Gold Outlook 2021: Could The Metal's Price Rise Further?

Gold prices in India surpassed Rs 57,000 per 10 grams for the first time ever in August of this year after US spot gold hit an all-time high of $2,072.4951 per ounce. The surge in 2020 was due to heightened economic uncertainties after the COVID-19 outbreak that pushed major economies, including India, into a technical recession.

Unprecedented monetary and fiscal stimulus announced this year to combat the impact of coronavirus and a sliding dollar index, supported the precious metal at lower levels.

Rates are now off the all-time highs, and analysts from reputed brokerages have published their outlook on the metal for the upcoming year 2021.

Axis Securities

"Gold suddenly lost its momentum due to ‘Risk on' trade in the global market amid positive development on vaccine front. Equity markets hit a fresh high in the month of November on account of relief from an uncertainty of the US elections and vaccination news. Overall investor's sentiments have improved in the last few days. Now, investors are betting higher on riskier assets like equity, these improved sentiments were further stoked by the optimism on the vaccine development after the upbeat results shown by two US drug manufacturers," said Axis Securities in a note.

"All these developments are keeping the gold prices under pressure. The improvement in global economy and likelihood of more predictable trade policies will further keep the gold prices range bound. However, lower interest rates and dovish policy stance could continue to attract investments in gold. We continue our Neutral stance on gold."

Kotak Securities

Kotak Securities said that ETF outflows have been weighing on the gold price.

It added that gold remains supported by stimulus expectations in the near term but "we do not expect a sustained rise as Fed's stance was largely anticipated and US leaders are still to finalize a stimulus deal and ETF investors are still not buying."

Goldman Sachs

Goldman Sachs is of the opinion that gold and bitcoin can coexist. The investment bank believes that the cryptocurrency does not pose a risk to the existence of gold as a safe-haven asset.

"Gold's recent underperformance versus real rates and the dollar has left some investors concerned that Bitcoin is replacing gold as the inflation hedge of choice," the bank said in a note. "While there is some substitution occurring, we do not see Bitcoin's rising popularity as an existential threat to gold's status as the currency of last resort," it said.

Jefferies

"We expect the US dollar to weaken modestly as the global economy continues to heal. Investors should consider diversifying their portfolios to gain exposure to assets denominated in other currencies," JP Morgan said its Outlook 2021 report.

Credit Suisse

Credit Suisse expects gold to keep moving upwards and average $2,100/ounce in 2021, peaking at $2,200/ounce in July-September quarter, but lowered its project from its previous estimate of $2,500/ounce.

"We think any near-term pullback in gold prices due to Covid-19 vaccine approvals and the rollout is a good entry point because the economy remains fragile and the post-pandemic recovery will be gradual at best, meaning a low rate environment and an elevated gold price environment is here to stay at least for the next few years. Risks to our view are a quicker-than-expected US economic recovery, a more hawkish US Fed, and lingering weakness in retail demand for gold," Credit Suisse said in its 16 December report.

(With inputs from agencies)

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