Gold and silver markets have been particularly volatile this year, falling sharply in March as the Covid-19 pandemic spread, then exploding to multi-year highs in August just before falling back in September.
What is the outlook for gold and silver? Are prices ready to resume the rally, or has the opportunity to invest in metals passed?
Our analysis of gold and silver examines what has driven volatility and analysts’ forecasts for the metals through 2021.
Flight to safety boosts gold and silver markets
The price of gold reached an all-time high of $2,069 an ounce on August 6, up 35% since the start of 2020 and 40% from March lows. After the initial reaction to the spread of the Covid-19 pandemic, when investors sold assets across the board, gold became an increasingly attractive investment as low interest rates and the stimulus unprecedented economic spurred safe-haven demand for the metal as a store. valuable.
Gold and silver price charts show the gold to silver ratio – the number of ounces of silver needed to buy one ounce of gold – topped 114 in April as that the silver market lagged gold, but the ratio fell towards 68 in August as gains in the white metal accelerated against gold.
Silver started the year at just under $18 an ounce and soared 63% to over $29 in August – its highest level since the start of 2013. The price of silver has been under pressure in the spring as industrial demand fell as manufacturing plants closed during the shutdowns. to slow the spread of the pandemic. Unlike gold, the majority of silver’s demand comes from its physical use in industrial products. However, the price surged in July in response to renewed interest from retail investors out of the gold market, analysts said. The white metal posted its biggest monthly price increase in July since 1979, rising $5.58 an ounce or 29.9%.
Investment demand has exceeded consumer demand for gold and silver, with jewelry sales in the first half of this year falling 46% from the first half of 2019 as consumers were stuck and the disposable income has been reduced by job losses.
Precious metal prices fell in August as the US dollar appreciated and the US government failed to agree on a new round of economic stimulus. However, analysts expect the macro environment to support further gains for gold and silver.
Gold and Silver Price Prediction: Rally Resumption, Price Rise to 2021
So what is the outlook for future gold and silver prices? Analysts point to continued economic uncertainty and signals from central banks that they will tolerate higher inflation as likely to push the metals higher.
In a recent note on gold, an analyst from Danish investment bank Saxo said: “There is a clear argument that most portfolios should have a position in this versatile and multi-faceted commodity. It is more than just a defensive play or a store of wealth, it is an active investment in the face of significant inflationary pressures and macro and political uncertainty. It is a hedge against market monetization by the Central Bank. I would discourage the idea that an investment in gold right now is consensual and belated. Now is not the time to think too much about what is a classic thematic investment. »
Ole Hansen, Head of Commodities Strategy at Saxo, commented: “We maintain a positive outlook for gold, and while we don’t see any significant short-term moves in real yields and inflation, the uncertainty ahead of the U.S. presidential election in November should be enough to deter anyone from taking profits before our expectations of a weaker dollar and weaker real yields eventually push prices higher in 2021.”
In their latest gold price update, Citibank (C) analysts said they are tactically bullish on the metal in the near term and structurally in the medium term. They are maintaining their 0-3 month price target at $2,200 per ounce and a six to 12 month target at $2,400 per ounce. They raised the estimated benchmark price of gold for 2021 by around $300 an ounce from an update in early July, to a record high of $2,275 an ounce.
“A higher gold price, coupled with the continued recovery in industrial demand, particularly from China, means that the price of silver should rise over the coming year,” they said. wrote Capital Economics analysts in a recent gold and silver forecast note. “Overall, a market deficit coupled with a rising gold price is expected to push the price of silver to $25 and $27 per ounce by the end of 2020 and the end of 2021, respectively. Demand of non-interest-bearing safe-haven assets, such as gold and silver, is expected to rise as real yields in the United States come down a bit.
In their latest gold and silver price forecast, analysts at Australian bank ANZ expect metal prices to rise through 2021, peaking in March.
ABN AMRO analysts released a gold and silver forecast in late September that put gold at $2,000 an ounce at the end of 2021, down from 1,900 at the end of 2020, and silver at $22 an ounce. ounce, versus $20 an ounce.
Meanwhile, analysts at Heraeus Precious Metals also gave their own gold and silver price forecast for September: “Despite weak consumer demand, strong investor demand should continue to support the Much of the political and economic uncertainty is already factored in. However, the pandemic is far from over and if the economic outlook deteriorates, central banks could further increase their monetary interventions.
“Investors will continue to see gold as a safe haven, pushing prices higher. In the near term, gold could trend sideways as it consolidates after its rapid rally to record highs in the early part of the month. August. The price is estimated to trade in the range of $1,850 per ounce and $2,200 per ounce in the final months of the year.”
Heraeus analysts added, “With the economic outlook still uncertain, further stimulus by governments or central banks could keep investors interested in silver. The price is likely to trade within the 22 range. $.5 an ounce and $35 an ounce for the rest of the year.”
WalletInvestor.com forecasts gold prices to reach $2,098 per ounce at the end of 2021, up from $1,892 in December 2020, and $2,926 per ounce by September 2025. According to the service, the Silver prices are also expected to rise, up to $24.37 per ounce in December 2021 from $23.44 in December 2020, rising to $29.38 per ounce by September 2025.
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