Gold broke US$2,000 in the summer of 2020, but soon fell back a few pegs. Many market watchers are now wondering, “When will gold go up?”
Of all the metals on Earth, gold shines the brightest when it comes to holding its value and being a vehicle for building and preserving wealth.
In fact, the gold price has risen by as much as 700 percent in the last 20 twenty years. Despite that impressive increase, many investors are still wondering, “When will gold go up?”
The precious metal is a safe haven asset that performs well in tumultuous times, and there have been plenty of global crisis events in the past few years — most recently the socioeconomic fallout from the COVID-19 pandemic.
There are plenty of gold bulls calling for the price of the yellow metal to double, triple and even quadruple the current figure. Nevertheless, answering the question, “When will gold go up?” is a bit of a guessing game, even for the most veteran gold market analysts.
That said, there are certain time-tested indicators for when gold will go up that market participants can track in order to make a more educated guess about the precious metal’s future price action.
When will gold go up?: Gold’s previous price performance
If you want to know when gold will go up, the yellow metal’s past performance is a good place to start. Let’s start with a look at gold’s price action during the coronavirus pandemic.
The gold price started off 2020 trading at US$1,527 per ounce, and by May the yellow metal was sitting above US$1,700, a price level not seen since late 2012. Later that summer, as the economic fallout and uncertainty surrounding the pandemic really began to sink in, the gold price broke the US$2,000 level on August 7 to reach an all-time record high of US$2,067.15.
However, the market couldn’t sustain that level for long, and gold had dipped below US$1,900 by the start of the fourth quarter. Pfizer (NYSE:PFE) and BioNTech’s (NASDAQ:BNTX) vaccine breakthrough announcement in November led to a 5 percent price shave, dropping gold once again below the US$1,800 level before it rebounded to just below US$1,900 by the close of the year.
All in all, gold closed out 2020 up about 21 percent for the year. According to FocusEcomics economist Steven Burke, its price growth in 2020 was strongly linked to the global impact of COVID-19. “The pandemic invoked unprecedented economic uncertainty, which led to a surge in safe-haven demand and, in turn, boosted gold prices,” Burke told the Investing News Network (INN).
Burke also pointed out that a return to certainty begets a stronger “appetite for risk” on the part of investors, which “bode(s) poorly for safe haven demand and gold prices.”
In fact, in the first quarter of 2021, the gold price fell by 8.1 percent to hit US$1,744 by the end of March. The main drivers of gold’s poor performance were high US 10 year Treasury yields on top of a strong American dollar. These factors contributed to a higher risk appetite among investors, which was evident by the increased demand for bitcoin.
Heading into late May 2021, gold broke through the US$1,900 level, with some analysts calling for a repeat of the summer of 2020 with another record-breaking gold price on the horizon. Gold’s lift in the second quarter has been partially attributed to comments from the US Federal Reserve that have market watchers believing interest rate hikes are not on the table — for now.
Investors interested in understanding when the gold price will go up should keep one eye on the Fed’s interest rate plans. Rate hikes are generally negative for gold because when rates are higher investment products that accrue interest are more profitable than the precious metal.
In July 2019, the Fed began cutting interest rates for the first time since 2008, dropping interest rates by a quarter point to a range of 2 to 2.25 percent. Since then, the Fed has slashed interest rates to 0 to 0.25 percent. As of its April 2021 meeting, the central bank had no plans to hike interest rates — in fact, some economists at the central bank are arguing for sub-zero interest rates.
When will gold go up?: Gold supply and gold demand
Whether the gold price is sliding down or heading up, market participants are always on the lookout for the next catalyst that will drive the price higher.
Investors should continue to watch for destabilizing geopolitical events, the ongoing socioeconomic impact of the COVID-19 pandemic, future Fed rate changes and ongoing trade tensions between China and other G7 countries, including the US, Canada and Australia.
But what about gold supply or gold demand? The World Gold Council’s (WGC) 2020 report indicates that last year both gold mine production and total gold supply decline by 4 percent compared to 2019. The WGC attributes that slide to operational disruptions caused by COVID-19 lockdowns.
