Gold Price Forecast & Prediction: 2021 and Beyond

After falling below $1200 per ounce in 2018, gold rebounded sharply over the next 12 months, and a significant bullish trend began. Its yield increased by almost 20%, whereas its quotes went up to $1,556 per ounce. The rally continued in 2020. The COVID-19 pandemic increased the popularity of the precious metal as a hedging instrument, which has led to an increase in its price. In this article, we’ll look into historical data, see what experts have to say, and make a gold price forecast and prediction for 2021 and some years ahead.

The article covers the following subjects:

A Recent History of Gold

Western investors’ interest in gold led to an increase in its rate from a minimum of $1160 in the summer of 2018 to a record high of almost $2073 in August of this year. During this time, the precious metal has become one of the most attractive financial assets on the planet. This year, the economic fallout from the pandemic and negative bond yields have driven a record $60 billion in gold ETF capital growth. This is twice as much as in 2009, at the height of the financial crisis.

The pandemic has convinced investors that gold should be part of their portfolios. The precious metal has become a leading hedge against volatility in equity markets and negative interest rates. Gold turned out to be one of the most attractive assets in 2020.

Large investors bought gold for protection against possible deflation in some countries, which could be the result of slowing economic growth and rising inflation in other countries as governments continue to pump liquidity into the economy. For instance, the American bank JPMorgan earned about 1 billion dollars this year from trading in precious metals (mainly gold). According to the consulting company Coalition, this year, revenue from trading in precious metals from the 50 largest investment banks will double and reach a nine-year high of $2.5 billion.

Even Warren Buffett changed his mind about gold. Previously, he considered precious metals a useless asset. This year, his Berkshire Hathaway Inc. acquired 20.9 million shares of one of the world’s largest gold mining companies – Barrick Gold Corp. (Canada).

However, demand in the main gold consuming countries, India and China, has not been up to par this year. People sold their savings in gold or pledged them when the precious metal rose to a record high in local currencies. The high cost of the precious yellow metal and the economic turmoil caused by the pandemic have crippled consumer demand. Therefore, in the first half of the year, jewelry purchases decreased in volume by 46% compared to the same period last year. The reason is quarantine and a decrease in the income of the population. 

Investors will continue to fill the gap in demand. This year, exchange-traded funds will accumulate 1205 tons of precious metal in their reserves, three times more than in 2019. The figure may reach 1,362 tons next year.

Central banks have been buying precious metals quarterly since early 2011. In the third quarter of this year, they became net sellers, reducing reserves by 12.1 tons. Nonetheless, CBRs remain net buyers annually as demand for the first three quarters was 220.6 tons. In all likelihood, they will maintain this status in 2020, although the volume of purchases will be less than in the previous two years. Russia has suspended purchases, and China has not reported an increase in reserves since September 2019.

Gold Price Today

The yellow metal rose 17% in the first half of 2020 and another 10% in July, and it reached a record high of $2073 per ounce on August 6. Since then, an ounce of gold has dropped to $1,844 amid news of a coronavirus vaccine. However, the euphoria about the vaccine is premature. The pandemic is not leaving the agenda. Nevertheless, this year’s yield on the precious metal was in the range of 16-30%. Note that many forecasts for 2020 assumed the growth of precious metal quotations to $1600-1700 per ounce in the event of increased geopolitical and economic instability. The current price of gold is $1 690.24. 

 

 

What Do Experts Predict? 

Analysts expect prices to rise. Many world-famous investment houses and banks are waiting for the resumption of growth in gold’s value this year and the continuation of the upward trend next. Citibank analysts said they are raising short-term targets for gold to about $2,100 per ounce, and target levels for the next 6-12 months above $2300 an ounce seem likely. According to Citibank, record ETF inflows, a weakening US currency, and negative real returns are the main factors driving further price increases. 

Forecasts for gold from the Australia & New Zealand Banking Group are similar. According to their analysts, the decline in prices since August 7 is only a short-term correction before rising to about $2300 next year. The bank experts call the same drivers of the XAU price rise. Plus, they are still waiting for the growth in demand for physical gold.

Saxo Bankis waiting for the $2000 level by the end of this year. Metals Focus also agrees with them. Many more opinions from reputable investment bankers and quotes from well-known analysts can be cited, but this will not change the overall picture: the vast majority of them predict a rise in the gold price. Such a consensus will certainly stimulate the flow of funds from investors in gold assets, contributing to an increase in the price of this precious metal.

Gold Price Prediction for 2021

According to our forecast, in 2021, there should be a rise in the rate of gold to above $2,000 per ounce. The following factors will facilitate this:

1. The increase in inflationary expectations and the weakening of the US currency will result from generous fiscal and monetary stimulus.

