Gold's rally to slow, not stop, as global economy recovers: Reuters poll

Shreyansi Singh
·2-min read
FILE PHOTO: A worker places gold bullion on display at Hatton Garden Metals precious metal dealers in London

By Shreyansi Singh

BENGALURU (Reuters) - Analysts and traders have downgraded their forecasts for gold but still expect prices to recover from current levels and many see it achieving record highs this year, a Reuters poll showed on Wednesday.

Traditionally seen as a safe place to store wealth, gold surged to a record level of $2,072.50 an ounce last summer as the coronavirus swept the globe.

But prices have since dipped to around $1,850 as the rollout of vaccines encourages investors to channel more money into assets such as equities that benefit from economic growth.

Gold will average $1,900 an ounce during the January-March quarter, $1,925 an ounce for the full year and $1,908 in 2022, according to the median forecasts returned by a survey of 40 analysts and traders.

That is lower than the prediction from a similar poll three months ago that gold would average $1,965 in 2021.

"We expect gold to perform well in 2021, although at a slightly more subdued rate compared to 2020," said Ross Norman, an independent analyst.

"We expect gold to score a fresh all-time high in 2021."

"Financial markets remain vulnerable and we think investors will continue to see gold as the near perfect antidote," he said.

Gold has benefited from action by central banks to slash interest rates and pump cash into the economy, which raises the threat of inflation and reduces returns on bonds, a competing asset class.

But while global economic recovery may weaken the dollar, helping gold by making it cheaper for buyers outside the United States, it also is likely to raise bond yields, making gold less attractive, said Julius Baer analyst Carsten Menke.

Silver behaved in a similar way to gold last year, surging to $29.84 an ounce in the summer, its highest since 2013, before falling to around $25.

The poll returned median forecasts for prices to average $25.86 this year, a little lower than the prediction of $26.00 returned by the poll three months ago, and $25.30 in 2022.

Bullion rallies https://fingfx.thomsonreuters.com/gfx/ce/xegvbebeepq/Bullion%20rallies.jpg

Gold benefits as returns on U.S. Treasuries turn negative https://fingfx.thomsonreuters.com/gfx/ce/rlgpdgqgqvo/Gold%20benefits%20as%20returns%20on%20U.S.%20Treasuries%20turn%20negative.PNG

Gold has lost value compared to silver https://fingfx.thomsonreuters.com/gfx/ce/xlbpgymyzpq/Gold%20has%20lost%20value%20compared%20to%20silver.png

Gold versus major equity indexes https://fingfx.thomsonreuters.com/gfx/ce/jznpnmqjkvl/Gold%20versus%20major%20stocks.png

Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn

(Reporting by Shreyansi Singh and Swati Verma in Bengaluru, additional reporting by Bharat Gautam; editing by Peter Hobson and David Evans)