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    Here's how gold will perform in 2021

    Here's how gold will perform in 2021

    Here's how gold will perform in 2021
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    By CNBCTV18.com Contributor  IST (Published)


    Gold recorded an impressive performance in 2020, hitting an all-time high of $2,067/oz in early August.

    Authored by Saida Litosh
    Gold recorded an impressive performance in 2020, hitting an all-time high of $2,067/oz in early August. Despite the volatility and episodes of correction and consolidation in the latter half, it still gained 24 percent over the course of the year to hit an annual average of $1,770/oz, up 27 percent year-on-year. The yellow metal came under renewed pressure in early 2021 and has been treading water lately, trading at $1,843/oz at the time of writing, down by 5 percent from the level seen at the start of the year.
    The delay in the US $1.9 trillion economic rescue package, a lack of additional information on future policy guidance from the Fed, along with the strengthening dollar have weighed on gold prices.
    Looking ahead, while the medium-term outlook for gold remains favorable, 2021 may prove to be a challenging year, with further weakness likely in the short term. We believe that the overall macroeconomic environment remains supportive for gold. We are likely to see more stimulus measures being implemented by governments and central banks around the world in a continuous effort to revive the global economy. This, along with rising inflationary expectations, increased debt levels, and interest rates likely to stay suppressed for the foreseeable future should continue to support gold investment demand in 2021.
    Moreover, with the global pandemic being far from over and the ongoing risks associated with the development of new variants, vaccine production and distribution, gold will continue to benefit from safety buying. With that in mind, we may see the yellow metal rally towards highs witnessed in 2020 or even hit a fresh record level at some point this year, particularly if the road to economic recovery and return to normal prove to be challenging.
    On the other hand, gold appears to be in a period of consolidation, with investors waiting for the approval of the new round of fiscal stimulus in the United States, and the uncertainty around the timing and scale of the package will continue to cast a shadow over the gold price, at least in the short term.
    Furthermore, with the COVID situation likely to start improving later in the year, particularly around summertime and with the continued roll-out of vaccinations, we may see gold come under renewed pressure, with prices retreating further. Meanwhile, as economies continue to re-emerge from the COVID-19 crisis, we may see a pick-up in demand from key physical markets, although relatively high gold prices will likely keep that in check. We forecast gold prices to average $1,853/oz in 2021.
    Saida Litosh is Lead Metals Analyst at Refinitiv, an LSEG business. Views are personal
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