Gold bars and gold coins saw an increase of 3 percent in annual demand, while gold exchange-traded funds reached record year-end holdings of 3,751.5 tonnes, up 120 percent year-over-year. Overall in 2020, investment demand for gold accounted for more than 46 percent of total demand.
However, overall consumer demand for gold in 2020 was negatively impacted by the coronavirus pandemic, resulting in a 14 percent decline that led to total annual demand dipping below 4,000 tonnes for the first time since 2009.
Much of this was attributed to demand for gold jewelry falling by 34 percent year-over-year to a record low of 1,411.6 tonnes. China and India are the two largest markets for gold jewelry, and both countries’ citizens have seen their purchasing power decimated by the coronavirus pandemic. Traditionally, gold jewelry is responsible for 50 percent of global gold demand. However, in 2020 the jewelry sector only accounted for about a third of total gold demand.
On the industrial side, gold is used in electronics technology and is benefiting from the rise of nanotechnology. This demand segment was also impacted by COVID-19 lockdowns, with demand for gold declining by 7 percent in 2020 to 301.9 tonnes.
Over the past decade, central banks have become net buyers of physical gold. “Although 2020 marked the 11th consecutive year of net purchasing by central banks, it was the lowest annual total for central bank purchasing since that trend began in 2010,” notes the WGC. Central bank buying declined by 59 percent for the year, with most of that drop coming in the second half of the period.
Much like gold jewelry and industrial demand, central bank gold demand in 2020 was also negatively impacted by the coronavirus pandemic. Some central banks moved to liquify their physical gold holdings to better support their economies through the crisis.
The WGC expects gold demand from these segments to recover in 2021 and beyond as the world’s economies improve. In its Q1 2021 gold report, the council revealed that consumer gold demand was on the rise, with jewelry demand up 52 percent over the same quarter in 2020. Gold jewelry spending reached US$27.5 billion, which the WGC notes was the highest value for a first quarter since 2013. Gold demand from the technology sector grew by 11 percent year-over-year.
When will gold go up?: Gold in the future
Gold broke through the US$1,900 level in Q2 2021, leading investors to dream of another Summer of Love for the precious metal. Will the gold price post a new record-breaking high in 2021? Many analysts think there’s enough support for gold prices to once again rise above US$2,000.
Byron King, who writes the Whiskey & Gunpowder newsletter at St. Paul Research, which is part of Agora Financial, told INN that he sees continued weakness in the US dollar as very supportive for gold. King thinks the gold price has the potential to repeat last summer’s performance. “Last summer we saw gold over US$2,000 an ounce. I expect we’re going to see the same thing again this summer,” he said.
Watch the full interview with King above.
Ed Moy, chief market strategist at Valaurum and former director of the US Mint, told INN in early May that he expects gold will trade between US$2,000 and US$2,100 by the end of 2021. Moy said that the demand for physical gold as an investment has led to higher premiums, with major gold retailers reporting sales of gold ounces already in that price range.
“So even though the spot price is well below that, to me the real price of gold is what the market is willing to pay for it — and they’re willing to pay up to US$2,100,” he noted. Moy also said that risk of inflation and uncertainty over when the economy will recover are both positive factors for a higher gold price.
Watch the full interview with Moy above.
Gareth Soloway, chief market strategist at InTheMoneyStocks.com, is even more bullish on gold. In a May interview with INN, Soloway pointed to US$2,860 as a price target for gold in the next year or two given the similarities between the supportive fundamentals right now and the 2007 to 2008 market.
“You have gold replicating to basically the tee exactly what it did the last time it broke above its high. It pushed through, then it pulled back … and then it just started to zoom higher — and that’s what I think will actually happen to gold,” he said.
Watch the full interview with Soloway above.
If the gold price continues to rise this year, breaking a new record high is a good possibility. And INN’s Twitter followers agree — at the end of May, we asked whether gold will reach US$2,000 again this summer. More than 87 percent responded in the affirmative.
Now it’s your turn. When will gold go up and break the US$2,000 barrier? Let us know in the comments.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.