These Three Facts Show Gold Is Poised to Soar in 2021

At all times, people valued and revered gold; it was not only a means of enrichment, but also a sign of power. It is believed that it was gold that became the guide of humanity into a new era of metals.

It was associated with the sun, endowed with magical properties, and owning it was not only prestigious, but also dangerous. Gold has accompanied humanity for more than 6,000 years, royal jewelry, statues, in Egypt it accompanied rulers to the afterlife. Various means of payment replaced each other, but only gold did not change its significance.

Market situation: trends

Gold does not change its qualities, due to which it is stable, because no external factors affect it, it does not oxidize, does not dissolve, in the natural environment it remains in its original form. Most likely, this is why in our time many people prefer to invest their savings in the precious metal, this applies not only to states, large and small companies, but also to ordinary citizens.

Even the abolition of the gold standard in 1971 had little effect on the demand for gold. There are no examples in history where a long-term investment in gold would lead to a loss, which makes it a stable and reliable investment. Over the last decade, inflation in Russia amounted to 132.99%; if you calculate it, the money put aside for a “rainy” day has depreciated by almost 2.3 times, and money invested in gold has increased by 4.5 times.

Gold is the money of freedom

There have been attempts to ban gold, but each time they were unsuccessful. If it is driven into the shadows, its price increases significantly. It is impossible to control gold. Even the all-powerful USSR failed to do this completely.

The form of accumulation of gold by individuals for savings is practically already clear: it is physical metal in a form, transactions with which should not have problems with the law and in a form that is the most “liquid.” So, coins or even simple inexpensive jewelry, with a minimal premium for the work involved in making the “product.” Plus “familiarity, recognition” by the population, plus “security” and convenience for authentication.

True, gold has not been involved in payments for goods as money for 40-50 years. On the contrary, they buy it for dollars, pounds, euros, that is, for money. It is a metal suitable only for jewelry and electronics. But if on the other side of gold there are no specific goods for consumption or construction, then the acquisition of gold and its storage is the withdrawal of money from circulation, as Adam Smith wrote about this.

Gold price forecast for 2021

Nowadays, many are trying to make a profit from everything that surrounds them, and gold is no exception. Anyone can make money by selling and buying it; of course, the size of the investment matters, but as practice shows, the main thing is a long-term investment. There is an exception, exchange players use gold for short-term speculation and investment, for this you need to have skills and speed of reaction, because the price of gold changes every day and even a slight decrease or increase in price can lead to enrichment or loss of funds. Citizens can also invest their money in gold by purchasing gold bars, coins, and jewelry.

Gold and war

In the event of war, when general agreements collapse, gold should be bought where there are no agreements (cheap in the zone of robbery), and sold where general agreements are strengthened (expensive in the zone of a fattening world). Gold is still not a place for investment, but a tool for transferring surpluses into the distant, distant future, as a means that does not sour and is capacious, unlike pieces of paper.

Gold is a commodity that was valued previously (for 5000 years) and is valued now. Sometimes it’s more expensive, sometimes it’s cheaper. But for long-term savers, this is a great option.

The means of payment are somewhat different. Yes, it is established by the “sovereign”. But the same gold can be exchanged for a means of payment that is currently valid. It was possible and now it is possible. Of course, the question is the exchange ratio and it can be assumed that the “sovereign”, using its right, which concerns not only the right to determine the means of payment, can limit both the circulation and the right to own gold (remember the Great Depression in the USA).

How will gold prices change in 2021?

The London Metal Exchange is responsible for the pricing policy for gold; it has been a monopolist in this matter for about 100 years, the gold rate changes daily, and it is the main reference point for all organizations in the world without exception.

Studying various expert opinions, it is difficult to come to a definite conclusion about the price of gold in 2021, since the politics and economy of many countries can change at any moment. It is probably because of this instability that many are looking for alternative types of investments, such as stocks, bonds, land, bank deposits, real estate, and platinum and silver have also become more in demand. In addition, most ordinary citizens prefer various gadgets and phones as a practical gift. It is not justified to assume that the demand for gold will remain only in the industrial sector, because it has always been and remains a reserve asset that helps in the event of an impending disaster.

What affects the price of gold

First, let's look at the main factors that influenced the price of the precious metal in recent years.

