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Gold prices to average $1,820 in 2021 - Metals Focus

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(Kitco News) - Although there is plenty of bullish sentiment in the gold market to support prices this year, one research firm said that investors shouldn't expect the same type of euphoria that drove the price to record highs last year.

Tuesday, Metals Focus published its annual Gold Focus report for 2021, and the analysts see a more tempered outlook for the precious metal as uncertainty over the global COVID-19 pandemic continues to ease.

The analysts said they expect gold prices to average around $1,820 an ounce this year, up 3% from last year's average price. However, this year's rally doesn't compare to the 27% jump seen in 2020.

The 2021 outlook comes as the gold market struggles to attract new bullish momentum after prices have been unable to hold gains above $1,900 an ounce. August gold futures last traded at $1,861.40 an ounce, up 0.28% on the day. The precious metal has managed to hold critical support above $1,850 an ounce.

The analysts noted that interest rates and inflation will remain the two significant factors that will dominate the gold market.

"Although we expect policy rates and nominal yields to remain low and negative in real terms, further cuts or declines are unlikely. This is resulting in slower inflows into gold than last year," the analysts said. "In contrast, the desire to own gold as an inflation hedge will be more prevalent this year. As the economic recovery remains uneven, monetary and fiscal policies should continue to be accommodative."

Looking at inflation, the U.K. research firm said that price pressures are rising as financial markets are awash in liquidity due to government and central bank stimulus policies. Neil Meader, director of gold and silver for the precious metal research firm, said that inflation is the watchword for 2021.

Looking at the physical market, Meader said that they expect to see a broad-based pickup in physical demand.

"We expect jewelry fabrication to rise by more than a third this year. Given 2020's low base, almost all countries are slated to see double-digit gains, led by India and China. Industrial fabrication is forecast to grow by 7%, benefiting from the global recovery. After a slump last year, official sector purchases are also expected to recover strongly, as a growing number of countries so far in 2021 have already added to their gold reserves. Meanwhile, physical investment is projected to build on 2020's gains, posting an eight-year high," he said.

Meanwhile, the report expects mine supply to reach record highs in 2021, offsetting weak scrap supply. Overall, Metals Focus projects gold's physical surplus to fall sharply but still achieve the second-highest level in its dataset.

"In keeping with 2020, investors will absorb this surplus, delivering the price gains," said Adam Webb, director of mine supply.

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.