Fitch has revised its price forecasts for gold and other metals

Gold price forecast in 2021

Official discount prices for gold and other precious metals are established by the National Bank of the Russian Federation every working day. The basis is taken by fixing on the London spot metal market, and then converted into rubles at the exchange rate to the US dollar.

On a note!

For calculations, take the US dollar to Russian ruble exchange rate, which is valid on the day following the day the discount prices are established.

The discount prices established by the National Bank are used in the accounting calculations of credit institutions.

In the previous year 2021, the most important driver that influenced price increases was the coronavirus pandemic. But in 2021, this factor becomes less relevant. They are no longer so afraid of an increase in the number of cases, since vaccination is imminent.

A similar situation will affect other drivers.

Positive quotes for rising gold prices:

1. Low lending rates and the risk of dollar inflation. During the coronavirus period, the Central Bank is forced to reduce interest rates to support the economy. Money becomes more and its value decreases. The lower the price of the dollar becomes, the more expensive gold is.
2. High demand for protective assets. Demand for gold was high in the previous year due to the crisis. It is unknown when it will end, so there is a high probability of an increase in the price of gold.
3. Global economic recovery. Thanks to vaccinations, economic growth is expected in many countries, accordingly, the demand for precious metals will increase.

Negative quotes that may affect the growth of gold include proximity to historical highs (the price of gold is much higher than cost) and oversaturation of the market.

Gold is forecast to grow by 5-10% in 2021. But some experts believe that this will not happen and that the decline will continue.

What awaits gold and silver amid a possible trade war between the US and EU

President Trump has imposed tariffs on some goods from other countries. In response, EU countries have prepared a list of goods on which retaliatory duties will be imposed if the trade war intensifies. This news had almost no effect on the price of gold, increasing its price by only 0.45%. But if a trade war breaks out between the US and China, it will support the price of gold.

Many experts believe that US President Trump has started a dangerous game by starting to impose duties on imports of products from other countries, primarily China. He also demanded that China take decisive action as soon as possible to reduce China's $1 trillion trade surplus with the United States. Last year, the U.S. trade deficit with China hit a record $375.2 billion. Now Trump wants not only to reduce this deficit to zero, but also to gain a trade surplus with China of $600 billion. Many experts consider such wishes as fantasy.

The Chinese government will never tell its companies to sell less goods to the US, or for importers to buy more American goods. Over the past decades, China's prosperity has been built on mass production of goods and selling them to the United States. Refusal of such a policy would lead to the release of hundreds of millions of jobs and mass unemployment, which is completely unacceptable to the Chinese leadership. Most likely, it will introduce retaliatory tariffs against American goods. Thus, a trade war could begin between the two countries, which would plunge the world economy into chaos and uncertainty. The American stock market will be in a fever, just like the Chinese one.

The winner in such a situation will be precious metals, primarily gold, as safe havens in the event of obvious global instability.

What will happen to gold prices from 2021-2025?

The gold price forecast for 2021-2024 is not so optimistic. It is expected that by this time a decline will begin, but not such a significant one. It will be associated with a new cycle of the global economy, as well as an increase in production volumes.

In the myrrh economy, the price of gold is usually quoted not per gram, but per ounce. Gold price forecast 2021-2025:

It is very difficult to say that the average numbers will be exactly that. This is due to the unstable macroeconomic situation; in 5 years, many events can happen in the world that will affect the final exchange rate.

On a note!

Raw material prices are much easier to determine. But the price of gold is highly dependent on economic regulators.

What changes are expected in 2021

Gold is one of the most popular investment instruments globally.
Over the past decades, its prices have been growing steadily, and all drawdowns are quickly paid off. Demand for physical metal is also high. According to analysts, the trend will continue in the coming years. Data from previous years superimposed on a chart of macroeconomic events will help determine average price targets for 2021. That is, in order to give a forecast for price minimums and maximums, it is enough to determine how strongly the quotes react to a particular incident. Of course, macroeconomics is not the only factor influencing gold; it can be called a base - an impulse component that sets the pace of movement in one direction or another, in a narrow time period. Any forecast is based on the macroeconomic climate, but the commercial component should also be taken into account: it is profitable for yesterday’s buyers to sell gold at a higher price. Investors planning to buy or sell precious metals are advised to conduct a comprehensive analysis that takes into account all indicators.

