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General Market Commentary
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General Precious Metals
$2,000 gold in 2021 is a conservative estimate - MKS PAMP Group
(Kitco News) - Unprecedented economic conditions caused by the COVID-19 pandemic will continue to support gold and silver prices at least through the first half of 2021, according to the latest research from Swiss refiner MKS PAMP Group.
In its latest forecast the analysts at the precious metals firm said that since their initial price forecast at the start of the year, the world has seen massive central bank action to support the global economy devastated by the coronavirus. They note that since March more than $15 trillion has been pumped into financial markets.
“This is unprecedented and will have a long-term impact on the world economies,” the analysts said. “Over the medium term, this massive influx of capital could result in inflationary pressure and a loss of purchasing power, in a negative global growth and negative interest rates context.”
In this environment, the analysts said they see gold prices pushing through $2,000 an ounce by the first half of 2021 as economic uncertainty and low interest rates continue to support prices.
“Despite a significant price increase in our forecast, we believe our scenario to remain conservative,” the analysts said. “As paper money loses value and markets remain volatile, gold shall face a significant influx of buying interest, and play its role as a safe haven and capital preservation asset. It is a perfect storm for gold or even a perfect hurricane!”
The firm now see gold prices averaging the third quarter around $1,770 an ounce, with the average price rising to $1,830 an ounce in the final quarter of 2020. Finally, the firm sees gold prices averaging $1,850 in the first half of 2021.
Although MKS is bullish on gold, they said that the market could face some headwinds of a strong equity market through the rest of 2020. However, they added that this could prove to be only a temporary setback.
“When corporate financial results are published in early 2021, they won ’t reflect the stock prices levels, as most corporate earnings will have significantly decreased. We do expect a major correction in stock prices towards the end of the year and beginning of 2021,” the analysts said.
Looking at silver prices, MKS analysts said that the precious metal should do well, dragged higher by gold ’s rally. The analysts see silver prices pushing to $23 an ounce in the first half of 2021.