With a start to the year starting with a bang for the BITCOIN and a Dow Jones breaking the ceilings, silver showing itself to be volatile when the markets are too, one wonders if gold will not be abandoned. by investors during this year 2021. Could this be a mistake?
The safe haven has played its role in 2020
The course of the gold price since the start of the COVID health crisis in March 2020 clearly shows its role as a safe haven. We thus note on March 16 a fall in price which seems to accompany that of the markets. In fact, it is real, but less strong. Above all, this sale of paper gold (ETFs) by portfolio managers saved their margin calls in March. Indeed, the rise of the yellow metal had been so significant for several months that the correction of mid-March 2020 only slightly impacted their capital gains on this asset. We will note thereafter an exceptional course with absolute records for the ounce at 1710 euros and 2020 dollars at the beginning of August.
Forecasts up to $ 2,400 per ounce in 2021
This journey, in a situation of health crisis, confinement of economies and electoral tensions in the United States, revealed the underlying multiples of gold, very different from those of other assets. It is on these elements, exacerbated by the crises of 2020 that some analysts of major financial and banking institutions venture to predict a course for gold that would break its recent records to reach, for the most optimistic, $ 2,400 per ounce.
These underlyings that could boost the price of gold in 2021
Now let’s take a closer look at these elements that prompt experts to predict a bullish course for gold in 2021.
A weaker dollar in 2021?
This is a well-known bias for investors in precious metals. Gold, which has no internal return (no dividends, no interest), sees its value linked to that of the currency in which its price is expressed. The stimulus plan announced by the new President of the United States Joe Biden raises fears that the dollar will fall with the influx of liquidity into the economy. Mechanically, gold whose reference currency is the American currency will then rise.
Still low interest rates
Interest rates close to zero or even negative are one of gold’s best allies. In fact, this strongly penalizes long-term investments deemed to be risk-free, such as bonds or life insurance. Their returns in this monetary situation are practically zero. Gold with its non-existent return but with a nominal value that can increase therefore takes the advantage. In any case, life insurance managers have integrated gold to diversify their units of account.
A global economy weakened by COVID 19
In 2021, many failures are to be feared in certain important sectors of the world economy: air transport, tourism, part of the food industry (no catering), business real estate, events and culture, etc. The French prism with very significant support for the economy by the government (PGE, partial unemployment, sectoral aid) is undoubtedly misleading compared to the rest of the world. The bad economic news is likely to multiply in the coming months.
Classes don’t go up to the sky
It is impossible to predict the future of BITCOIN. The previous peak at the end of 2017 was followed by a huge correction. The price of BITCOIN had been divided by 5. At the time, moreover, gold had been a little neglected then had found its amateurs a few months later. For the records of January 2021, we have not noted such a movement of communicating vessels between the two assets.
For the Dow Jones, on the other hand, such a course may be surprising, while we are living through a pandemic which is having a strong impact on the economy. We are also navigating record levels above 30,000 points. The price of wheat or soybeans, which is breaking through the ceilings, is also surprising. It remains to be seen at the time of the next correction whether after accompanying this decline, gold will regain the upper hand to play its role of safe haven.