Fed interest rate increase

Since the United States is a fifth of the entire world economy, any changes in the American financial system directly affect the price of all goods, including gold.

The Fed rate increase, which has been happening in the States recently, has led to the dollar strengthening. The stronger the American currency, the cheaper the goods denominated in it. Remember that gold grew for quite a long time and the time of its growth coincided with the period of the “zero” Federal Reserve rate.

Since with an increase in the rate, investors need to look for income-generating assets, gold automatically fades into the background - after all, it is more of a saving, protective asset and the profitability on it is quite low. Moreover, the Stock market has been on the move for many years and it is much easier to get a high% there.

Strong dollar

The stronger the US currency, the more expensive goods produced in the US are, and this also affects the decline in demand. The demand for gold is not spared from this decline.

It is enough to draw a parallel between the price of gold and the price of oil over the past 3 years, as you can see very interesting dynamics.

Infographic 1. Change in the price of Brent oil in dollars for 2015-2017

Infographic 2. Dynamics of gold prices in dollars for 2015-2017

A strong dollar (reflected in the price of oil) is a competitor to gold and therefore pushes its price down. However, as soon as the dollar begins to weaken, gold (and oil) immediately try to win back their previous positions.

Stock market growth

The more actively the securities market grows and the more growth points on it that bring profit, the higher investors' appetite for risk and the lower the demand for protective assets.

The rapid growth of the stock market has led to the fact that gold is not growing in price - over the past year there has been increased volatility in a narrow range.

Gold purchases by China and Russia

China is considered the main buyer of the precious metal in the 2000s and 1900s. In 2009, China bought almost 500 tons of gold on world markets. After which I didn’t repeat this for 6 years. However, in 2021 this trend reversed: China purchased about 700 tons of gold on the world market, and in 2021 about 100 tons more.

Table 1 China's gold reserves from 2009 to 2021

Also, over the past ten years, the Government of the Russian Federation has been an active investor in the precious metal. On the contrary, Russia’s gold reserves show a smooth trend: from year to year, reserves of the “yellow” metal are growing.

Table 2 Gold reserves of Russia from 2008 to 2021

The remaining countries - the world's largest economies (USA, Japan, Germany, France, India, Italy) - have not changed their gold reserves over the past 10 years.

Lack of large gold buyers

Since no one except the leading Central Banks is engaged in buying gold on a global scale, its price very much depends on consumer demand.

In 2015-2017, the demand for gold came only from China and the Russian Federation, and even then in 2021 China purchased 7 times less precious metal than in 2016. Russia buys gold from licensed producers within the country and its demand does not enter the foreign market.

India is a traditional buyer of gold jewelry and products made from it, but recently demand from there has not allowed the price to adjust.

Influence of external factors

The price of gold is influenced by factors such as:

1. Investment activity.
2. Unstable economy.
3. Natural disasters.
4. Public holidays.

There are many opinions and forecasts, let’s take a look at some of them. Some experts believe that the demand for gold will decrease; experts estimate the approximate cost at $1,000–$1,090 per ounce. There is another opinion that, despite the falling demand, the price of an ounce of gold will rise to $1,300.

In addition to demand, the price may also be affected by the planned closure of fields that are generating losses; only those that are worthwhile will be developed and financed. And if this really happens, the price of gold will stabilize and you shouldn’t expect a sharp jump upward. Don’t forget about the dollar exchange rate, because if you analyze the market, its influence extends across all industries. The US economy has not been in its best shape since the Obama administration.

Many did not like the new president's policies. Entrepreneurs did not support tax reform, Congress and the Senate rejected healthcare reform, and a large number of unemployed people also negatively affects the country's economy. And various disputes with NATO partners can lead to the cessation of established economic ties.

Last news

Democrats openly proposed impeachment of the president; this statement alone led to a 2% drop in the Dow index and panic in the stock market. Despite this, “gold” quotes remained on the sidelines and did not change their positions; investors in this situation began to invest in projects that would bring dividends in a short time. Nevertheless, at the moment, analysts are inclined to believe that there are no prerequisites for a sharp increase in the value of the dollar in 2018, but one should not count on its fall either.

So, if no major cataclysms occur in the near future, the price per ounce of gold in 2021 will stabilize between $1,200 and $1,300.

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