Gold Price Forecasts for 2021 – Will Value Increase or Decrease?

POSTED ON November 27, 2020
Gold Price Forecasts for 2021 – Will Value Increase or Decrease?

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Will Gold Price Increase Or Decrease In 2021?

2020 has been an uncertain year, without a doubt, for all sorts of things. With the widespread nature of the COVID-19 pandemic, it makes sense that many markets have been deviating from their usual trends. Usually, this is not bad news for gold, as gold generally benefits in times of uncertainty.

As you can see from the graph below, the price of gold has experienced a fairly consistent climb throughout most of 2020. Aside from a quick dip and recovery as COVID cases grew quickly in the middle of March, the price marched from $1500 to $2000 throughout the year.

Starting the year at a low 1527.10 USD per troy ounce, gold price hit a peak mid-August. In fact, the highest price of gold in history — $2,032.16 USD per troy ounce — was achieved on the 7th of August, 2020. Since August, prices have been trending downwards. As of November 22nd, the price of gold stands at 1890.90 USD per troy ounce.

While this data is definitely useful, what does it tell us about gold prices going into 2021? The classic investment advice of “past performance isn’t an indicator of future results” is as true as always, although it’s difficult to ignore gold’s long-term success over the past few decades. But it still begs the question: will gold prices increase or decrease in 2021?

 

What Affects The Price Of Gold

Before we look at how 2021 will play out for gold and gold prices, we need to have a basic understanding of the many factors that affect the price of gold.

Gold today is every bit a precious metal as it has always been. And as always, it’s prices are affected by a number of different factors. Everything from decisions of central banks on interest rates and inflation, and even the exchange rate can affect the price of gold. Lower interest rates and a higher inflation both tend to make gold more expensive.

Any weakness in the US dollar will also cause the gold price to rise because usually, gold and dollar share an inverse relationship. As such, when the value of the dollar decreases, it increases the value of currencies of other countries. This will lead to an increase in the demand for gold, which will subsequently lead to a rise in gold prices. You should also remember that when the US dollar loses its strength, investors want alternate investment opportunities and gold fills that need very well.

That demand — or rather, future demand — for gold can affect the price as well. Estimates show that the global demand for gold is about 1,000 tonnes more than the available supply. This lower supply with a vastly oversized demand also contributes to gold price changes.

And of course, gold is thought of as a stable, secure investment in times of financial uncertainty. When there are threats to the peace and harmony of international relations, or it seems tough economic times lie ahead, many investors may shift to quality, stable investments like gold. Things like erratic decision making when it comes to international policy by a president like Donald Trump, or a global pandemic, may have both helped to push gold prices higher.

 

The Bull Case for Gold in 2021

Many investment analysts are calling for a continued rise in gold prices into 2021. Vaccine news and the election of Joe Biden have reduced uncertainty in the market – this has caused a pullback in the market that many have seen as likely. However, as macroeconomic conditions unfold, many analysts think the price increase will revive.

At Bank of America Securities, analyst Michael Widmer has a forecast of $2000-$3000/ troy ounce for gold due to ongoing fiscal and monetary stimulus. In other words, government stimulus creates new money which drives inflation up. When that happens, an investment like gold should increase in value.

Analysts at Goldman Sachs have set their price target for the metal at $2,300 USD per troy ounce, stating that “In our view, the structural bull market for gold is not over and will resume next year as

  • inflation expectations move higher,
  • the US dollar weakens and
  • emerging-market retail demand continues to recover”

“Near term, however, it may be difficult for gold to generate a meaningful momentum in either a higher or lower direction.”

VTB Capital predicted in August that the gold price will hit $3,000 USD per troy ounce in 2022. Citibank also joined in on the positive predictions, with the bank’s analysts saying that they see gold rising to $2,200 USD per troy ounce in three months and to $2,400 USD per troy ounce in six to 12 months. Analysts at the Australian bank ANZ predicted gold to rise to $2,200 USD per troy ounce by the end of 2020 and then hike further to $2,300 USD per troy ounce by early 2021.

