03:16 PM
Sunday 29 November 2020
–
I wrote – Yasmine Selim:
Reaching good results regarding possible vaccines for the Coronavirus has cast a shadow over global gold prices, falling from its highest peak due to the repercussions of the Corona virus.
And gold prices recorded a decline at the end of last Friday’s trading – the last of the week’s transactions – to 1787.8 dollars an ounce, and this is the third consecutive weekly loss for gold.
And gold prices rose to record levels with the intensification of the Corona virus crisis, after investors resorted to buying safe havens to protect their money.
This increase pushed gold prices from $ 1,500 an ounce in January to an all-time high when it hit $ 2,072 in August, and expectations, including Bank of America, were saying that the price might reach $ 3,000 an ounce soon.
But these prices began to decline with the beginning of the announcement of the effectiveness of possible vaccines for the Corona virus.
According to Adam Berlaki, Director of Investment Research at the World Gold Council, in his post on the Council’s website, there are several reasons for the recent drop in the price of gold, the first of which is confirmation of the arrival of three successful vaccines for the Corona virus, secondly, the newly elected US President, Joe Biden, started announcing Candidates for his government, and the start of the procedures for handing over power to the elected president.
Has gold lost its luster?
While some analysts now believe that the rise in the price of gold has reached its peak, others say that prices may still have room to rise, at least for some time, according to what Reuters reported in a report.
“As we expect a continuous improvement in the economic environment next year, the demand for the safe haven should diminish,” said Carsten Minke, analyst at Julius Baer.
According to Bank of America, investors withdrew a record $ 4 billion from gold funds in the week ending November 18, and the bank abandoned its price target of $ 3,000 for an ounce of gold.
Reuters says the change in expectations is evident in the value of gold relative to copper, an industrial mineral that is booming thanks to economic growth, and in April gold was 11,000 more expensive than copper, and while still well above its long-term average, that ratio fell to 8,000.
Also, US 10-year bond yields rose as investors sold bonds, which are another “safe haven” asset, and this could reduce the appeal of gold, as it does not provide a return and is more common when the bonds do not provide any return as well.
Macquarie analysts expect the price of gold to reach $ 1,550 an ounce by the end of 2021.
“Gold prices have already peaked,” they said in a research note.
According to the Director of Investment Research at the World Gold Council, “There is no denying that the recent news was very positive for the markets and negative for gold prices, but gold is still up 17% this year and is stronger than any of the major assets.
It may take some time before vaccines are approved and even longer before they are deployed and vaccinate a large proportion of the population. This requires additional financial and cash assistance to fully “heal” the economy, adding credibility and support for gold demand, according to Adam Berlaki.
He said that the vaccine may eliminate the pandemic, but that its impact on the economy will continue for the coming years.
And many analysts believe that gold has still room to move upward, according to Reuters.
While Bank of America lowered its gold forecast, this change has not turned completely bearish, and it still expects prices to rise above $ 2,000 next year, before falling back to around $ 1900 to $ 1,950 in 2022-2025.
Citibank analysts expect the average price of gold to reach $ 2,100 an ounce next year and $ 2,200 in 2022.
Central banks are likely to keep interest rates low and limit bond yields, after they have pumped money into the financial system, increasing the risk of inflation, which gold can act as a buffer against, said Ole Hansen, an analyst at Saxo Bank.
“The vaccine can kill the virus, but it cannot kill the mountain of debt,” he said, expecting the dollar to weaken with the improvement of the global economy, making gold cheaper for buyers outside the United States.
– .
