(Kitco Information) – The gold market has room to maneuver larger in 2021, however one worldwide financial institution notes that {the marketplace} might be plagued with uncertainty.
Georgette Boele, senior treasured metals strategist at ABN AMRO, stated in a 2021 outlook report that gold will proceed to garner help as a “new regular” is established all through monetary markets.
Boele famous that gold noticed unpreceded demand this previous yr as currencies world wide stay unattractive in an setting of “rock-bottom rates of interest.” She added that this theme will proceed to dominate sentiment within the treasured metals sector subsequent yr.
The financial institution sees gold costs averaging subsequent yr round $1,950 an ounce, with gold costs buying and selling round $2,100 an oz by December 2021.
“We anticipate the Fed to maintain coverage charges low within the coming years. The Fed may even restrict the rise in U.S. treasury yields to help the financial system,” she stated in her analysis, “In actual fact, we anticipate decrease U.S. Treasury yields for 2021. If inflation expectations keep across the present degree, decrease U.S. Treasury yields will end in decrease U.S. actual yields. It is a clear damaging for the greenback and a constructive for gold costs.”
Boele’s outlook comes as the gold market sees new bullish momentum, which picked after the Federal Reserve’s financial coverage assembly Wednesday. The U.S. central financial institution reiterated its stance that it’s going to keep its ultra-loose financial coverage for the foreseeable future.
Though bettering financial sentiment may affect gold’s safe-haven attract. Boele stated that traders nonetheless face a brand new paradigm shift as central banks are not anticipated to tighten financial coverage, at the same time as the worldwide financial system recovers from the COVID-19 pandemic.
“Gold costs have the tendency to weaken if an financial restoration goes hand in hand with expectations of tighter financial coverage and larger charges. However gold costs have the tendency to rise if the financial system recovers however financial stimulus stays in place and U.S. actual yields decline,” she stated. “That is additionally our base case. However we’re in an distinctive setting the place regular relationships are challenged.”
Whereas the Dutch Financial institution is bullish on gold, Boele added that their outlook shouldn’t be with out dangers. A significant bearish issue she highlighted in her report is the market’s present positioning, particularly in exchange-traded merchandise.
“The full ETF positions are nonetheless big. For the reason that peak on 15 October they’ve declined by solely 4%. These positions are nonetheless 28% larger than at first of the yr and 29% larger than the previous peak of 20 December 2012,” she stated. “Briefly, gold remains to be a crowded commerce. In 2013 a liquidation of 36% of the full excellent ETF positions resulted in a decline in gold costs of 30%. These positions stay a threat.”
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