Gold investors face challenges ahead of Glory 2020

Gold wrapped up its best annual performance in years. What comes next is idolatry surviving on unpredictable dynamics, ranging from the strength of the global economic recovery to the health of the US dollar.

One of the most active sell-offs in gold futures for February delivery ended Thursday’s session at 1,895.1d, up more than 24% from 2010. It also surpasses the S&P 500, which grew 16% in 2020. The futures settled at 1,893.1 on Thursday.

After rebounding earlier in the year, gold prices have slipped back to 2,069.50 an ounce in August on signs of recovery in the global economy. Investors tend to buy metals when they are worried about holding risky assets like stocks or corporate bonds.

Therefore, some investors expect a more moderate gain in 2021 as the economic outlook improves. Significant changes from record flows at the beginning of the year, according to World Gold Council data, Nov. From 6 to 18 December, investors pulled more than 10 10 billion from gold-backed exchange-traded funds.

U.S. Much will depend on the strength of the recovery. Traders say the coronavirus epidemic re-emerged in Georgia next month to determine control in the Senate to support gold prices, and the run-off election in Georgia could lead to market volatility.

But many investors expect a strong recovery in 2021. According to economists surveyed by the Wall Street Journal, the rollout of the coronavirus vaccine in the second quarter is expected to lead to an increase in rent and gross-domestic-product growth.

Critical for investors’ gold outlook: Return on bonds when adjusting its direction or inflation known as real yield. The real yield on the benchmark’s 10-year Treasury note will be around minus 1%, said Capital Economics economist James O’Rourke. Said. It expects real yields to fall further and gold prices to reach 2021 per ounce per ounce.

Some forecasters expect a weaker dollar to limit the price of gold.


David Gray / Agence France-Presse / Getty Images

“Actual yields are not always the driver of gold prices, but with such low interest rates and inflation expectations, they are the primary driver.”

A strong recovery, meanwhile, could trigger a surge in real yields and hurt the value of gold. The real U.S. Significant moves in Treasury Yield have been linked to the opposite move in gold prices since the 2008 financial crisis, according to JPMorgan Chase & Co. According to the data, which increases every 0.25 percent in real 10-year Treasury yields, gold moved 80 ounce in the opposite direction.

After consumers recommended buying gold for 2 years this past July, Natasha Kaneva, head of commodity research at JPMorgan, now expects the true crop to grow by the end of 2021 and gold prices to fall by 16 per cent.

“If real yields are rising, why would you buy gold?” She said.

Yet some expect a weaker dollar to limit gold declines. Many Wall Street forecasters have predicted an increase in government spending and a shift to riskier assets in the U.S. Will pull on the currency, which is bought with gold and sold with the dollar dollar, so a weaker dollar dollar makes gold cheaper for foreign investors.

The WSJ Dollar Index, which measures measures against 16 foreign currencies, lost more than 5% during 2020, its biggest annual decline since 2017.

Silver prices have also recorded record years. The most actively traded silver futures contracts ended Thursday’s session.4 26.412. That’s 47 percent of the year’s growth – Silver’s best performance since 2010.

Because silver is used to make products as diverse as electronics and solar panels, some analysts say demand could increase even as the global economy improves.

“The story with silver is very much like gold. What’s different is that an improvement in industrial demand will help push silver prices slightly higher than gold next year, ”Mr O’Rourke said.

Gold prices are becoming reckless during times of economic uncertainty and the craze for investment calls into question the metal’s reputation as a safe haven. WSJ explains. Example: Liz Ornitz / WSJ (originally published August 14, 2020)

Market review at the end of 2020

Write to Sebastian Pellegrino at [email protected]

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