The gold price and related equities remain under pressure as 2020 comes to a close. It remains a frustrating period for many investors, despite the necessary consolidation taking place in precious metals. A perfect storm of epic stimulus and inflation fears took gold to record highs in 2020; now, many investors and speculators are concerned about where gold’s price goes in 2021.
CitiGroup Touts $2,500 Gold Price in 2021, as Selloff Continues
The host opens his discussion very early on with a statement:
“Gold prices have come under pressure ever since that positive vaccine announcement two weeks ago.”
The idea that with the vaccine, stimulus and deficits will end is not a logical one. The United States runs a $1 trillion deficit standing still, with no pandemic. Now, deficits and stimulus are hallmarks of the American economy. Gold investors understand this.
Where is Gold Price Heading?
Three factors: stimulus, a weaker dollar, and inflation expectations increasing all took gold to record highs in 2020. Can these trends continue into 2021?
CEO and Founder of GraniteShares, Will Rhind, gave his thoughts via phone, noting,
“The conditions that drove gold to a new all-time high this year are very much still in play.”
“The fundamental conditions are still here. And I believe that they will be here for the next 12-15 months minimum.”
Fundamentals of the Gold Market Looking Bullish
ETF Trends CIO Dave Nadig says inflation and a declining US Dollar are macro trends that favor the gold price. He points to constrained supply and demand, including investment demand, at all-time highs.
“I tend to think much more about where are the drivers. And the drivers right now do seem fairly bullish for gold.”
“I’m not a big gold bug. Right, I’m the first one to point out that gold is a non-producing asset. It’s a psychological commodity. Meaning it’s only worth what somebody else will pay for it. But that being said, it’s hard to argue with thousands of years of history of folks looking to gold as a store of value during times of crisis.”
Gold and gold stocks are under pressure for numerous reasons. One thing to consider is that mining stocks raised billions of dollars on the TSX Venture in the latter half of the year – these financings typically come with a four-month hold. As these financings come free trading in an environment far different from the one 3-6 months ago, many investors are bailing, putting pressure on mining valuations. When you couple this with December’s weak seasonal forces, it becomes expected to see lower valuations, at least for the next four to six weeks. So, rosy gold price forecasts might be the only thing keeping gold investors warm this Christmas season.