(Kitco News) – 2020 has been a historic year for gold and silver as unprecedented stimulus measures around the world were unleashed on financial markets. And one firm is calling for higher prices next year.
In its 2021 outlook, analysts at the U.K. research firm Metals Focus said they expect gold prices to push to $2,300 an ounce next year. Meanwhile, silver prices are expected to average the year around $28.60 an ounce as it pushes to a high of $30.00.
The comments come as gold and silver have pushed off critical support levels after dismal November performances. December gold futures last traded at $1,843.50 an ounce, up 0.73% on the day; meanwhile, March silver futures last traded at $24.135 an ounce, up 23% on the day.
“Precious metals have come under significant pressure recently as investors revisit cyclical stocks after news of the vaccine started to come through,” said Neil Meader, director of gold and silver at Metals Focus in the report. “But we doubt whether this will be sustained. It will take time for the vaccine to be widely deployed. We also don’t expect there to be a return to normality until at least mid-2021.”
The analysts at Metals Focus said that the gold market will continue to benefit from further stimulus measures, low bond yields, and rising inflation pressure.
‘Low yields benefit gold from the minimal opportunity cost of holding the metal. This also limits the bond market’s ability to act as a hedge against equity price corrections,” the analysts said.
At the same time, the firm also sees potential for gold’s safe-haven allure to attract investors.
“Under the Biden Administration, the U.S.:China relationship is likely to remain challenging, while geopolitical risks still exist elsewhere. All these factors, coupled with rising inflation expectations, should continue to underpin gold investment, driving prices up by 14% to an average of $2,030 in 2021,” Neil said.
Looking at silver, Metals Focus said that the precious metal will continue to benefit from gold’s rally but will also be boosted by rising industrial demand.
The analysts said that silver industrial demand is expected to grow back to 2019 levels next year. While the market is expected to see the sixth year of surplus, Metals Focus said that growing investor demand should be enough to take a lot of slack out of the market.
“Once the gold rally resumes, tactical buying will help fuel further price gains for silver,” Neil said. “This should help silver outperform gold, which we believe will see the gold:silver ratio continue to fall during 2021.”
Looking at PGM metals, Metals Focus expects to see higher platinum and palladium prices in 202.
The analysts see platinum averaging next year above $1,000 an ounce. For palladium, they see prices pushing to $3,000 next year and averaging around $2,600.
“Palladium will achieve its tenth successive deficit and lead to a further fall in above-ground stocks. This in turn will help underpin the expected price upside we are calling for in 2021,” the analysts said.
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