We should always take the price forecast with a grain of salt since we are only speculating using the information we have up to this point. We can’t know for sure what will happen in the future, and knowing the market is volatile, we certainly don’t know what can affect the prices. Even the most outstanding expert can only predict so much. Many are interested in how gold will perform in 2021 since experts say the price will rise, but many factors can influence this in a good or a bad way. Let’s see what this year could have in store for gold stocks on the market.
These predictions are compilations of many experts, so keep in mind that’s what can make them slightly (or very) different, and then see for yourself what you would expect from it given what you know.
We have seen many experts predict gold will surpass $2,000 per ounce. It is a very bullish point of view, where they say there could be some setbacks, but gold will only continue to rise during the next couple of years, nevertheless. If we compile all forecasts together, it seems like the price of gold would be average to $2,300 per ounce. While CPM Group predicts the price will sharply rise, it could happen only in a case of political or economic crisis (investors would buy lots of gold in that case). One of the most respected analysts, Ross Norman, predicted the price would rise 20% in 2021.
Trading gold in 2021 will be a wild ride, so we have to look at what could impact the price, whether positive or negative, if we are serious about trading, and have an interest in gold.
The monetary stimulus comes from the Fed, and we can’t expect it to go lower this year. Charles Evans even mentioned we should prepare ourselves for further expansion of the balance. On the other hand, the stimulus that comes from the president and congress is called a fiscal stimulus and is more likely to burst this year. President Joe Biden stated fiscal stimulus would continue to support people, and there is more coming. The amount is not clear, but everyone expects something around $3 trillion in 2021.
Why do we mention this? Because it can affect gold most strongly. It’s in everyone’s interest for the fiscal and monetary stimulus to come to fruition because it would mean many good things for investors and traders. Let’s name a few.
It seems like monetary stimulus conditions will be super easy, so this means we should prepare for low-interest rates (lower than ever, if we rely on this information). We can’t forget the “real” rate, because it has been negative for some time in the U.S., and the real yield will continue to go down if inflation begins. Bear in mind the relationship between real yields and gold can show you the most exact predicament of the gold price.
The price of gold is always in dollars, so you can imagine how much influence the U.S. dollar value has on gold. If the dollar goes weaker, the price of gold will go up. Experts predict the U.S. dollar price will go down because of the number of fiscal expenses expected in 2021. In case the pandemic is somehow contained, this would mean the stimulus wouldn’t be so big, which would give the opposite result. We also might expect higher inflations rates (exceeding 2%), that could throw us off track.
COVID virus continues to evolve and change, and this could mark a new wave of lockdowns and no crossing borders. The vaccine is here, but it isn’t tested out thoroughly. We are yet to find out if it will work on a new “version” of the virus or not. We have to consider this as well. What does this have to do with gold? If the economy starts to recover thanks to the vaccine, we will still have a prolonged recession because many small businesses were shut down or struggling. Many of them went bankrupt, and unemployment levels are high. The gold performs well during the recession, but we can’t be entirely sure about how the price will go.
Black swan can be another market event that can catch everyone off guard. Many factors can happen, such as Brexit, many political and social discrepancies and even stock market crash. In a market sense, a black swan signifies an event that was so unforeseen everyone is taken aback, and it’s hard to react right away. Let’s hope for the best, regarding the world and the economy, and keep your eyes on important events. It is the only way to see where the price is heading, whatever the predictions are.