2. An increase in investment demand and a gradual recovery in consumer demand in China and India will support the precious metal rate at a high level.

3. Government bonds (government debt) will not play the role of defensive assets in the face of inflation and negative interest rates since they will cease to generate income.

At the same time, the opportunity cost of owning gold decreases. This will increase the popularity of the precious metal in the eyes of investors in 2021.

All Western countries are experiencing unprecedented growth in the money supply. From the beginning of February to the end of October, the aggregate volume of money supply in the United States increased from $15.4 billion to $18.8 billion, an increase of 22%. In the United States, the Eurozone, the United Kingdom, and Japan, the figure rose 15.7% from February to September 2020. Consequently, the risk of higher inflation in 2021 is very high.

As the purchasing power of the leading currencies decreases, gold tends to rise. The precious yellow metal is an inflation hedging instrument.

According to the IMF forecast, global GDP growth in India and China will stabilize in 2021, which means that the population’s purchasing power in the main countries that consume precious metals (China and India) will increase. Signs of a recovery in consumer demand in these countries emerge at the end of 2020. Thus, in October, jewelry sales in China increased by 17% year on year. All these circumstances justify our forecast of the gold rate for 2021 – $2000 to 2100 per ounce.

Gold Technical Analysis

As of December 18, 2020 (midday), the gold price shows some new negative trades to retest its previous 1875.00 level. As long as the price stays above this level, a bullish impression shall remain in force for the coming days, supported by statistically distributed reach to the oversold areas, besides the EMA50 that continues to carry the price from below, reminding us that our next targets begin at 1917.00 and extend to 1928.60. The expected gold trading range based on these indicators is currently between 1860.00 support and 1910.00 resistance.

Source: economies.com, the screenshot was taken on December 20, 2020

Gold weekly price forecast as of 08.03.2021

Last week, the XAUUSD was trading down. The price consolidated below Target Zone 2 [1759 – 1749]. The next sell target is at Target Zone 3 [1659 — 1649].

I have drawn the trend key resistance level at [1808 – 1797], up from the low hit on Friday. Until the price consolidates above the resistance, the gold downtrend will continue.

Therefore, it is relevant to enter gold sell trades in the resistance zones. The nearest zone to enter new shorts according to the pattern is [1752 — 1738].

XAUUSD Trading ideas for the week:

1. Sell according to the pattern in the zone of [1752 – 1738]. TakeProfit: Target Zone 3 [1659 – 1649]. StopLoss: according to the pattern rules
2. If the price breaks out level 1753, buy. TakeProfit: Target Zone [1808 – 1797]. StopLoss: 1725.

Technical analysis based on margin zones methodology was provided by an independent analyst, Alex Rodionov.

Gold Price Forecast 2022 – 2025*

Let’s summarise the gold price predictions for next 5 years.

January 2022

At the beginning of the month, we predict a price of $2204. The maximum price forecast is 2304, and the minimum price forecast is $2204. The average price prediction for the month is 2246. The price of gold forecasted at the end of the month is $2270 with a total 3.0% change in January 2022.

January 2023

At the beginning of the month, we predict a price of $2,595. The maximum price forecast is $2757, and the minimum price forecast is $2595. The average price prediction for the month is $2666. The price of gold forecasted at the end of the month is $2716, with a total 4.7% change in January 2023.

January 2024

At the beginning of the month, we predict a price of $2,597. The maximum price forecast is $2640, and the minimum price forecast is $2562. The average price prediction for the month is $2600. The price of gold forecasted at the end of the month is $2601 with a total 0.2% change in January 2024.

January 2025

At the beginning of the month, we predict a price of $2657. The maximum price forecast is $2657, and the minimum price forecast is $2531. The average price prediction for the month is $2604. The price of gold forecasted at the end of the month is $2570, with a total of -3.3% change in January 2025.

*Please note that long-term price forecasts for any investment asset are very approximate and may change due to various factors. Keep reading to find out which factors may affect the price of gold.

How Has the Price of Gold Changed Over Time?

Below is a chart that shows how the price of gold changed over the past ten years. In order to make our predictions and forecasts as accurate as possible, it’s important to look back to such historical data.  

Source: Goldprice.org, the screenshot was taken on December 20, 2020

Factors That May Affect the Price of Gold

Typically, traders associate fundamental analysis with the stock market, not gold. While fundamental stock market analysts monitor certain companies’ financial statements, gold market analysts monitor macroeconomic factors, political and economic world stability, and competition from investment alternatives to forecast prices. Let’s look into five macroeconomic parameters that can influence the cost of the main precious metal.

