gold price

gold price

Olivier Le Moal/Adobe Stock

The Global Precious Monthly Metals Index (MMI) gained 5.3% for this month’s index value, as the gold price surged to start the year but couldn’t hold onto those gains.

January 2021 Global Precious MMI

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Gold price ups and downs

Amid ongoing economic uncertainty, a falling dollar and the coronavirus pandemic, many market watchers are keenly interested in the fortunes of gold.

While numerous analysts predicted gold could reach $2,500 per ounce last year, that didn’t happen.

The gold price did reach as high as $2,034 per ounce in early August, inspiring speculation with respect to how much further the price had to run.

Gold cooled off in the ensuing weeks before heating up again throughout December and early January. The gold price reached $1,957 per ounce during the first week of January before retracing, dropping to $1,828 per ounce as of Jan. 10.

Meanwhile, the U.S. dollar — which generally correlates inversely with the gold price — hit a two-year low back in August (when gold reached its 2020 peak). From the beginning of November to early January, the dollar lost approximately 5% of its value.

However, the dollar has staged a small rally over the last week. The U.S. dollar index fell to 89.44 as of Jan. 5 before bouncing back to 90.47 on Jan. 11.

So what could drive the price this year?

“Physical demand could pick up in 2021,” MetalMiner’s Stuart Burns wrote last month. “China is forecast for potentially double-digit growth in 2021 with a strong tailwind from this year’s stimulus measures and a robust recovery in consumption.

“India, the other major physical gold market, does not look as positive. The country will likely have a slow vaccine rollout and is facing severe banking risks. That could hamper the Indian economy’s recovery in 2021. In turn, a slower recovery could impact consumer appetite for spending, with unemployment up and some sectors still struggling.”

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The Global Precious Monthly Metals Index (MMI) gained 1.5% for this month’s index value, as the gold price has lost some of its gains from the summer.

December 2020 Global Precious MMI chart

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Gold price gains

MetalMiner’s Stuart Burns recently checked in on the gold price and where it might be expected to go in 2021.

As precious metals watchers know, the gold price has enjoyed a sharp rise this year amid the global pandemic.

“The bulls are predicting a resurgence in the price to U.S. $2,300 per troy ounce in 2021,” Burns wrote.

“Goldman Sachs stated last month they had a target of $2,300, as recovery from the coronavirus-related recession fuels higher inflation next year. Goldman’s economics team sees inflation rising to 3% next year before weakening through year-end. Further fuel could be added from a recovery in demand from India and China.”

However, in the short term, the gold price has retraced since its August peak.

“Investors rotated out of safe havens into riskier assets on hopes of a vaccine-induced economic boom next year,” Burns explained.

“The story here is more conflicting. Yes, vaccines appear to be coming faster than London buses in rush hour.

“However, so are infection rates and hospitalizations.”

So, as with most commodities and commercial sectors, much of what happens next depends on the the world’s ability to get the pandemic under control and begin to return to pre-pandemic routines of life.

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The gold price has been on the rise during the pandemic this year. As infections rise, vaccines loom on the horizon and economies gradually recover, what do we expect from the gold price in 2021?

Gold price bulls

The bulls are predicting a resurgence in the price to U.S. $2,300 per troy ounce in 2021.

Goldman Sachs stated last month they had a target of $2,300, as recovery from the the coronavirus-related recession fuels higher inflation next year. Goldman’s economics team sees inflation rising to 3% next year before weakening through year-end. Further fuel could be added from a recovery in demand from India and China.

Punchy, you may think.

The gold price rose strongly in the first half of 2020, in large part due to the fall in both nominal and real yields. An increase in safe-haven investment demand in the wake of the virus-induced economic slump also contributed, Capital Economics wrote recently. The research house explained the the price rise has been strong since the start of 2019, riding an 18-month surge in demand for ETF holdings as a safe-haven investment. That is a process that gathered pace in the face of the pandemic.

Gold price retraces after August peak

However, the gold price has dipped from its August peak. Investors rotated out of safe havens into riskier assets on hopes of a vaccine-induced economic boom next year.

The story here is more conflicting. Yes, vaccines appear to be coming faster than London buses in rush hour.

However, so are infection rates and hospitalizations.

It will be a dark winter, as actual vaccination rates fail to live up to expectations and people continue to die. However, markets generally look forward, not at the present. The expectation remains that, sooner or later, markets will recover as vaccinated immunity spreads through the population.

