After a fantastic year precious metals are expected to make more gains in 2021 with silver tipped to outperform, but analysts are growing more skeptical about the outlook for gold as the global economy recovers from the coronavirus impact.
The pandemic triggered stockpiling by investors looking to protect their wealth. This, alongside supply deficits, pushed gold and palladium prices up by more than 20 percent this year, while silver rose 47 percent, and platinum 10 percent.
“We are going to see new record highs for gold and palladium (in 2021),” said experts. “But silver will see the chunkiest gains,” he said.
Historically seen as a safe place to store money, gold started to rise as economic growth slowed in 2019, but the pandemic boosted the surge to reach a record high of $2,072.50 in August 2020.
While demand for physical gold was hammered as the virus forced shutdowns, investment demand increased, as reflected in the holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, which reported its largest annual gain of about 30 percent since 2009.
As investors stopped buying and vaccines were deployed against the virus, prices dropped to about $ 1,900, encouraging investment in assets that perform well during times of economic growth.
Analysts predict that massive government debt, negative real bond returns and risks of inflation and market instability, all of which benefit gold, will continue in 2021. Next year, gold could climb another 20 percent, they said.
Silver, a safe-haven asset like gold, but also an industrial metal used in products such as solar panels, rose from $18 an ounce in January to almost $30 in August before falling to around $25.
Analysts say its dual role and its greater volatility mean it could fare better than gold as economic growth picks up, and as US President-elect Joe Biden’s push into clean energy prompts more usage.
Platinum and Palladium
Investors also accumulated a surplus of platinum, which is often used in jewelry, industry and by automakers to minimize emission. But they are unlikely to do so again, particularly as supply, which has declined due to the coronavirus, bounces back, analysts said. That will likely drag on prices, which at around $1,000 an ounce are only slightly higher than at the start of the year.
The auto industry uses four-fifths of palladium, which, like platinum, neutralizes engine emissions. It is used little for investment. Years of undersupply drove prices to a record high of $2,875.50 an ounce in February. “The market thought it might run out of metal,” said a trader.
Most analysts expect shortfalls to continue in 2021 as the global economy revives and auto sales rebound.