If you are curious about why the price of gold is going up now, Jim Steel, chief precious metals analyst at HSBC, explained: “Most gold rallies are supported by two features: debt and liquidity, and some varying degrees of one, the other, or both. Right now, the gold market is the beneficiary, and has been for quite some time, of both debt and liquidity, and by that I mean we’ve had highly accommodative monetary policies going on for a very long time.”

That makes another analyst who either direction or indirectly states that a dovish Fed will be required to keep gold prices going higher.

 

The Bear Case for Gold in 2021

While the majority of analysts seem to be favoring a slight increase in gold prices during 2021 – most we looked at were predicting a 10-30% rise, not all analysts were quite so rosy on this familiar investment.

Samuel Burman, an analyst at Capital Economics, sees gold hovering in its current price range throughout 2021. He wrote in a recent Precious Metals Update that “while the positive developments in finding an effective vaccine against COVID-19 have boosted investor risk appetite, we still think that gold prices will remain high in the year ahead.”

“All told, we think that persistently low US real yields will support gold demand and offset much of the weakness associated with an increase in risk appetite. As a result, we expect that the gold price will stabilize around $1,900 per ounce until end-2021.”

Burman focuses his concern on the falling US dollar. While USD will have its own ups and downs, the overall trend for the USD right now seems to be a downwards one which makes the new year look especially appealing for gold.

Fitch Solutions estimated that gold will average $1,850/oz in 2020-21, then fall to $1,700/oz in 2022 followed by other slight decreases in following years. The increase in supply by miners is cited for the major reason for this call.

Edison has forecasted situations that call for a much more dramatic lower – as low as $661/oz in 2021. Their primary reasoning is due to the Federal Reserve’s plan to shrink the balance sheet by almost 40%. In theory, that would bring gold prices all the way down. If they don’t affect the price and Edison prices gold just based on the future changes in the US currency (which has also been doing poorly), then they estimate the price at $1,622/oz.

So, not everyone believes that gold will continue its march upward. Investing is always a risky proposition, and when gold hit all-time highs in 2011 very few were calling for a multi-year decrease in price.

 

Dealing With Changes in Gold Prices

If you subscribe to the idea that gold prices are going higher as we enter 2021 and go beyond, you may be looking to take advantage of it from an investment perspective. If so, right now would be a good time to invest in some gold. We recommend buying gold bullion for investment purposes, such as gold coins or bars. You don’t need to buy physical gold though – there are many gold ETFs and funds that you can invest in too.

If the analysts’ predictions are correct, you should be well protected in 2021. If factors like the excessive and growing level of US debt and the high-cost spending promises from the President-Elect continue, gold could see a healthy rise in 2021 once again.

However, one must note that while current price projections are showing an upwards trend for gold prices in the upcoming year, global financial markets have been, are, and will always remain highly volatile. Which means that when it comes down to it, we can’t exactly count on all the positive predictions to play out as prophesied by the pundits and professionals. The price of gold may take a nose dive in the next few years, only to start a steady climb up again in a few years after that.

Convinced gold prices have seen their highest prices for a while? With prices backing down from $2000 to $1800 towards the end of 2021, you aren’t alone. If that’s the case, it could be a great time to sell your gold. Investment-grade gold of course, but you can also consider selling your scrap gold too.

Because of this volatile nature, you should always be aware of your options to deal with the gold that you may currently have.

 

Selling Gold

Gold prices are near an all-time high, and it’s always uncertain whether they will continue higher or see a multi-year dip like we saw from 2013-2019. If you have unwanted gold sitting around, it may not be a bad time to get rid of it. “Buy low, sell high” as the old adage says. And for now at least, we’re “relatively” high (about 10% all-time highs in August).

Whether you have scrap gold jewelry or investment-grade coins and bullion (which is what you’re likely to have if you’re investing in gold) or anything in between, we buy everything and we pay you a fair price for it. Whereas most other gold buyers you come across in the market pay as little as 25% of the value of your gold, at Cash for Gold Mailer, we actually post how much we pay for gold. The amount of cash you get depends on what you have to sell and how much, and are team is happy to answer any questions on how the value is calculated.

Ready to get started? You can request a free gold mailer kit now!

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