2020 Gold Projection and its effects on reserves!

2020 could be the year for the price action of Gold due to the recent upturn!
The US/Iran conflict where the metal acts as a hedge against geopolitical risk and negative interest rates are main supporter of gold prices.
Furthermore, does it appear that China’s expansion into Eurasia pushes gold back into a position of monetary reserve asset.

Intrusive lasting US Dollar Popularity
The US Dollar continues its popularity and central bank use it as a reserve asset, possibly being one of the reasons which puts a floor under the gold price. Nations are opening their economies up to Chinese investment and in China gold has a long standing heritage and apparently China rather sees gold take the place of the Yuan/Renminbi (RMB) as a reserve and settlement asset.
The US Dollar is still the primary reserve asset used by central banks globally even though the USA has been at the centre of a trade war threatening to sink the world into a recession weaponizing its financial system and using it as a punishment for Russia, China and Iran.
No wonder central banks are shifting their currency reserves and US Dollars into Gold! Central Bank’s gold purchases 2019 were the highest since 1971 totalling 684 tonnes. The gross amount of gold purchased by central banks and monetary in authorities in 2019 rose by 17 tonnes over the previous year, which had been a 50-year record high.
The current popularity of the US dollar as a reserve asset is likely to support gold in US dollar terms going forward. Central bank gold buying is likely a way to divest US dollar reserves, as the global reserve asset has low-to-no yield in real terms, and rising political risks attached to it.
The gold buying that occurred in the first half of 2019 represented a year-on-year rise of 57%. To be sure, the decline of US popularity in the geopolitical arena isn’t the only reason why gold buying by central banks and other monetary authorities is rising. China appears to be promoting the use of gold as a reserve asset, and not pushing to internationalize its currency as a means of settlement.
China/Eurasian Push Advantageous for Gold Prices
China is in the middle of the biggest international infrastructure program in history. The Belt and Road Initiative (BRI) is a Chinese state-sponsored program that seeks to connect China to Eurasian markets, and global natural resources with China. The BRI is being funded by Chinese entities both public and private, with billions of RMB flowing into nations across planet.
It would be natural to assume that with the advent of BRI funds flowing offshore, the RMB would become a more widely used reserve asset, and also a means of international payment. This is not the case, as most BRI funds are ‘sent’ in the form of RMB loans, which are then spent directly back into the Chinese economy.
There is no way to know if China is intentionally supporting the role of gold in the Eurasian financial market, but the net effect of China’s resistance to push RMB usage outside of bilateral deals leaves numerous central banks with a dilemma: continue to hold USD and EUR, or shift reserve assets to gold?
On the central bank gold buying side, we see that numerous BRI-linked countries are buying gold. Over the last five years Kazakhstan, Uzbekistan, and Turkey have been among the top 10 largest buyers of gold for central bank reserves, with Russia and China holding the top two positions for both the last five and ten years.
Obviously, gold is taking on a larger role in the Eurasian financial system and this trend is likely to support gold prices in US dollar terms. China no longer has the desire to accumulate US debt in the way it did over the last few decades. In fact, Japan overtook China as the largest holder of US sovereign debt in 2019, though both nations are shedding US government debt on a gross basis.
Geopolitical Risks Support Safe Haven Assets
All risks to geopolitical stability support gold prices. The recent assassination of Iranian General Qasem Soleimani demonstrates how a seemingly benign geopolitical threat can quickly metastasize into a regional conflict. Not only Iran but any other events could upset the fragile geopolitical balance. Therefore, central banks, investment professionals and traders face new challenges in times of rising risks. One of the traditional safe-haven assets, government bonds, may not be safe anymore.
Today, the US is at the centre of a conflict that could easily shatter the value of the US dollar. Any issues with the US dollar’s value would eliminate the role of US debt as a low risk asset and plunge the global financial markets into chaos. There is no way to assign a probability to these sorts of events, but the conditions for a major FOREX dislocation are in place.
Rise of New Reserve Assets
The role of gold as a reserve asset in the West is limited, but many other regions are quickly adding gold to central bank or other official state reserve assets. Even in the absence of further geopolitical risks, central banks across Eurasia are likely to continue to add gold to their official reserves. China’s rise to economic power has not seen the RMB challenge the USD, which leaves many nations with difficult choices.
2020 seems to be the year where gold can maintain its present value due to central banks diversifying away from the USD. Gold may rise substantially from current levels if there is a geopolitical crisis or FOREX dislocation that involves the USD.
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