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Gold has been one of the top-performing commodities of the year 2020 with prices of spot climbing to a record high of USD 2,073.41 per ounce in August 2020 over panic in the market and plunging interest rates across the globe.
Image Source : © Kalkine Group 2020
The rally in gold had been well supported by a massive capital influx from global gold-backed ETFs and large institutional purchases to hedge their portfolio risk, leading to a surge in the prices.
Many gold-players including miners, explorers, dealers have successfully enchased the gold bonanza with many ASX-listed gold stocks climbing to record highs and rewarding shareholders over superior return as compared to the broader market amidst the COVID-19 scenario.
However, with gold now retracing down and entering another phase of consolidation, many investors and traders are once again trying to envisage the gold price moves in 2021.
2021 Crystal Gazing
In the recent past, gold prices have reacted sharply to the COVID-19 vaccine development with prices losing the USD 2,000 per ounce ground and reaching a base level of USD 1,800 per ounce with a +/- 2 per cent deviation.
In 2021, an important question that needs to be addressed is, would gold continue to appeal to institutional and retail investors as it did in 2020? However, many industry experts are closely watching if large funds would move out of the safe haven and divert their capital towards risky assets such as Bitcoin to earn superior returns.
Furthermore, central banks, who have been net buyers of gold in 2020, are expected to reduce their buying with an anticipated annual decline of 5.8 per cent through 2021 and 2022.
Image Source: Megapixl
However, despite a lot of negative buzz rolling-in for gold, the average price for gold is anticipated by the market, and many large banks, to remain high, which might be a fundamental booster for many gold stocks, depending upon the demand.
- As per the estimation of the Department of Industry, Innovation and Science (DIIS), the gold spot is projected to average USD 1,695 per ounce in 2021 as compared to the average price of USD 1,800 per once in 2020.
- The estimated average price for gold is still higher as compared to the average price of USD 1,500 per ounce in 2019 and an average price of slightly more than USD 1,200 per ounce in 2018.
Image Source: © Kalkine Group 2020
While the average price of gold is anticipated to remain higher in 2021 against 2019 and 2018, and lower against the average price for 2020, the demand for gold in successive periods ahead is anticipated to gradually increase, which coupled with the volume profile of ASX-listed gold stocks should dictate the price course for them in 2021.
The DIIS projects global gold consumption to surge by 3.1 per cent in 2021 and 4.1 per cent in 2022 against 2020. The demand is anticipated to take a push from a 30 per cent increase in gold jewellery demand in 2021.
Therefore, a higher average price against 2018 and 2019 along with the estimates of higher demand against 2020, might support the perspective for ASX-listed gold stocks ahead. However, such viewpoints for individual stocks would majorly depend upon the production capacity and the individual companies’ execution capabilities.
