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Gold prices to average $2,300 an ounce in 2021 - CIBC

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(Kitco News) - 2020 has been one big roller-coaster ride for the gold market, and while volatility is expected, one bank sees bigger upswings next year.

In its 2021 outlook, analysts at CIBC said that they see gold prices averaging the year around $2,300 an ounce as the world continues to deal with the devastating economic fallout of the COVID-19 pandemic.

"Covid-19 only served to accelerate our 'lower for longer' rates outlook, which was the foundation of our bullish gold call at the beginning of 2020. The global pandemic turned the world upside down economically, with governments quickly injecting stimulus to stave off corporate and personal bankruptcies," said Anita Soni, author of CIBC's gold outlook.

Ongoing news of potential vaccines to fight the coronavirus has recently boosted positive investor sentiment and weigh on gold, recently driving prices to a four-month low below $1,800; the precious as bounced off its recent lows but is still struggling to find renewed buying interest. December gold futures last traded at $1,807 an ounce.

Some economists and analysts have noted that the distribution of vaccines could lead to more conservative fiscal spending. However, CIBC said that it is too early to assume a vaccine as a major game-changer for the global economy and more stimulus.

"In our view, this may be premature, as economic risk and uncertainty is far from over, given that globally we are in the midst of the second wave, and what will be a 15-18 month Global slowdown of the world economy will have longer-term effects,' Soni said. "We forecast real rates, the primary driver for gold prices in our view, to remain under pressure for the next several years as governments tackle heavy debt loads and focus on reducing unemployment numbers. The US Fed Reserve will likely reiterate a 'lower for longer outlook' particularly in light of the global economic backdrop, which we continue to view as positive for gold."

While low to negative real interest rates will be positive for gold "for several years," CIBC said instead of focusing on central banks, investors should focus on government stimulus initiatives.

"Central Banks don't have much more room to cut rates from here. As such, governments are under pressure to continue pumping money into the system to fend off further balance sheet pressures. We have yet to see the long-term fallout for the stimulus to date and yet more stimulus is expected," Soni said. "Global macro uncertainty and investor demand for currency diversification will likely continue to be key drivers for ETF and physical demand for gold and silver."

CIBC is not just bullish on gold; it expects that silver prices will outperform in the precious metals markets. The bank sees silver prices averaging 2021 around $32 an ounce.

"Even though the commodity has already performed well year-to-date, this metal has the potential to provide investors with even more torque given the relatively smaller market for silver vs. gold."

Looking past 2021, the Canadian bank said that they see gold prices averaging $2,200 an ounce in 2022, $2,100 an ounce in 2023, and $2,000 an ounce in 2024.

For silver, CIBC said that they see an average price of $31 an ounce in 2022, $30 an ounce in 2023, and $28 an ounce by 2024.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.