Gold Price, Stocks And Energy 2016 Outlook

Despite my hesitation writing another piece like this, love seem to love prediction articles. It used to be easier an easier task to simply identify and go with the trends, but so much is now up to the whims of our central planners that it is nearly impossible to have much accuracy. There are just my best guesses and I will make sure to revisit them in another 12 months to see if how well they held up.

The stock market corrects sharply from overbought levels, driven partly by increasing interest rates. The S&P500 will drop by 25% or more during 2016 as a global recession unfolds. Economic data shows patterns similar to what was witnessed right before the last recession. The FED has little wiggle room to prop it up like they did last time around, but may be forced to reverse course on rates and introduce a new stimulus program.

Gold will finally carve out a base and bottom in the $950 to $1,050 range. The gold price will show a high level of volatility and ultimately close out 2016 with a gain of 20% or more. The silver price will follow gold, with a higher level of volatility in both directions. Precious metals will likely get dragged down initially in any economic crisis, but the monetary will bounce back quickly and re-assert themselves as true safe haven assets. With such a small participation in gold and silver currently, it will not take much a shift of funds into this relatively tiny market to move the prices significantly higher.

The USD continues to strengthen versus other currencies, as the FED raises rates and other central banks continue to cut. Our fractional reserve fiat monetary system is a great scourge on the world in my view. It enriches the few at the expense of the many and must be enforced at the barrel of a gun. We will likely see an increased trend of de-dollarization during 2016, particularly as the BRICS nations move away from using the USD in trade. Nevertheless, the USD remains the best of the fiat currencies and it will likely benefit from its perception as a safe haven when investors begin to flee stocks in mass.

The unemployment rate reverses course and moves higher during 2016. The official unemployment rate (U3) has been cut in half since the financial crisis unfolded in 2008. It spiked to 10% during 2009, but has since dropped to just 5% in late 2015. Of course, a large portion of this decline was driven by a lower participation rate, sacrificing quality for quantity, more part-time jobs and BLS manipulation of data to brighten the overall jobs landscape. Alternative calculations of true unemployment remain near all-time highs around 24%. In 2016, the U3 unemployment number will stop falling and eventually begin to move higher for the first time in years.

Home prices flatline and begin to trend lower during the second half of the year. Home prices have put in an impressive rebound over the past five years, but the rally is losing steam. During 2016, I expect a continuation of modest price gains in the first half of the year, then flat-lining price growth and an eventual drop in home prices by the end of the year. This trend will be driven by rising interest rates that make homes less affordable, an increasing supply of new homes hitting the market and another peak in the average income/home price ratio.

Energy prices will continue to dip in the first half of 2016, but eventually find a bottom and trend higher. The price of oil will test $30/barrel and dip as low as $25/barrel, but will bounce sharply and end the year closer to $50/barrel.

********

We will be positioning the Gold Stock Bull portfolio to take advantage of these trends in 2016. If you aren’t already a premium member, you can sign up here to receive the newsletter, model portfolio and trade alerts. Enter the coupon code 2016 GO for 20% OFF any membership if you sign up today. Happy New Year!