Prices and price rates per gram of gold today

In Russian banks, the price per gram of gold is indicated in rubles. The meaning changes constantly as the situation in the world changes. At the moment, there is a slight increase in the cost of 1 gram of gold:

Since the price of gold changes little, many people consider investing in gold to be a safe haven. This option is ideal for long-term investing.

Perspective

You can't argue with the facts - rates are rising, but gold is falling. But the assumptions underlying these trends are wrong. This means trends are bound to change, perhaps dramatically. Again, we need to put things into perspective.

This is not the first time interest rates have jumped. On April 2, 2010, the 10-year yield reached 3.96% before falling to 2.41% by October 2. It rose again to 3.75% on February 8, 2011 and fell sharply to 1.49% on July 24, 2012. Yields reached 3.22% on November 2, 2021, and then fell to 0.56% on August 3, 2020, one of the biggest increases in bond prices ever. There is a pattern in all of this called "lower highs and lower lows": highs of 3.96%, 3.75% and 3.22% and lows of 2.41%, 1.49% and 0.56% .

The fact is that the bond market recovers from time to time. And when this happens, it is unable to maintain previous betting highs and ends up falling to new lows.

If we apply this model to current rate increases, expect rate increases to be well below 2.5% and could be followed by a new low of 0.25% or even zero. There are no guarantees, but it would be in line with a decade-long downward trend in rates.

However, there is more to it. The economy is not nearly as strong as the headlines and Wall Street claim.

Where and how to invest money in gold correctly step by step

Before purchasing gold for storage, you need to understand what investment option is planned: short-term or long-term, in order to choose the right strategy and method in the future.

All gold financing options are divided into two groups:

• physical purchase;
• paper gold.

These two categories of investments have their own characteristics.

Physical gold

A person in Russia cannot come to a factory or gold mining company to directly buy a gold bar or product. Purchase is possible only through a bank, exchange or other intermediary. Today you can purchase several options for physical gold:

1. Jewelry. Purchasing this option is as easy as pie, since earrings, chains, and rings are sold in stores and pawn shops. But this option is not very profitable for the investor. Precious metal products are an alloy and not a pure product. Also, upon purchase, the buyer pays VAT, which is not returned upon sale. In general, the acquisition of gold products is illiquid, since when sold, they will offer no more than half of their real value.
2. Ingots. You can purchase them in banks, and goods of this type have the best purity - 999. You will also need to pay VAT upon purchase. Another serious point is that you can only sell the bullion to the selling bank, and some of them are reluctant to even buy back their goods. An interesting point is that the difference in rates between buying and selling depends on the weight. The greater the weight of the product, the lower its price. This method is also not suitable for generating quick income.
3. Coins. A very questionable way to generate income. To buy really valuable coins, you need to be an expert and understand which ones will increase in value over time.

On a note!

Purchasing physical gold will not provide an opportunity to make money by selling it later, since even experts do not know how the gold exchange rate will change.

Paper gold

This option is similar to storing money on a card, but you won’t be able to touch the gold. When purchasing, a person receives only a contract indicating the acquired gold reserve, and he will not have the precious metal itself:

1. Compulsory medical insurance (unidentified metal accounts). An account is opened in the bank, which indicates the amount of metal purchased. If the exchange rate rises, its quantity does not change, but the cost increases. This way you can earn money. If after some time the price of the precious metal increases, then you can sell and make a profit.
2. Mutual funds. You need to find funds that invest in gold. Not a very profitable option, since the management company will charge a commission. And if the price of gold does not rise, then the person will suffer losses.
3. Purchasing precious metals on the market. The danger is that you can go bankrupt.
4. Purchase of contracts. The option is designed for short-term profit making. Sales are carried out on the derivatives market. This requires the ability to analyze and guess. High risk of capital loss.
5. Shares of gold mining companies. This is an option for real investment, in which constant profit will depend not only on the price of the metal itself, but also on the work of the company and its profit.

As you can see, any method of investing in gold has a number of disadvantages. To earn large sums from buying gold, you need to be able to think ahead.

Nothing new

The situation is repeating itself. Gold fell 17% between August 5 and December 1, 2021. It also fell by 8.1% from September 8 to December 13, 2017, and by 12.5% ​​from March 6 to March 19, 2020, during the pandemic panic.

After each of these declines, gold recovered and maintained a trendline with higher highs, finally reaching the $2,000 dollar per ounce threshold in August 2020.

Important questions for those investing in gold: is it just a decline or the start of a new bear market? What led to the decline? When to expect improvement?

Let's answer them by looking at the mainstream scenario and explaining why it's wrong and what to actually expect.