Gold and global instability
It is safe to say that coronavirus made 2020 an unstable year, and even 2021 doesn’t seem to look a lot different than it. Lockdowns worldwide, Black Monday and Black Thursday that made history in the stock market, the Russo-Saudi Arabian oil price war, delays in the Brexit deal, hectic and controversial US presidential election; a lot happened last year. But, unfortunately, 2021 seems to take after this socio-political-economic stability, with the military declaring a coup in Myanmar and overthrowing its democratically chosen leaders.
It is a fact that whenever there is global instability or turmoil, currency, any currency, is given the backseat because precious metals take over. If we look back and go through the market trends of 2012 when everyone believed that the world would end, gold prices reached a new high, and precious metals enjoyed a bullish market in the next year. History repeated itself in 2020 when gold became the first investment choice for many amidst the rising political and economic uncertainty.
The yellow metal became the preferred choice of those who aversed to risks and diversified their portfolios. Gold prices went as high as $2000/ounce in 2020, but the question that many investors are asking now is if gold prices will remain this high in 2021 as well or not. Will they go beyond $2,000 per ounce?
Let’s recap gold’s performance in 2020 and throw light on some older facts as well. We will also discuss the factors that may drive its value in 2021. Finally, we will review the latest gold price forecast for 2021 through some famous analysts’ eyes.
Gold price today in the USA
Gold price this month chart is presented below:
1 troy oz gold is worth as 1.097-ounce gold or 31.1 gold grams. Currently gold price per ounce is
One tola gold is equivalent to 10 grams of gold. Therefore, ten tola gold price is the same as 100 grams of gold.
Gold Price Forecast 2022
Is Gold Going Up?
Yes, the gold price is going up in 2021. because of the following factors:
- The real Interest rate is negative.
- US Inflation is rising.
- Investors invest in metals more than in bonds.
- Potential crisis in the first part of 2022.
- Technical analysis shows a bullish pattern on daily, weekly, and monthly charts.
Gold price forecast for 2022. year close is around $2000.However, silver is going up faster than gold.
We are well into the first half of 2021, and while everyone is hopeful because of the vaccine, its manufacturing is still limited. Many people are displaying negative reactions to it. We can see the economy recovering, and people are slowly returning to their old routines but will this be enough? Let’s see what the analysts have to say about the yellow metal.
An analyst at Capital Economics, Samuel Burman, shared his views on the topic. He believes there will be a significant recovery in economic activities because people have started getting vaccinated. He also sees the probability of further selling of ETFs backed by gold. However, even though he considers economic recovery, he is optimistic about gold. According to him, finding an effective vaccine will not bring down gold prices, and 2021 will be suitable for gold.
He also believes that persistently low US yields are highly likely to support gold demand. This will ultimately offset a large chunk of weakness associated with a rise in risk appetite. This will stabilize gold rates at around $1,900/ounce by the end of 2021.
Sharing their gold price forecast, Goldman Sachs’ analysts firmly believe that their bullish outlook for the yellow metal will persist in the upcoming year. It is likely to reach a price target of $2,300 per ounce. They continue that the structural bull market for this precious metal is not yet over. They think it will resume in 2021 as inflation is expected to increase. It will subsequently weaken the US dollar. However, they maintain that it might be difficult for gold to sustain any momentum in the market in the short term.
Citibank also has a similar view. Their analysts ushered in their gold price prediction that they can see the metal reaching $2,200/ounce in the next three months and to $2,400/ounce within a year.
Analysts at the Australian bank, ANZ, predicted that gold would reach $2,200 per ounce as 2020 culminates. They are also highly optimistic and believe that the prices can quickly get $2300 in 2021. However, we believe that this will likely be the highest price for the commodity this year.
Jim Steel of HSBC is the bank’s chief precious metals analyst. As per his predictions, the metal will likely cost $1,965/ounce in 2021. He believes that it will strengthen in the first half of the year. It may even see some moderation in the other half, but that is just the average. This means that the prices will likely stay close to $2,000 for some time and drop to $1,900 in the second half of 2021.
However, Steel did warn investors by saying that the yellow metal is susceptible to geopolitical risk. The rapprochement on the trade issues can change the game altogether. Now that the geopolitical system has changed and the new Biden administration is in power, it is still difficult to predict how the USA’s trade relations with other countries will pan out. The Biden administration will likely form close allies with other nations, which went sour under the previous administration. This is likely to impact trade positively, thus, bringing down the price of gold.
Trading Economics, unlike others, has bearish gold predictions. The precious metal prices can quickly drop to $1,749/ounce within 12 months.
