Where is the price of gold headed in 2021? Ever since the 1800s gold rush and the printing of the first gold-backed U.S. paper currency, the price of gold has always been used as a measure of the U.S and the world’s economic health. The price of gold is a reflection of the faith of commodity traders in the economy, and right now, it is predicted to remain where it is ($1800-$1900/ounce) instead of skyrocketing owing to some good news of the economy recovering from the damage caused by COVID-19.
See, gold is considered a safe haven for investments. When investors sense uncertainty ahead, including inflation, a rise in unemployment, and a negative yield on government bonds, they put their money in gold. When they forecast certainty, they take their money from gold and put it in real estate, stocks or bonds because, at that time, they’ll be more profitable than gold.
Throughout the COVID-19 pandemic, the price of gold has shone brightly. The demand for gold was furthered by safe-haven purchasing and international policy support in response to the crisis.
Throughout the world, central banks eased monetary policies, and governments implemented fiscal stimulus to soften the global recession caused by the pandemic. Interest rates and treasury yield also crossed to the negative territory, causing precious metals to rise. Another contributing factor for the upward trending price of gold was mine shutdowns due to the pandemic or other factors.
But now, the economic outlook is good, and experts predict that this year’s price of gold will likely trend close to its current level. The global economy is expected to pick up considerably as vaccination activities proceed smoothly in various parts of the world and lockdown measures disappear.
Positive news on the vaccination activity, reduced inflation, and rising Treasury yields are pushing investors to act bullish again and sell their position in gold and other safe-haven investments.
According to Focus Economics, the gold price will average $1889/troy ounce in the fourth quarter of 2021 and $1823/troy ounce in the fourth quarter of 2022. However, experts still warn to watch out for logistical challenges to the vaccine’s transportation and distribution. If vaccination activities go faster, the gold prices will fall significantly, but if the vaccine distribution hits a snag, the price of gold won’t fall. Also, the present gold price levels are expected to persist over the next few years because of downside risk.