LAWRIE WILLIAMS: A $2,200 plus gold price this time next year? Christmas cheer for gold and silver.

Price forecasting tends to be an invidious exercise.  My forecasts of just over a year ago for the precious metals, although decently positive, mostly fell well short of eventuality – but then who could have predicted the distorting effects of the COVID-19 coronavirus pandemic on the markets?  Indeed had we even foreseen it we might well have advanced our precious metals forecasts quite substantially further as we would have anticipated devastation of equities markets, but this did not occur with stock indices mostly even gaining despite the worst economic figures seen since the Great Depression of the 1920s and 30s.

Even so, with the likelihood of my latest forecasts being open to question, or even ridicule from some quarters, ahead, and after the event, I’m making my Christmas predictions for precious metals prices, major market indices and the dollar index at both end-June 2021 and for the close of the year regardless, thus opening myself for two doses of ultimate criticism.  I’m choosing two time points because I think 2021 could be a year of two distinct halves as the coronavirus seemingly balloons out of control in the first half of the year, but sees the beginnings of hopefully some success in combating it as the proportion of people vaccinated against it begins to have an impact in the second half.  However one should bear in mind that back in March this year most of us probably thought that the growth of the virus pandemic would be behind us well before now.  How wrong we were!

Much will depend, though, on whether the vaccinations prove to be successful in halting the likelihood of virus infection among those who receive it, the speed at which governments roll out any kind of mass immunisation programme and the degree of acceptance of receiving the vaccine by the general public.  Initial indications are that in the U.S. in particular around half the populace may reject being vaccinated against the virus due to fears about the safety of vaccines seemingly rushed into production and approvals without adequate safety testing.  This fear has been coupled with social, and mostly right wing, media-fanned conspiracy theories regarding ulterior motives from the ‘deep state’ in implementing a mass immunisation programme, all tied up with population control and the ’great reset’.

Table:  Price and index predictions for end-June and end-December 2021.

Note: Current prices and index values rounded to around current and recent figures

Breaking these forecasts down individually we are cautiously optimistic on  gold price growth as uncertainty over the virus and U.S. internal political differences of opinion continue to abound with a Democrat-controlled House of Representatives and a likely Republican controlled Senate, albeit tiny majorities retained in each house.  We anticipate the Gold:Silver Ratio coming down a couple of notches leaving silver to perform marginally better than gold in percentage terms.  We see also the Palladium:Platinum ratio coming down a little too with perhaps the first signs of the currently far less costly platinum usurping palladium’s place as an exhaust emission system control catalyst for petrol (gasoline) driven automobiles – by far palladium’s largest market.  Perhaps there will also be a price impact resulting from a more environmentally aware approach by a presumed Biden administration giving a potential boost to sales of electric-powered light vehicles which do not need palladium-rich exhaust emission control systems at the expense of petrol driven units.

As to the major global equity indices, the likely continuing adverse impact of the coronavirus on the global economy suggests weakness here, although for the moment we are holding off predictions of a major price collapse in general equities.  They have held up remarkably well so far and the ever-optimistic investment public may keep them stronger than they perhaps deserve as has been the case in the current year.  The U.S. markets tend to set the pattern so if an incoming Biden administration manages to push a bigger stimulus programme through Congress, this could have a positive impact on U.S. equities – and also on the precious metals.

We foresee the U.S. dollar remaining a little weaker in the first half of 2021, but perhaps holding its ground in H2 providing the virus vaccines are seen to be having an impact and start slowing the spread of infections.  If this should occur, the U.S. Fed may thus turn a little less pessimistic on the overall outlook going into 2022 and beyond, but much will depend on the level of vaccine uptake and whether it is indeed seen to be bringing overall infection rates downwards.

So, to sum up we are suggesting that precious metals prices will see gradual increases through the year, while equities will at best mark time.  Gold will move ahead and again breach the $2,000 level – and where gold goes the other precious metals tend to follow.  Of course all this could be upset by newly emerging geopolitical crises which could drive prices higher than our best guesses at the moment and we will obviously keep readers of these articles apprised of any likely changes in our thinking as the year progresses.

Meanwhile we wish all our readers as happy a Christmas as restrictions around the world allow, and the hope that 2021 proves to be a far less traumatic year with an end to coronavirus worries at least beginning to take shape.

24 Dec 2020 | Categories: Gold

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