But there is another important, yet often overlooked, aspect of gold and precious metals investment: the price forecast.
While, like with any other asset, it is impossible to know exactly where the price of gold will be in 2021, expert analysts can still provide valuable insights on the drivers for precious metals and their forecasted price movements.
So, will the price of gold go up in 2021? Will the economic recovery affect the price of precious metals? Should silver be used as a portfolio diversifier?
This short and comprehensive outlook on gold and precious metals prices by MKS expert, Frederic Panizzuti, will help investors understand where the price of precious metals could go in 2021.
It will cover the following topics:
- The Key Drivers for Precious Metals in 2021
- Precious Metals Highlights for 2021
- Gold Forecast for 2021
- Silver Forecast for 2021
- Platinum Forecast for 2021
- Palladium Forecast for 2021
The Key Drivers for Precious Metals
Economics drivers for gold in 2021
The global economy plunged into its worst recession since World War II as a result of the pandemic, and is expected to slowly recover, especially in the second half of 2021. Real interest rates are likely to remain close to historical lows for the foreseeable future. As the percentage of vaccinations across the globe increases, economic activity should return towards a more normal situation.
The rate and speed of vaccinations will not be evenly distributed around the world, creating regional discrepancies in the level and speed of economic recovery.
One of the key factors driving commodities in 2021 is our expectation for the USD to remain on the weaker side against most of the major currencies.
Geopolitics drivers for gold in 2021
After years of global geopolitical instability, 2021 displays comforting signs of stability. Long-term conflict resolutions in the Middle East, an expected comeback for the United States of America to international negotiations and pacts, are some of the promising steps we expect to see in 2021.
Precious Metals Highlights for 2021
2021 shall be another year of growth for precious metals. The global economic instability, low yields, the risk for higher inflation, and more downside pressure on the USD remain some of the major factors supporting the well-established bull trend. We also expect a recovery in the international commodity trade and increased physical demand especially in the second half of the year.
Gold Forecast for 2021
Gold closed the year over 24% higher. We expect 2021 to be another bullish year. While the global economic recovery shows some positive signs, we will continue to face uncertainties especially in the first half of the year. In the context of low global real interest rates, a slow recovery in growth, higher market volatility and a weakening USD, gold shall remain an asset of choice in investors’ portfolios as a safe heaven and insurance against disruptions. More inflows into ETFs and increased physical demand, especially towards the second half of the year, shall comfort the upside trend.
We expect gold to hit a new all-time high at 2,300.00 USD/Ounce.
Silver Forecast for 2021
Silver was the top-performing precious metal closing the year at over 47% higher. We expect the silver price to climb further in 2021 as gold is set to move higher. Some Gold/Silver ratio play may result in speculative silver buying accelerating the upside trend momentum. The expected mild global economic recovery in the second half of the year, could further benefit silver industrial demand, particularly in China.
As we expect gold to move towards new all-time highs, investors might be tempted to diversify into silver. 2021 could be another volatile trading year for silver.
We see silver averaging 32.50 USD/Ounce and to peak at 40.00 USD/Ounce in 2021.
Platinum underperformed compared to other precious metals in 2020, closing the year just 10% higher. The large supply deficit in 2020 is expected to narrow in 2021 but demand is still expected to exceed supply. Further recovery in the automotive sector and increased interest in green hydrogen technologies and fuel cells in electric vehicles shall provide some decent support. Demand from the jewelry sector, especially in China, is set to grow after several years of modest demand.
We expect investment demand to increase throughout the year as platinum is almost half the price of gold and far behind palladium and will remain an attractive and relatively “inexpensive” alternative. All parameters are pointing towards a perfect storm for platinum.
We see Platinum averaging 1,205.00 USD/Ounce and to peak at 1,450.00 USD/Ounce in 2021.
Palladium Forecast for 2021
Palladium closed the year 21.5% higher. 2021 shall be another year of supply deficit. The automotive sector shall further recover and the catalytic demand for palladium is set to further increase especially with the ongoing tightening of emissions standards. On the investment side we don’t expect to see much inflow into the metal as the already high prices make it less attractive than silver or platinum.
Still, some speculative sporadic short-lived interest could result in sharp rallies followed by corrections. We expect 2021 to be another very volatile year for palladium.
We see palladium averaging 2,480.00 USD/Ounce and to peak at 2,850.00 USD/Ounce in 2021.
If you’d like to read more in-depth knowledge on this subject, we invited experts from the World Gold Council and The Silver Institute to discuss the outlook for silver and gold in 2021. You can read their Expert Opinion here.