What started with a bang is now ending with a whimper. After a meteoric rise in gold prices through the first three quarters of 2020 (gaining +24.3% from January 1 through September 30), gold prices cooled off in 4Q’20, having lost around -1% at the time this forecast was written in December 2020.
Some of the reasons for shifts in underlying fundamentals that dictated a pause in the gold price rally in 4Q’20 are still valid in 1Q’21, while other catalysts have disappeared or reversed course altogether. While the 1Q’21 gold price outlook is bullish, there are some caveats – mainly, that gold may not be the best performing metal, precious or otherwise.
With government deficits rising and interest rates staying low – much like the 2009 to 2011 window – now that the global economy is looking ahead to a period of significant growth post-pandemic, silver prices have a recent historical precedent to suggest that they are likely to lead gold prices for the foreseeable future.
Traders shouldn’t be surprised if platinum, alongside base metals like iron, nickel, and copper, all outpace gold prices in 1Q’21 as financial markets remain ever-forward looking towards a future where the pandemic has been contained, growth is on the march, and substantial support is still being provided by central banks and sovereigns globally.