FX.co ★ Gold outlook for 2021

Gold is projected to rally this year, but then drop quite significantly by the end of the year. This is because investment demand is expected to shrink to 42.8 million ounces, which is clearly lower than the figure last year.

Investment demand is an important indicator for gold. It is directly tied to the cost of precious metals. More specifically, it is inversely correlated with the rise in prices for it.

This dependence is most clearly seen in Asian countries. In fact, when prices increase there, the population takes a wait-and-see attitude, temporarily refusing to buy jewelries made of the yellow metal.

Therefore, last year, the rate of gold shot up quite significantly when investment demand declined. But this year, analysts expect that it will drop lower, so investors will increase their positions in the market.

In short, gold will be under pressure in the short term. Therefore, players should continue monitoring US Treasury yields, as well as the rate of the US dollar.

To date, gold is trapped between a strong dollar and falling bond yields. In the event that yields continue to fall, the metal may gain support even amid a rise in the US dollar. But at the moment, its attractiveness has shrunk because in ICE futures, the dollar index has risen to 92.15 points (up by 0.4%).

But the main pressure on gold over the past month is the sharp growth in US Treasury yields. Since this indicator decreased this week, gold has received a kind of respite from the rally.

At the same time, programs to stimulate the economy, as well as hopes for its early recovery, are negative factors for the gold market.

The rapid pace of vaccination is also unfavorable for gold, especially since it gives investors considerable optimism, thereby encouraging them to invest in risky assets, to which the yellow metal does not belong.

As a result, analysts have lowered their three-month forecast (for gold) to $ 1,750 per ounce, and the yearly one to $ 1,700 per ounce.