Cailianshe (Shanghai, editor Zhou Ling) reported that , under the impact of factors such as the global outbreak, central banks restarting quantitative easing (QE), and the U.S. election, gold once again returned to the "king of safe-haven" in 2020, and gold prices set a new historical high. When the risk aversion sentiment was strongest, global gold coins and bars were once out of stock, and physical gold continued to be in short supply.
But at the end of the year, as the economy entered a recovery trajectory and positive news of the new crown vaccine continued to spread, the golden light began to dim. The bulls and bears have different opinions on whether gold can continue to be dazzling in 2021.
Note: Gold price trend chart for the past 50 years
For most of 2020, gold performance was the best in history. The central bank's large-scale printing of money, weakness in the US dollar and uncertainty in the election stimulated safe-haven demand, pushing up gold prices. The decline in real U.S. Treasury yields prompted gold prices to rise sharply in July and August, and eventually rose to a record high of $2,075 per ounce.
Specifically, the spot gold price trend has gone through four stages this year:
The first stage - January 1 - March 8, 2020 : The epidemic broke out in some countries and began to spread around the world. For risk aversion, the price of gold gradually rose.
COVID-19 epidemic began to spread globally from individual countries at this stage, and the capital market has taken the lead in responding. At that time, economists had cut expectations for global economic growth across the board, as tourism restrictions and lockdowns had affected tourism, supply chains and factory output in many countries.
The second stage - March 9-March 19 : The new crown epidemic broke out in Europe and the United States and other countries, and risky assets such as gold and US stocks all fell sharply.
In response to the plunge in gold at this stage, institutional analysis believes that it is mainly due to the tight US dollar liquidity.
When the market is in sharp turmoil, gold is usually sold along with the risk market, providing liquidity to investors and filling in margin , so gold and gold mining stocks will also be impacted together.
Phase 3 - March 20-August 6 : The global epidemic continues to worsen, and gold, as a safe-haven asset, soars and continues to rise.
After resisting the liquidity-based sell-off, the price of gold was snatched as a safe-haven asset, setting a new historical high in 2011 and breaking through the important mark of $2,000 per ounce in one fell swoop. institutions continue to sing more gold at this stage.
The printing of money at major global central banks, including the Federal Reserve, is unprecedented in this stage, with the Federal Reserve's balance sheet doubled in just a few months.
In addition to concerns about risky assets, people are also worried that fiat currencies will depreciate and gold will become the only stable asset.
Phase 4 - August 7 - so far : Economic indicators show signs of recovery, positive news about the progress of the new crown vaccine continues to spread, and the decline in political uncertainty in the United States after the election has put gold under pressure at this stage.
So far, the spot gold price of has been pulled back by more than 10% from the historical high in August this year. The successive release of Pfizer and Moderna's high-efficiency vaccines has further alleviated the market's risk aversion and posed a threat to the gold price.
On November 9, the day Pfizer announced that preliminary results showed that its vaccine effectiveness reached 90%, the price of gold showed the second largest single-day decline in seven years .
At the same time, the bearish golden camp of institutions is also getting bigger and bigger. Deutsche Bank is the latest institution to join the camp. The bank's commodity and foreign exchange strategist Michael Hsueh recently warned that gold will still fall 12% in the short term.
Extremely panic - Gold bars and gold coins were once out of stock
In the early stage of this year's gold trend, that is, after the price of spot gold in London bottomed out on March 19, out of extreme panic about the epidemic, the world is rushing to buy physical gold, and gold bars and gold coins were once out of stock .
At that time, although the price of spot gold in London was only about $1,580 per ounce, in fact, the price of paper gold is completely different from the actual price.
Cailianshe (Shanghai, editor Zhou Ling) reported that , under the impact of factors such as the global outbreak, central banks restarting quantitative easing (QE), and the U.S. election, gold once again returned to the "king of safe-haven" in 2020, and gold prices set a new historical high. When the risk aversion sentiment was strongest, global gold coins and bars were once out of stock, and physical gold continued to be in short supply.
But at the end of the year, as the economy entered a recovery trajectory and positive news of the new crown vaccine continued to spread, the golden light began to dim. The bulls and bears have different opinions on whether gold can continue to be dazzling in 2021.
Note: Gold price trend chart for the past 50 years
For most of 2020, gold performance was the best in history. The central bank's large-scale printing of money, weakness in the US dollar and uncertainty in the election stimulated safe-haven demand, pushing up gold prices. The decline in real U.S. Treasury yields prompted gold prices to rise sharply in July and August, and eventually rose to a record high of $2,075 per ounce.
Specifically, the spot gold price trend has gone through four stages this year:
The first stage - January 1 - March 8, 2020 : The epidemic broke out in some countries and began to spread around the world. For risk aversion, the price of gold gradually rose.
