Gold has been volatile in recent months since it set its new all-time high in early August. News of worsening Coronavirus cases and the subsequent government and central bank stimulus packages have underpinned the gold prices.
All these factors have pushed some proponents to say that the precious yellow metal will rise further. Suki Cooper, the Standard Chartered Precious Metals Analyst, said in her latest client note, that gold would see most of its gains in the first half of 2021.
“We maintain a positive view on gold; expect prices to retest USD 2,000/oz threshold and reach new highs. We believe the bulk of gold gains are likely to materialize in the first half of the year.”
According to Cooper, investors are expected to continue allocating funds in the gold market since the dollar is weakening. If the dollar continues to wobble, investors will turn to haven assets like gold to guard their portfolios.
Other factors that are pushing investors into gold is accommodative monetary policy, real yields remaining negative, rising inflation expectations, and further fiscal stimulus. Currently, it appears like gold is caught between conflicting macro drivers amid a weak physical market.
“A key question in 2021 is just how ‘sticky’ the metal held across ETPs is and whether holdings have peaked.”
Earlier this month, flows initially turned positive while the growing government debt and worries around inflation may prompt tactical and strategic investors to seek buying opportunities.