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gold bars

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The Global Precious Monthly Metals Index (MMI) fell 2.2% for this month’s index reading, even as the gold price surged in late October.

November 2020 Global Precious MMI chart

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Gold price surges before significant drop

After hovering around $2,000 per ounce in August, the gold price took a step back over the ensuing months.

In late October as Election Day approached in the U.S., gold fell to $1,878 per ounce to close the month. The price rose as high as $1,960 per ounce by Nov. 9.

However, the gold price lost a good deal of shine that day, plummeting back down to $1,860 per ton. The single-day decline marked gold’s largest drop in seven years, according to MarketWatch.

News of a potential Pfizer and BioNTech COVID-19 vaccine sent the dollar upward. The dollar index closed last Friday at 92.23 before closing Monday, Nov. 9, at 92.72.

Gold in Scotland?

Late last month, MetalMiner’s Stuart Burns delved into Scotgold’s efforts to develop gold reserves in Scotland’s Trossachs National Park.

“So, it has taken a strong gold price and political blessing for Scotland’s only domestic gold miner, the aptly named Scotgold, to gain permission to develop gold reserves in the Trossachs National Park,” Burns wrote. “The park is in an area of outstanding natural beauty and is home to some of the best-preserved oak woodlands in Scotland.

“Gold mining and Scotland are not activities and locations that one immediately makes an association between. In fact, more Scots rushed to California’s gold rush than ever mined at home.  However, gold prospectors have looked for gold in Scotland’s rivers for centuries.

“The country is in the broad gold belt that stretches from Scandinavia across Greenland to Canada with, in places, similar topography and geology.”

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The Global Precious Monthly Metals Index (MMI) retraced 2.2% for this month’s index reading, as the gold price and the silver price both lost previous gains.

October 2020 Global Precious MMI chart

 

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Gold price rally loses steam

Amid global economic uncertainty, precious metals like gold have benefited.

The gold price surged as high as $2,063 per ounce in August. The price proceeded to trade sideways for about a month before dipping from mid-September onward, falling to nearly $1,860 per once in late September.

Prices dipped Tuesday after President Donald Trump tweeted he would end negotiations over another federal stimulus package.

Central bank sellers

Central banks are some of the largest holders of gold reserves.

In that vein, the World Gold Council reported central banks switched from net buyers to net sellers in August.

“Global central banks sold a net 12.3 tonnes (t) during the month, continuing this year’s trend of a slower pace of accumulation compared to recent years,” the World Gold Council reported. “Purchases were concentrated amongst regular buyers: Kyrgyz Republic (5t), India (4t), Turkey (3.9t), UAE (2.4t), Qatar (1.6t), Mongolia (1.3t), and Kazakhstan (1.3t).”

However, the Council noted Uzbekistan reduced its gold reserves by nearly 32 tonnes.

Fed releases September meeting minutes

In other news impacting precious metals, the Federal Reserve on Wednesday released minutes for the Sept. 15-16 meetings.

“While the economic outlook had brightened, market participants continued to see significant risks ahead,” the minutes release reads. “Some noted concerns about elevated asset valuations in certain sectors. Many also cited geopolitical events as heightening uncertainty.”

Furthermore, absent a new stimulus package, the release explained “growth could decelerate at a faster-than-expected pace in the fourth quarter.”

As for currencies, the Fed noted the depreciation of the dollar. Traditionally, the price of gold and the U.S. dollar correlate inversely.

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gold price rising

Are gold prices really going to keep rising? Source: Adobe Stock/Nikonomad.

This morning in metals news: the gold price has surged to an all-time high; China is eyeing changes to its steep capacity swap rules; and Northern Dynasty Minerals has received an environmental impact study for its Pebble copper-gold-molybdenum project in Alaska.

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USMCA

ronniechua/Adobe Stock

This morning in metals news: the United States International Trade Commission asked for an additional $2.75 million in its budget to help it toward implementation of the United States-Mexico-Canada Agreement (USMCA); the World Gold Council released its H1 2020 report; and U.S. beverage makers are grappling with an aluminum can shortage.

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The Global Precious Monthly Metals Index (MMI) gained 1.7% for this month’s reading.

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The Global Precious Monthly Metals Index (MMI) gained 1.7% this month.

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zerophoto/Adobe Stock

This morning in metals news, Novelis Inc. reported fiscal year 2020 net income fell 3%, ArcelorMittal has opted to suspend dividend payments and Barrick Gold has benefited from the gold price’s rise this year.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

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