COVID-19 epidemic began to spread globally from individual countries at this stage, and the capital market has taken the lead in responding. At that time, economists had cut expectations for global economic growth across the board, as tourism restrictions and lockdowns had affected tourism, supply chains and factory output in many countries.
The second stage - March 9-March 19 : The new crown epidemic broke out in Europe and the United States and other countries, and risky assets such as gold and US stocks all fell sharply.
In response to the plunge in gold at this stage, institutional analysis believes that it is mainly due to the tight US dollar liquidity.
When the market is in sharp turmoil, gold is usually sold along with the risk market, providing liquidity to investors and filling in margin , so gold and gold mining stocks will also be impacted together.
Phase 3 - March 20-August 6 : The global epidemic continues to worsen, and gold, as a safe-haven asset, soars and continues to rise.
After resisting the liquidity-based sell-off, the price of gold was snatched as a safe-haven asset, setting a new historical high in 2011 and breaking through the important mark of $2,000 per ounce in one fell swoop. institutions continue to sing more gold at this stage.
The printing of money at major global central banks, including the Federal Reserve, is unprecedented in this stage, with the Federal Reserve's balance sheet doubled in just a few months.
In addition to concerns about risky assets, people are also worried that fiat currencies will depreciate and gold will become the only stable asset.
Phase 4 - August 7 - so far : Economic indicators show signs of recovery, positive news about the progress of the new crown vaccine continues to spread, and the decline in political uncertainty in the United States after the election has put gold under pressure at this stage.
So far, the spot gold price of has been pulled back by more than 10% from the historical high in August this year. The successive release of Pfizer and Moderna's high-efficiency vaccines has further alleviated the market's risk aversion and posed a threat to the gold price.
On November 9, the day Pfizer announced that preliminary results showed that its vaccine effectiveness reached 90%, the price of gold showed the second largest single-day decline in seven years .
At the same time, the bearish golden camp of institutions is also getting bigger and bigger. Deutsche Bank is the latest institution to join the camp. The bank's commodity and foreign exchange strategist Michael Hsueh recently warned that gold will still fall 12% in the short term.
Extremely panic - Gold bars and gold coins were once out of stock
In the early stage of this year's gold trend, that is, after the price of spot gold in London bottomed out on March 19, out of extreme panic about the epidemic, the world is rushing to buy physical gold, and gold bars and gold coins were once out of stock .
At that time, although the price of spot gold in London was only about $1,580 per ounce, in fact, the price of paper gold is completely different from the actual price. In reality, the price of gold was already high at that time close to $1,800, and there was a high probability that it would not be able to buy it.
According to media reports, before White House approved the $2 trillion emergency response plan on March 25, the big gold traders of had already sold a large amount of gold coins and bars in panic.
paper gold and gold ETF can be purchased, but there is no (physical) gold on the market.
Canadian gold trading giant Kitco previously reported that they had sold almost all standard one ounce of gold coins at that time. The Eagle Gold Coins and Buffalo Gold Coins issued by the Federal Mint have been out of stock. The world's most widely circulated gold coins such as the Maple Leaf Coins issued by Canada, the British Coins issued by the UK, the Kangaroo Coins issued by Australia, and the Kruger Gold Coins issued by South Africa have also been announced to be out of stock.
Gold and Bitcoin - the battle between the "new and old safe haven kings"
Gold played an important role during this year's epidemic, but as a traditional safe haven asset, 's brilliance is being overshadowed by the emerging asset Bitcoin . JPMorgan (JPMorgan) warned in December that with the rise of Bitcoin in the mainstream investment circle, gold will become a victim .
Bitcoin price was around US$7,000 at the beginning of this year, and has risen to above US$20,000. has risen by more than 180% ; in contrast, gold price at the beginning of the year is around US$1,530, and now it has risen to around US$1,860. has risen by only about 20% .
Even if gold is taken at its lowest point in the year on March 19 (US$1451.55) and its highest point in the year on August 6 (US$2074.71), the biggest increase in the year on gold is only about 43%. Whether it is price or increase, Bitcoin is much higher than gold.
"Institutional investors have just begun to accept Bitcoin, and their acceptance of gold is very high." Nikolaos Panigirtzoglou, quantitative strategist at JPMorgan, commented in a December report.
JPMorgan predicts that as digital currencies are accepted by more and more people as an asset class, the gold and cryptocurrency markets will undergo significant changes. Even if investors transfer a small portion of their investment from the gold market to cryptocurrency, will cause serious trouble for the longs in the precious metals market.
"If this medium- and long-term view is proven to be correct, then gold prices will encounter structural countercurrents in the next few years," said JPMorgan Chase.
In October and November, the Bitcoin trust, owned by digital asset management company Grayscale, had nearly $2 billion inflows, while gold ETFs had more than $7 billion outflows.