An online forecasting source, Wallet Investor, has a different opinion. It believes that the metal will most likely be 2021 at $2,124/ounce; and $3,048/ounce in 2025.
Analysts at Heraeus Precious Metals shared that the worsening global situations because of the pandemic weaken the economies, which has ultimately triggered the selling of commodities and assets in the financial markets. Gold was also amongst the things which were sold off. The gold price has a strong inverse relationship with US bonds.
Gold’s Performance in 2020
We are in the first quarter of 2021, and it is too soon to predict anything, but it would be easy to predict the future of gold by looking at how it performed last year. In 2018, gold lost its edge and fell to $1800 per ounce. However, it had an astonishing recovery in 2019 when it surged by almost 20% and closed the year at $1,519/ounce. The trend continued into 2020 when its prices rose to $1,672/ounce by 24th February 2020. It is interesting to see that this was when the governments had just started taking coronavirus seriously.
In mid-March of 2020, the broader market sell-off witnessed a downfall in the prices of gold. At that time, it was trading at $1,477/ounce. But, it rapidly hiked past this rate as unprecedented economic stimulus and low-interest rates boosted investor interest in gold that is often seen as safe-haven assets.
In early June 2020, the market dipped yet again, only to break through its previous records. It reached an all-time high later in the summer of last year. On 6th August 2020, gold prices sat comfortably at $2,070/ounce. This was an exceptional growth of 35% compared to the beginning of 2020 and 40% compared to March’s lows. This spike’s driving factors were the weakening of the US dollar and several significant economic and geopolitical events happening in the global arena. Some of these events were the EU’s agreement on a €750bn coronavirus recovery fund. Another one was the closure of the Chinese consulate in the US.
September presented some good days for the USD, and the currency started to pick up. As a result, the metal retreated and traded between $1,900-$1,950/ounce. It dipped to $1,865/ounce at the end of October, but the uncertainties regarding the US presidential election pushed the precious metal up, and it peaked at $1,960/ounce on 9th November 2020. But, as soon as Pfizer announced its Covid-19 vaccine, the gold market fell a little, and it was trading at $1,900 per ounce.
It is important to note how economic and socio-political stability is inversely proportional to gold prices. As soon as the conditions stabilize, gold prices begin to pull. Similarly, when the USD strengthens, gold prices become weak.
Let’s Do a Quick Recap
Before we dig deeper into the gold forecast for this year, let’s quickly revise the latest trends that can potentially drive gold value going forward.
It is crystal clear that political and economic instabilities fuel these precious metal prices. More uncertainties mean higher gold prices, and the year 2020 was full of nothing but these uncertainties and shocks on a global level. As a result, investors, to hedge their portfolios, have moved to metals, especially gold and silver. They are adding these to their holdings in every shape and form. Gold bullions, stocks, exchange-traded funds (ETFs), and whatnot. This, in turn, is lifting the gold’s value higher.
In 2020, inflation was also on everyone’s mind and other issues. As governments tried to compensate for the damages done by Covid-19, in the form of quantitative easing and fiscal stimulus, trillions of dollars were allowed to enter into the global economy. McKinsey conducted research and concluded that this 2020’s stimulus had already exceeded the previously taken measures during the global crisis of 2008-2009.
As more currency was in circulation, investors felt that its value had decreased. This encouraged them to switch from the USD to precious metals, especially gold.
If we are talking about the near future, the most important factor determining if gold prices will go up or not is the coronavirus. The cases start going down by the end of 2020, but now the world leaders are bracing themselves to deal with its second wave. The issues have started to rise again, and the governments are talking about reinstating lockdowns. In some places, the governments have already imposed short-term lockdowns. This will make things even more difficult for the already struggling economies. If the governments decide to introduce a new stimulus plan or a fresh fiscal, it will push gold prices higher.
The question again is if gold prices will go up in the future. It will depend on whether or not the global economy continues to remain stagnant. In addition, factors like the continuation of the pandemic and continuously rising geopolitical tensions will impact the already disturbed international trade. Unfortunately, it doesn’t seem like the situation is getting any better. If this continues, gold prices will be climbing higher. The new prices might even break previous records.
Is gold a good investment for the year 2021? While no one can predict any financial instrument’s exact future, it is safe to say that most forecasts favor the metal. These predictions point that the prices of gold will either increase in 2021 or remain steady.
One must keep in mind that while most projections are generally bullish, the global financial markets, due to the economic and health crisis, remain highly volatile. This makes predicting the prices of gold will be rather tricky.
For the time being, we need to keep our eyes on the metal prices and think thoroughly before investing.