Although the gold market has fallen under pressure since November, it is still up about 20 per cent for the whole year, an eye-catching performance.
(Commerzbank), a German commercial bank, said this year's increase was only the beginning of a bull market in gold. Although it seems that the vaccine has brought a positive turning point to the epidemic, it will still take a lot of time for the economy to recover, and many factors that are good for gold will continue to exist.
"We do not think that extremely loose monetary and fiscal policies will change immediately as a result of the vaccine. Governments and central banks will continue to need these policies to offset the economic impact of the epidemic. "
The bank points out that if the necessary fiscal stimulus does not come in time, central banks will have to enter the market for further easing.
In this case, large amounts of liquidity are injected into the market, and it is only a matter of time before gold prices hit new highs again.
The bank expects gold to average $2000 an ounce next year and rise above $2300 in the fourth quarter.
In addition, the bank expects the gold market to rise until 2022, when the average price will be $2200 an ounce.
"even if the global epidemic is really brought under control in the second half of next year, the resulting surge in debt and the balance sheets of central banks will last for a long time."
The bank said the Fed would not change monetary policy until inflation remained above 2 per cent for some time and reached full employment. Yet these two measures have barely been met in the past 20 years.
Moreover, the problem of low interest rates is not unique to the United States. The ECB will maintain negative interest rates for the foreseeable future.
On the other hand, investment demand is also a concern for the gold market.
This year is the first time that investment demand in the gold market has exceeded demand for gold ornaments, which did not happen before during the 2009 financial crisis.
But as the global economy recovers slowly, demand for gold jewellery may also start to pick up.
The strong recovery of China's economy means that demand for gold ornaments will continue to rise. India's recovery is still early. "
In addition, the purchase of gold by the central bank, which has weakened sharply this year, will also be an important factor in supporting gold prices. Commerzbank believes that central banks will continue to be net buyers of gold next year.
"the trend of the central bank's preference for gold has not changed. Dollar-denominated bonds in foreign exchange reserves bring almost no yield, and euro-denominated bonds are even negative interest rates. The performance of gold prices this year proves the necessity of gold in foreign exchange reserves. "
