Is Gold going to Rule 2021?
HOW GOLD SAW SUCH AN ALL-TIME HIGH DURING THE TIME OF PANDEMIC?
A sharp turn in global monetary policies that led to a low-interest rate scenario and unprecedented liquidity, which began in mid-2019, gave a boost to gold price in all major currencies, making the yellow metal attractive for investors.
Interestingly, the gold prices have seen a dramatic new high of 28% since the start of 2020, spurred by the coronavirus pandemic. Gold was priced at US$1,950.85 per ounce as of Sept. 18, jumping from US$1,520.55/oz at the start of 2020. Most analysts expect the pandemic and its economic fallout to further buoy the precious metal, but price expectations begin to diverge markedly as they look further ahead. Though macroeconomic conditions appear likely to remain fundamentally supportive for demand in the short term, supply is set to expand more quickly than in previous years.
If you look back at the financial crisis, gold prices zoomed higher from mid-October 2008 after the US Federal Reserve acted to stimulate the country’s economy with its so-called $700 billion (Dh2.57 trillion) “big bazooka”.
THE FUTURISTIC 2021 FOR GOLD
According to Wall Street’s Experts, the new Start-Ups or businesses are more likely to file for more bankruptcies, and reports depict that there are greater chances that it will create more shocks for the global economy. Now, this can directly have a major impact on the gold market which could once again help the gold price to move higher.
Another thing that the experts are bidding high-on that is surely going to influence the gold price is the trend in the dollar index, which is determined and monitored by the Federal Reserve’s monetary policy stance. According to the most recent Federal Reserve meeting, it was clear that the Fed is more optimistic about the economic recovery, and this made them upgrade the growth forecast for the U.S. economy.
Once again, if the virus is contained, and Covid-19 remains under control, the Fed will likely change its stance toward its forward guidance. This means that the Fed could start preparing the market to begin scaling back from its asset purchase program. If the markets perceive the Fed’s stance as hawkish, it is likely to bring life to the dollar index, which could be negative for the gold price.
To conclude the above story in short, the bottom line is that the gold price trajectory in 2021 is very much dependent on the coronavirus situation. If the situation continues to improve during the first quarter of 2021, investors will favor riskier assets, and that means lower gold prices for the rest of the year.