Gold price projections in June 2020

Following the model developed by the AXL Capital Management team, this report provides the projected levels of gold prices for June 2020. For June 2020, the model indicates a lower limit of 1,640US$/0z and an upper limit of 1,812 US$/Oz. This upper limit continues to increase will see if, in the coming months, it can indicate a trend.

The U.S. economy is following its recovery plan, and New York - the state with the highest number of COVID-19 infections - has also entered its first phase of economic recovery. With the U.S. employment data and the growing number of people infected -and dying- by COVID19, we will see in the coming weeks if Gold can reach the upper limit of the AXL Capital model: 1,812 US$/Oz or on the contrary, it is close to the lower limit; 1,640 US$/Oz.

The economic reopening and a resurgence of the virus crown correlate, in the short term, indirectly and directly, respectively, with the prices of Gold.

Likewise, in the last two weeks, there has been an increase in social unrest in the USA as a result of issues associated with racism, the cases of contagion in the USA by the COVID-19 exceed the record figure of 2 MM. However, to date, they have had no impact on the economic reopening or the volatility of the VIX.

Chart #1: The daily chart of the VIX volatility index remains between 23.8 and 32.9 in June.

Technically the US economy after two negative quarters went into recession. However, it's increasing economic reopening - and the turmoil on the NYSE - at the time of this report brings the NASDAQ to a record high of 10155. On the other hand, the price of Gold remains above 1,680 US$/Oz and closes at 1,736. Both scenarios demonstrate that the upward forces of the stock market versus the skeptics who seek asset safe, haven during times of uncertainty, are currently in a state of flux. 

    

Chart #2: Nasdaq Index vs Gold prices in solid positive correlation close to 0.9 since the stock market crash on March 16, 2020.

The monthly tracking of model estimates and gold prices from January 2018 to May 2020 for all values at the end of each month is within the budget. To date, the model operates within its 90% confidence limits.

Chart#3: Tracking model results vs. actual data gold price, monthly closing (10 am LBM) January 2018- May 2020.

The revision of the average estimation error issued by AXL Capital's model for May 2020 versus the actual average reported by the LBM ( 10 am) is -1.1%: 1,697 US$/oz vs. 1,716 US$/oz. These are within the model's error acceptance range.

Conclusion

AXL Capital Management's econometric model projects for June an upper level for Gold prices of 1,812 and a lower level of 1,640. The monthly average would be around 1,720 US$/Oz.

We will continue to analyze the global context also from the good Total Market Cap/USD ratio at the date of this report this ratio is significantly overvalued: 1.47 (31 trillion US$/21 trillion US$). We think that by the time the TMC/USG ratio gets close to 1. In summary, that the stock market has a strong, and healthy decline, we will probably see gold prices after a few weeks, reaching and exceeding 1,800 $/oz and with it great monetary benefits and a potential new rally for gold mining companies' stock prices.

Yro S. Cortez Ramos

Mining Business Development Manager

AXL Capital Management

yro.cortez@axlcapitalmanagement.com

Disclaimer: The results issued by AXL Capital Management are carried out with a deep level of analysis, however, they are subject to potential global macroeconomic variations that have a high level of uncertainty, so those results must be used only for information and do not represent purchase recommendations. / sale or short, long-term investments for the global Gold market, its derivatives, ETFs, or shares of mining companies or any other type of investment.