Gold in 2021: Between Economic Hopes and Inflation Concerns

Gold, Palladium, Platin, Silber

Comme on le sait, la pandémie de Corona a également provoqué des turbulences sur les marchés des métaux précieux l’année dernière. Au début de la première vague d’infection en Europe, le prix de l’or a chuté de fin février à mi-mars 2020, car un certain nombre de gestionnaires de fonds et de gestionnaires d’actifs professionnels ont dû réduire leurs avoirs. Ce faisant, ils ont généré des liquidités indispensables pendant la crise. Mais par la suite, la fuite de nombreux investisseurs vers l’or, qui est souvent qualifié de „valeur refuge“, a entraîné une hausse des prix, qui sont passés d’environ 43 euros par gramme à la mi-mars à un nouveau record de 56 euros par gramme au début du mois d’août. Outre le marasme économique et l’avenir incertain de l’économie, les réactions globales des banques centrales ont également joué un rôle. En réduisant les taux d’intérêt directeurs et en achetant des obligations d’État, ils ont fait baisser le niveau de rendement sur le marché obligataire, rendant l’or d’investissement plus attrayant. Depuis l’été 2020, cependant, le prix de l’or a rendu une partie de ses gains (voir le graphique ci-dessous).

So, what are the prospects for gold in the coming months?

The Corona pandemic and related developments in the financial markets will most likely continue to be decisive. The biggest risk to the global economy remains the spread of a potentially more contagious or deadly mutation of the Corona virus. In this case, governments would have to impose new lockdown measures, which would, in turn, put a strain on businesses. However, with new infections declining in most countries, the warmer season just around the corner in the northern hemisphere and the vaccination rolling out at record levels, economic recovery is the more likely scenario. In its most recent report, the International Monetary Fund (IMF) has forecast an abundant real economic growth of 5.1% for the US this year, 4.2% for the Eurozone and 3.5% for Germany, and, in France, where the decline in 2020 was above average at an estimated 9.0 %, even high growth of 5.5 % could be expected, and this will have several consequences for the gold market.

Against the backdrop of a brighter outlook for companies, interest in the „safe haven“ gold will presumably decline, but the physical demand of loyal followers of precious metal, ingots for instance, is likely to remain high. Many investors who have so far invested indirectly, however, could shift assets or try to realise the book profits achieved through sales. This is an impressive illustration of the development of exchange-traded securities backed by physical gold, the so-called gold ETCs. According to the World Gold Council, the lobby group for mine operators, their holdings rose by around 725 tonnes between March and the end of September 2020, reaching a new high of around 3,450 tonnes of gold. Since then, however, investor ETC sales have led to an estimated 160-tonne reduction in holdings. The gold price, which has been falling since summer 2020, shows even more clearly the decline in interest. Upon the release of vaccine test results released by pharmaceutical companies BioNTech and Pfizer last November, a sudden euphoria hit the financial markets, and the gold price fell by €2p/g in just one day.

The economic recovery is also likely to be accompanied by a noticeable rise in inflation in the coming months which should support investor interest in gold – at least in phases. However, the foreseeable higher inflation has already led to a rise in yields on the international bond markets in recent weeks, which, in turn, is negative for precious metal. Moreover, due to the statistical base effect, the surge in inflation is likely to decline again towards the end of this year, and this is likely due to the remaining high unemployment in the most important economies, which should only result in low wage pressure on consumer prices.

Despite this, however, it is likely that more encouraging times lie ahead for the jewellery industry, whose demand for gold plunged by 34% to 1,411 tonnes in 2020, the lowest level in decades according to the World Gold Council. The lockdown measures over recent months inadvertently resulted in forced saving for many households as the options for spending money were limited. In the US, accumulated funds are estimated to average as much as 9% of an annual disposable income, and the opening of the retail sector is, therefore, expected to boost demand for luxury items such as jewellery in 2021.

Incidentally, the expected increase in air traffic in the coming months should lead to improved opportunities for precious metal transport between miners, processors and retailers, which could result in a decline in premiums for gold products and semi-finished products after the rise experienced last year. An increase in the volume of recycled gold is also likely with the opening of the retail sector.

Dr. Thorsten Proettel

Further detailed reports on silver, platinum and palladium can be found in the current Focus Precious Metals.