The gold market is currently struggling with the mark of 1,850 USD per ounce, but more and more analysts state that the precious metal has significant potential to rise in 2021.
At ING, for example, they believe that the news about various vaccines has led some investors to exit the gold price for a short time, also in view of the approaching end of the year. Fundamentally, however, the experts are of the opinion that the outlook for the gold price in the coming year will remain positive.
The bank’s latest forecast is for an average gold price of $ 1,965 an ounce, with gold expected to rise above $ 2,000 an ounce by the third quarter of 2021. In the short term, a large chunk of the outlook for the yellow metal will depend on the timing and extent of the next US stimulus package, as well as the spread of COVID19 vaccines. Although this is foreseeable, ING is actually expecting another slump in economic activity due to the latest wave of lockdowns.
According to the analysts, inflation and interest rates will have the greatest impact on the gold price in the coming year. At ING, the expectation is that nominal interest rates will fall to 50 basis points, which is a halving of the current level. But even if nominal interest rates recovered later in the year, real interest rates would remain low, it said.
Inflation expectations are likely to outpace the rise in nominal interest rates, so real interest rates are likely to weaken further, on which the bank’s positive medium-term outlook for gold is based.
Investment demand, particularly for listed products backed by gold, continues to be the biggest driver of the gold price. However, ING also sees a return in demand for physical gold when the world recovers from the corona pandemic. This “pent-up” demand will significantly increase physical consumption in 2021, as consumers will return to the market mainly due to celebrations and weddings. While higher prices may scare off some consumers, the government’s stimulus programs and an increase in disposable income should, in the opinion of analysts, provide sufficient liquidity for consumers to increase gold purchases.
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