021 gold trend outlook
As uncertainty in the US election fades and some countries begin to receive the Pfizer vaccine, investors' confidence in economic recovery rebounds, gold market is not optimistic in the future, and the institutional bearish camp is getting bigger and bigger. The main reasons are the following:
1, epidemic is expected to be controlled . As Britain and the United States begin to announce the Pfizer vaccine, the market expects that more and more countries will receive the new crown vaccine in full, and the epidemic is expected to be controlled next year. Under such circumstances, risk aversion sentiment will gradually fade and gold prices will be suppressed.
2, The possibility of large-scale economic stimulus plans being issued declined . It has been difficult for the two parties in the United States to reach a new round of economic stimulus agreement before. As the vaccination work progresses, the possibility of stimulus plans may be further reduced. Even if the United States can eventually introduce stimulus measures, the market is worried that the scale of stimulus will greatly reduce , which will be detrimental to the rise of gold prices.
3, funds turn to risk assets . As the economy begins to recover, fund managers may turn to risk and value assets, meaning the bull market in gold may come to an end.
4, Bitcoin may seize the limelight . Even if the US dollar continues to weaken or inflation rises, it will help gold continue to rise, but emerging safe-haven asset Bitcoin may also snatch the halo of gold, and this scene has already happened this year.
"We think it's hard for gold to hit new highs again."Deutsche Bank, which has recently turned from bulls to shorts, said they have strategically bearish on gold, and the decline cycle of gold "often lasts for many years" .
Macquarie Group Ltd. also believes that the "cyclical bull market in gold has ended" and the gold price may have peaked.
Inflation and vaccines may bring variables to the gold price
However, not all institutions are so pessimistic. For 2021, inflation will become the key to the gold prospects.
The financial crisis broke out in 2008, and central banks began to large-scale quantitative easing, which triggered people's concerns about hyperinflation. Gold prices hit a record high in 2011. Therefore, some gold bulls believe that under the inflation expectations next year, gold can still continue to hit a new high. .
Standard Chartered Primordial Metals analyst Cooper (Suki) Cooper said: “Gold price risks remain upwards in light of expectations of loose monetary policy, and global real interest rates remain at low or negative levels. "She believes that the increase in government debt will push up inflation expectations.
also has a positive effect on gold. Although the first positive news of Pfizer released the gold price plummeted, the subsequent progress of similar vaccines did not cause the same strong reaction, which shows that the gold market has digested the negative impact of the vaccine on it. After the news of Moderna vaccine on November 16, the price of gold has almost no change.
In addition, it is too early to assert whether the emergence of vaccine can control the epidemic. Rhona, head of market analysis at StoneX Group, financial services company, O’Connell said that vaccines do not mean a cure, and there is still a long way to go before getting out of the predicament.
bulls also believe that the weakening of dollar is good for gold . Economic recovery is a long process, and central banks will still maintain quantitative easing turn, which will further lower the dollar and boost gold.
Bank’s US dollar abandoned its previous target of expecting gold to rise to $3,000 per ounce in its 2021 commodity outlook, but it has not turned long and short. In the latest estimate, Bank expects the average price of gold to be around $2,063 per ounce in the next year.
"Deutsche Bank, which has recently turned from bulls to shorts, said they have strategically bearish on gold, and the decline cycle of gold "often lasts for many years" .Macquarie Group Ltd. also believes that the "cyclical bull market in gold has ended" and the gold price may have peaked.
Inflation and vaccines may bring variables to the gold price
However, not all institutions are so pessimistic. For 2021, inflation will become the key to the gold prospects.
The financial crisis broke out in 2008, and central banks began to large-scale quantitative easing, which triggered people's concerns about hyperinflation. Gold prices hit a record high in 2011. Therefore, some gold bulls believe that under the inflation expectations next year, gold can still continue to hit a new high. .
Standard Chartered Primordial Metals analyst Cooper (Suki) Cooper said: “Gold price risks remain upwards in light of expectations of loose monetary policy, and global real interest rates remain at low or negative levels. "She believes that the increase in government debt will push up inflation expectations.
also has a positive effect on gold. Although the first positive news of Pfizer released the gold price plummeted, the subsequent progress of similar vaccines did not cause the same strong reaction, which shows that the gold market has digested the negative impact of the vaccine on it. After the news of Moderna vaccine on November 16, the price of gold has almost no change.
In addition, it is too early to assert whether the emergence of vaccine can control the epidemic. Rhona, head of market analysis at StoneX Group, financial services company, O’Connell said that vaccines do not mean a cure, and there is still a long way to go before getting out of the predicament.
bulls also believe that the weakening of dollar is good for gold . Economic recovery is a long process, and central banks will still maintain quantitative easing turn, which will further lower the dollar and boost gold.
Bank’s US dollar abandoned its previous target of expecting gold to rise to $3,000 per ounce in its 2021 commodity outlook, but it has not turned long and short. In the latest estimate, Bank expects the average price of gold to be around $2,063 per ounce in the next year.
