Apart from industrial use, silver also exhibits high volatility. What’s more, decarbonization efforts and focus on renewable energy will give…
Gold is a safe haven for investors in times of uncertainty. Investors rush to accumulate precious metals when conventional paper investments such as stocks decline or experience volatility. For this reason, gold had a good run in 2020 due to the coronavirus pandemic coupled with geopolitical and economic uncertainty.
Investors resorted to stockpiling precious metals to protect their wealth. As a result, the price of precious metals leaped significantly due to a supply deficit. To be precise, gold recorded a 20% increase while silver and platinum increased 47% and 10%, respectively.
Precious Metals Will Perform Better In 2021
After a spectacular year, precious metals are poised to experience solid gains in 2021. According to Phillip Newman, MD at consultants Metal Focus, gold will hit new highs, but silver will see the highest gains. The price of precious metals will strengthen in the first quarter thanks to the low-interest rates and weak dollar.
According to ForexTradingBonus.com, The US economy’s slowdown could trigger a weaker dollar during the first quarter and low corporate earning. Fast economic recoveries s in other parts of the world could exacerbate this situation.
Effect of Economy Recovery on Precious Metals
Investors have been cautious and liquidated their positions, especially due to covid 19 worries.
Luckily, there is a likelihood that many countries will end restrictions and lift curfews with corona vaccine rollouts. This means there is a glimmer hope of economic recovery. Deploying the vaccine against the virus will boost investors’ confidence in assets that record a good performance during economic growth.
Additionally, with the end of the electioneering period, investors can now concentrate on fundamentals and other trading factors. For instance, Inflations threats, negative return on a bond, and massive government debt will continue in 2021, further supporting gold. According to Ros Norman, the Gold price could see a 20-25% increase.
Silver And Platinum Will Outdo Gold
Gold started experiencing growth in 2019 due to a slowing economy. The rally accelerated after the pandemic, hitting a record high of $2075 on August 7, 2020. As a result, the price of gold dipped to around $1900 as investors stopped buying. Although the demand for physical gold-dipped due to shutdowns, a surge was recorded in investment demand. For instance, SPDR Gold Trust, the largest gold-backed exchange-traded fund, recorded a 30% gain, the biggest since 2009.
According to USB Global Wealth Management, it is unlikely that gold will maintain this stellar performance in 2021. In fact, the firm predicts that silver and platinum will outperform gold in the coming months.
Similarly, MKS managing director Frederic Panizzutti points out that all precious metals prices will record solid gains this year. In an interview with Kitco news, he predicts that silver will be the best performer. Panizzutti also says that gold will reach an all-time high at $2300 despite the slow start this year. According to the firm, silver, platinum, and gold will be the best performing precious metals. The lag in silver and platinum could create a gap that will attract investment and speculative interest.
Silver Will Excel
As the economy improves, industrial demand for platinum and silver will increase significantly. Metal Focus analysts predict that an ounce of silver will hit $30 by the end of the first quarter of 2021 and average $27 per once toward the end of the year. This means that the metal will continue its bull run from last year. Silver was the best performing metal hitting a high of $29.26.
Apart from industrial use, silver also exhibits high volatility. What’s more, decarbonization efforts and focus on renewable energy will give the silver price a massive boost. About 50% of silver in industrial applications is used, manufacture solar panels and electronics. Joe Biden’s push for clean energy will prompt more usage, helping silver fare better than gold.
Platinum is used in the jewelry industry and to reduces pollution in auto manufacture. Moreover, it makes up about 50% of catalysts’ demand. The price of platinum started nosediving after the Volkswagen diesel emission scandal in 2014. As a result, most producers switched to petrol engines that use palladium catalysts after the scandal.
During the pandemic, the precious metal experienced a steady price increase. Investors accumulated surplus platinum to caution themselves against the unpredictable economic condition.
Platinum plays a great role in the hydrogen industry. This will boost the platinum price, with the demand expected to outpace supply by 240000 ounces as per Metal Daily CEO. Platinum will increase to $1250 per oz by the end of 2021, as per the UBS forecast. The firm also predicts that platinum price will hit a $2900 per ounce high within the year.
That said, the demand for platinum will likely increase once novel coronavirus is under control. However, the price will only increase slightly as the supply bounce back after the pandemic. In general platinum, performance will supersede gold.
What Will Happen To Gold?
While gold is the most preferred inflation hedge, there is doubt it will continue holding this position. In fact, the return of economic normalcy will boost silver and platinum prices due to the industrial demand. However, the colossal amounts of government stimuli and market uncertainty will cause economic issues.
Investors might therefore invest in gold which is considered a safe haven during crises. While gold might increase and hit the August peak of $2285, the silver and platinum returns will be much more. However, gold prices will fall with macroeconomics improvement in the second quarter. As per CNBC’s interview, Joni Teves, a USB investment bank strategist, predicts that Gold will break above $1900.
Government Interventions Will Impact Gold
While global economic recovery is on pace, it will take sometime before the world gets to pre covid levels. The recovery will be gradual with an acceleration expected in the second quarter. Also, the GDP growth and interests will be low.
To deal with the gradual economic recovery, governments will start accumulating some commodities after Covid 19 recovery to ensure a steady supply in times of pandemic. The 2020 coronavirus was a wake-up call for having better contingency plans for ensuring self-sufficiency. Some governments will stockpile commodities like precious metals to guarantee steady supply in uncertain times.