$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.
The analysts said that silver prices could average $19 an ounce in the third quarter. They see average prices rising to $20 an ounce in the final quarter of 2020. The firm sees silver prices averaging $20.05 an ounce in the first half of 2021.
The analyst said that they see the gold-silver ratio falling back into the 80 point range after hovering above 100 and hitting a high of 125 points at the start of the COVID-19 pandemic.
“The industrial demand will remain subdued on the back of the recent standstill and the lower expected global growth. But the speculative play of the Gold to Silver Ratio will be the name of the game and we would expect some very volatile rally sessions in the coming months,” the analysts said.
Although the Swiss refiner is bullish on gold and silver, the analysts see only modest gains for platinum and palladium.
The analysts said that they see platinum rising to $950 an ounce in the first half of next year with an average price of $850 an ounce.
“The automotive industry published depressing numbers and the medium-term future does not look much brighter for the industry. Still we remain neutral to mildly bullish on Platinum,” the analysts said. “While the industrial demand for Platinum continues to significantly weaken, an increase in investment demand could act as a parachute in the price fall.”
MKS said that weak industrial demand in the auto sector will also weigh on palladium prices. The firm sees palladium prices reaching a high of $2,250 in the first half of 2021 with an average price of $2,045 an ounce.
“We started the year with a supply demand deficit and the mining production might slightly decrease over the coming few months. These 2 factors might, to a certain extent compensate for the industrial demand decrease,” the analysts said.
“In January we believed that Palladium would be the big winner, but now we strongly see Gold and Silver on top of the podium,” they added.