020 were typically around the $1,600 an ounce mark. It was therefore pretty remarkable to be above $1,600 in the first week of the year.
But this did follow two black swan events: the US killing of Iran's top military commander Qassem Suleimani in Baghdad followed by an attack on US bases in Iraq. After such a hiatus a retreat back from overextended gold prices was only to be expected, absent further revenge attacks.
However, few commodity analysts think that was it for gold in 2020. It was perhaps a dress rehearsal for a later spectacular performance. Super-high US share prices still look priced for a correction if profits disappoint, and yields are so low that treasury bonds are also expensive.
If history is any guide, precious metals and the commodities complex deliver the best performance in such circumstances. Goldman Sachs tips gold as the best hedge, not oil.
The more difficult thing is to map exactly how this could play out in 2020. In my view geopolitics is not actually the main worry for investors. The biggest political event of the year is the US presidential election on November 3.
At the moment, incumbent Donald Trump is facing impeachment. This he will win. But the election in November is far from a done deal, with polls showing him lagging behind the leading Democratic contender, Joe Biden.
Few investors need to be reminded just how good Mr Trump has been for Wall Street. Thus the moment of maximum uncertainty for US stocks should be November 3 — when he could really be unseated — and that could also be the high point for gold prices this year.
If Mr Trump survives, then US stocks will rally from whatever sell-off they have endured before then, and gold prices plunge. If a far more left-wing president is elected then investors will assume the worst: stocks will dive and presumably gold will head higher.
Gold should become the go-to, win-win, safe haven asset in the months before the presidential election by default. Its main rival US treasuries will not be nearly so attractive as interest rates will stay low courtesy of a compliant Federal Reserve while inflation should rise with a weaker dollar.
That said, silver could be the real winner, riding on gold’s coattails as a far cheaper precious metal. Nonetheless, getting the right vehicle for each stage of this precious metals’ rally, to maximise performance, can be challenging.
In the first stage, as we saw last June, gold will outperform silver. You can buy the exchange traded products GLD or BAR for gold online, and SLV or PSLV for silver, and hold them just like any other investment in your brokerage account.
There is a small cost for holding these exchange traded products. But custody fees for actual physical gold or silver would be higher and it avoids the obvious security issues of storage.
Another approach is to open a gold account with Emirates NBD, National Bank of Fujairah or RAKBank, and hold your savings in gold at the bank. You can open an account with as little as Dh500.
Noor Bank will sell you gold over the counter and deliver, or store it for you. Emirates Islamic Bank has a gold certificate scheme. It is also easy and inexpensive to buy physical bullion in the gold souks of the UAE.
Usually in stage two of a gold bull market it will be silver that takes the lead, typically outperforming gold by a factor of two. The ratio of the silver price to gold has fallen from the early 90s last year to the mid-80s today, but it still has a long way to drop to reach its long-term average of 55.
That means stocking up on silver could be a very good investment indeed. But silver is notoriously volatile in price and you might have a bumpy ride along the way. Plus make sure to sell well before this classic bubble pops as it last did in April 2011.
You can buy silver in 1 kilogram and 500 gram bars in the gold souks, though holding it in an online brokerage account is more practical.
It is also generally true that shares in the producers of gold and silver tend to rise in price during a boom by a multiple of the price of the actual metals. But if share prices start to tumble across the board — as they would do if US stock markets correct, then be careful to put stop-losses under these share holdings.
With careful management, buying the shares of top precious metal producers should be a very good investment as it was in 2019. Towards the very end of a boom in precious metals, the shares in junior exploration companies also usually soar in value.
There are several exchange traded funds that hold baskets of these shares and so remove individual company risk. For larger gold and silver shares consider GDX and SIL respectively, and for the junior gold and silver companies, GDXJ and SILJ.
Peter Cooper has been writing about Gulf finance for two decades