Gold prices hit a four-month low yesterday (Tuesday) after languishing near $1,275 since the start of October. Despite the pullback, there are three major gold catalysts everyone is overlooking.
That's why Money Morning Resource Specialist Peter Krauth just released a shocking new gold price forecast for 2020.
Krauth believes gold prices could rise another 6.7%, to $1,350, before the year is out. But that's nothing compared to his new gold price target for 2020.
Normally, traders migrate to the precious metal during times of uncertainty and political turmoil. Events like North Korea's recent missile testing and the continuing controversies in Washington would normally have served as catalysts for gold prices.
But as the stock market continues setting record highs in 2017, gold is being ignored. And that's a huge mistake.
Investors are missing three major catalysts that will lead to gold's bull market through 2020.
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Here are the three reasons why we're raising our gold price forecast - and the shocking new price target we've set for 2020...
According to Krauth, inflation will be a huge boon for gold prices through 2020.
The current 1.6% inflation rate is the second-highest level in the past five years. That number is forecast to move even higher as the stock market keeps hitting record highs, according to Krauth.
Inflation is the rate at which prices of general goods and services increase and the purchasing power of the dollar decreases.
That's why the U.S. Federal Reserve manages inflation by raising interest rates. This has kept inflation from getting out of control as the stock market rises.
But there's been a growing sense of uncertainty among investors as the stock market keeps hitting record highs. Rising inflation often convinces people the economy is growing unstable, which can cause investors to exit the stock market.
Since assets like gold are considered safe havens during times of economic uncertainty, gold prices will rise as people protect themselves.
And that's only the first gold price catalyst...
Reduced short selling in the gold market also indicates the price of gold will rise over the next three years.
Over the last year, the number of short positions on gold stocks has fallen. One of these stocks is a Canadian gold mining company called NovaGold Resources Inc. (NYSE: NG). In the last 12 months, the volume of short bets on the stock declined 79%, to 522,400. This shows a shift in sentiment from bearish to bullish for gold.
A broader indicator of short interest is the Gold BUGS Short Index (NYSE: HUISH). This index tracks short selling on mining firms that specifically refuse to cut gold production based on gold price movements. In the last 12 months, HUISH has dropped 6.24%, indicating short interest in the broad gold sector is falling.
But wait till you see this shocking trend...
Since 1986, U.S. Fed interest rate increases have been followed by strong gold gains.
Before the rate increases, you'll see gold prices skid. But then, after the actual rate increase, they'll rally. This is supported by 30 years of data.
And this trend appears to be happening again right now. The Fed's September meeting showed an interest rate hike wouldn't be likely until December. And gold prices peaked this year at $1,348.80 on Sept. 8, before falling to $1,275, where they've been at ever since.
If gold prices behave like they have for the past 30 years, then they should rally following a December rate hike and continue rallying in step with further rate increases.
Now that we've run through the three catalysts for gold prices, here's exactly where we see them heading by 2020...
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Krauth's newest gold price forecast has the precious metal soaring to $5,246 an ounce by 2020.
"The bears have been unable to quash gold," Krauth said. "That's why I'm looking for the next big move to the upside, and it could come right after the Fed hikes rates."
If history is any indication, gold prices could rise a tremendous 314% over the next three years from its current price of $1,267.
Although currently down 6% from this year's high of $1,348 per ounce on Sept. 8, gold prices are still in a bull market. After hitting a five-year low of $1,056 in November 2015, gold staged a 23% turnaround the following year. Even if gold prices see a dip in 2018, it won't be enough to end their current bull market.
Since 1970, every gold bull market has offered astounding returns. The median return and duration of each bull market over the last 47 years has been 451.4% and 41 months, respectively.
After the Fed raises interest rates in December, the price of gold can really take off.
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