Few markets over the past year have seen more volatility than precious metals. After setting all-time highs, gold managed to finish the year out strong.
With the New Year now in full swing, analysts are looking to see where the yellow metal will finish in 2021.
Gold continues to have a lot of appeal in 2021 with Covid-19 still spiking across and hindering the world’s leading economies. These disruptions coupled with increased risk aversion in the short-term help buoy gold’s prospects.
On the flip side, Pfizer vaccinations are already being administered with Moderna now entering this process. Unfortunately, herd immunity is months away and optimism surrounding the vaccines have already been priced in.
All About Covid?
Gold is still at the mercy of Covid for the next few months. Digging deeper however, it’s impossible to discount the impact of central banks and monetary policy over the past year.
The US Federal Reserve’s commitment to keeping US markets afloat was on clear display for the majority of 2020. This trend is unlikely to waiver in 2021 as a recession is unfolding not just in the United States but also Europe.
The US dollar has managed to stage a slight comeback thus far in 2021 and this also helps insulate the value of gold. Following the holiday season in the Western world, it was not surprising to see gold surge in early 2021.
Most analysts have been strongly bullish on gold in the near-term. The reasons are not overly difficult to find. With vaccine rollouts already factored into markets, a freshly unveiled $1.9 trillion stimulus plan in the US was also a healthy boost for gold prices.
Additionally, governments around the world have independently opted to continue printing money in the New Year. This could be the makings of a bull market for gold that could last over the next few years.
Gold prices are supported by a 6-month low at $1,767, which looks to provide a strong foundation for any near-term moves. The past few weeks have seen a gold maintain a much stronger posture, which hasn’t come close to testing this level.
Rather, gold instead looks to be eying new resistances as inflation is a driving factor. The US dollar index could be due for some sort of rebound, though thus far has not come to fruition and continues to give gold bulls positive signals.
It will be important to note where gold momentum slows to identify any meaningful resistance points, though for now there are no obvious levels in sight short of the psychological $2000 level.
Any sustained push above $2000 will invariably lead to a target of previous highs seen last August at $2,065. Short of contrarian trends, there’s little to hinder the momentum of gold currently, though this could change quickly.