Gold’s prospects for 2021 look bright. Citigroup in recent weeks has set a target price of $2,500 an ounce for gold in 2021 and compared various catalysts to the 1970-1980 bull market.
Will Rhind, GraniteShares founder and CHIEF executive, said on CNBC’s ETF Edge on Monday that these catalysts were “already very sufficient”.
“Stimulus… “This is probably the most obvious one and will certainly drive gold higher through most of 2020.” He said.
Beyond that, a weaker dollar, rising inflation expectations, lower real yields and continued market volatility will continue to boost gold prices, Rhind said. Rhind’s company manages the GraniteShares Gold Trust (BAR).
“The conditions that drove gold prices to record highs this year are still basically in place,” he said. I think it’s only natural for an asset class to see some consolidation once it reaches historic highs, and that’s what we’re seeing. But the basic conditions are still there and I believe they will continue to be there for at least the next 12 to 15 months.”
Dave Nadig of ETF Trends once declared himself “not a big gold bug”, but he pointed to several more bullish catalysts.
“I was the first to point out that gold is an unproductive asset,” Nadig, chief investment officer and research director of ETF Trends and ETF Database, said in the same INTERVIEW with ETF Edge. It is a psychological good, meaning that “its value is simply what others are willing to pay for it.”
“Having said that, there is no disputing the fact that people have been using gold as a store of value in times of crisis for thousands of years,” he said. If it weren’t for the crisis, I don’t know where we would be right now.”
In addition to macroeconomic drivers, Nadig said gold has a “micro” push and pull role.
“Keep in mind that gold mining, like other industries, has been hit by coVID-19, from mines to distribution to manufacturing,” he said. All this has been limited. So supply is still very limited, and at the same time, demand is higher than ever before. “Investment demand for gold, particularly ETF investment demand, is at an all-time high.”
The ETF analyst predicts that gold’s rebound may only add to that sentiment.
“Whether it’s investors realising that a 5 per cent gold allocation is a good way to provide some sort of inverse correlation in a portfolio, or people are just speculating that gold will go up in the next six months, there will be demand,” he says. So these big macro drivers are still there and the underlying microeconomic structure of the gold market is bullish.”
Spot gold hit as high as $1,817.64 an ounce on Wednesday, helped by a weaker dollar. The price of gold is up more than 18% this year.