1. Inflation

Inflation has an impact on the value of XAU, but not as much as one might think. Most novice gold investors believe that if inflation rises in the US, then gold price should also go up since more inflation dollars will have to be paid per ounce. However, in the long term, there is no strong correlation between inflation and gold prices. This can be seen from the chart below, which shows the inflation dynamics in the US and gold prices.

Source: Tradingview.com 

This lack of a strong correlation can be explained by two reasons:

a) Gold is not a commodity. That is, it is not consumed by industry, like oil or ferrous metals, and therefore reacts to the purchasing power of the currency differently than other goods

b) During periods of economic and stock market growth, gold has to “compete” for profitability and investor attention. Moreover, during such periods, inflation is usually at a high level.

2. Currency Fluctuations 

Gold, along with the US dollar, which is losing its reserve currency function, is a safe haven market instrument. Therefore, if the exchange rate of one of the currencies (for example, the dollar) depreciates relative to the other reserve currencies, while the purchasing power of buying gold in other currencies is preserved, then the logical consequence is the rise in the price of gold relative to the depreciated currency. The chart shows an inverse long-term relationship between the US dollar index (white line) and the dynamics of gold prices (yellow line).

Source: Tradingview.com

3. The Risk of a Recession Due to War

War or the threat of war is the most significant (after financial market crises) source of uncertainty for investors. Gold is best used as a safe investment in times when investors are terrified, and war may well cause such conditions in the market. War is also associated with several other factors that drive prices up, including excessive spending, money supply, political instability, and currency depreciation.

4. Interest Rates

Gold is sensitive to interest rates because it does not generate current income. Therefore, it is highly sensitive to alternatives in the stock market that offer potential income, such as bonds or even stocks that pay dividends. There is a noticeable, albeit not perfect, negative correlation. When US government bond yields rise, the likelihood is high that gold will trend sideways or even downtrend, while declining yields tend to lead to very positive movements in gold prices. 

For example, to combat the recession in the early 2000s, the Fed lowered interest rates to very low levels, forcing long-term investors to withdraw from low-yield bonds and diversify their portfolios with gold. This provided good support to the already rising gold prices.

5. Supply and Demand

Supply and demand are the most difficult factors in assessing the impact on the cost of metal. Large investors in gold, including central banks, the IMF, and leading funds, significantly impact the market. The actions of these participants can substantially change the demand for gold jewellery and investment instruments.

Accounting for the actions of these large players is an impossible task for an ordinary private investor who does not have access to the disclosed information of all the players’ data.

For a general understanding of the market balance, you need to know that most of the demand for gold is more or less evenly distributed between investment instruments and jewelry.

As an example, it is shown below that China and India (with strong economic growth) have become major buyers of gold over the past two decades to invest and create reserves and, therefore, have provided an additional stimulus for price increases.

China, Central Bank gold reserves, t.:

India, Central Bank gold reserves, t.:

Conclusion: Is Gold a Good Investment?

Gold has proven to be an excellent defensive asset in 2020. Against the backdrop of the coronavirus crisis and recessions in key countries of the world in 2020, gold quotes have reached historical highs. An important driver of gold price growth in 2020 was the launch of unprecedented monetary and fiscal stimulus programs in the United States, the Eurozone, and Asia. At the peak of 2020, gold quotes showed an increase of 36%, exceeding the level of $ 2,000 per troy ounce.

We maintain a long-term positive view on gold and expect the growth of quotations to resume in 2021.

Month	Begin.	Min-Max	End	Month %	Total %
2021
Jan	1913	1909-1967	1938	1.3%	6.8%
Feb	1938	1843-1938	1871	-3.5%	3.1%
Mar	1871	1816-1872	1844	-1.4%	1.7%
Apr	1844	1756-1844	1783	-3.3%	-1.7%
May	1783	1754-1808	1781	-0.1%	-1.8%
Jun	1781	1781-1919	1891	6.2%	4.2%
Jul	1891	1891-1966	1937	2.4%	6.8%
Aug	1937	1937-2011	1981	2.3%	9.2%
Sep	1981	1981-2136	2104	6.2%	16.0%
Oct	2104	2075-2139	2107	0.1%	16.2%
Nov	2107	2073-2137	2105	-0.1%	16.0%
Dec	2105	2105-2237	2204	4.7%	21.5%

As new initiatives of the world’s central banks and governments to support markets and economies are implemented in 2021, gold quotes will resume their growth. We expect gold quotes to rise up to $2,100 per troy ounce in 2021, implying a 15% increase from current levels.

Make sure to create a free demo account on LiteForex! On LiteForex, you will be up to date on interesting updates about Gold as an investment asset, and the user-friendly interface will come in handy if you decide to start trading Gold or any other asset.  

Price chart of XAUUSD in real time mode