Investors may want to be comfortable with the current level of gold prices, as one bank does not expect any improvement in the precious metal in the short term.
Commodities analysts at Soci é t é G é n é rale (Societe Generale) said in their latest forecasts that they expect gold to trade around $1675 an ounce by the fourth quarter of 2021. Analysts added that the economic recovery and the introduction of effective vaccines could hurt the price of gold.
Analysts warned that the downside risks to gold prices were high and that they were "not confident" that the gold price would remain above $1700.
Analysts said: "the trend of gold in 2021 looks very different from that in 2020, when ETF's traffic in the first nine months of this year was almost shocking. So far in 2021, the capital flow of ETF has reversed to 112t, and the price has fallen by about US $200per ounce, so the impact of the capital flow on the price decline is greater than that of the rise. "
Soci é t é G é n é rale said the key to gold prices remained interest rates and bond yields. Economists at the bank say they expect 10-year Treasury yields to reach 2% by the fourth quarter.
"it is important to assess whether the market continues to focus on real interest rates or nominal interest rates," analysts said. Real interest rates should remain slightly negative and nominal interest rates should rise, which seems to increase the opportunity cost of holding gold. The reflation theme must include gold, which is a factor that leads us to maintain a positive outlook for 2021. But if this argument loses momentum, our supportive prospects may soon collapse. "
Depending on the rest of the year, Societe Generale thinks there is a 28% chance that gold will be around $1525 by the end of the year.
"our economic outlook is good, which means that the launch of the vaccine will be very smooth and effective, but this is still the most pessimistic for gold because it will ease concerns about dovish monetary policy and stock market turmoil. The memory of gold's collapse in 2013 could hit the market as investors sell more ETF, "analysts said.
Judging from the rally, the French bank thinks there is only a 13 per cent chance of gold rising by the end of the year.
"systemic risks caused by excessive government and corporate debt or overheated stock markets will support upside risks. We expect gold investment to increase in the event of one or more sovereign debt crises, but as the dollar strengthens, there may be headwinds, "analysts said.
