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Gold prices have been on the defensive in recent weeks as risk appetite has flooded back into financial markets. The yellow metal’s fallen from the record peaks above $2,050 per ounce struck in August. It even fell 300 bucks lower from these highs this week as news on a Covid-19 vaccine rollout in the UK emerged.
I don’t think that gold’s race is run, though. Tops and corrections are typical during healthy bull markets. And there are plenty more geopolitical and macroeconomic drivers in play that could drive the safe-haven metal to fresh highs.
Gold To Rebound In 2021?
Indeed, gold’s risen $60 in the past few days as tension surrounding Brexit talks has resurfaced. Uncertainty over the effectiveness of Covid-19 vaccines and the global rollout process also hangs in the air. Meanwhile, total coronavirus cases on a worldwide basis continue to rocket higher.
You’ve also got the prospect of further rounds of interest rate cuts and quantitative easing (QE) programmes to consider. Ongoing money printing by central banks has driven gold prices over the past couple of years on heightened inflationary concerns. Even more extreme rate cutting and huge stimulus packages introduced following the Covid-19 outbreak drove yellow metal prices to their recent summit.
Further action from the Federal Reserve in 2021 would be a particular boon for gold prices. It would worsen those inflationary worries even more. And it would also have a detrimental effect on the US dollar, making gold — which is traded in dollars — more cost-effective to buy. Fed chairman Jerome Powell has taken action in recent months like abandoning the bank’s inflation target to keep the money printers switched on. It looks like ultra-loose monetary policy is here to stay.
Finally, there’s also the possibility that the trade tensions which stymied global growth long before Covid-19 appeared will resurface in 2021. China’s just slapped more tariffs on Australian wine. The European Union’s placed $4bn worth of taxes on the US following subsidies given to Boeing
Critically it appears as if the bickering between the world’s two largest economies will stretch into 2021 too. US President-elect Joe Biden recently indicated to The New York Times
that he has no plans to roll back 25% tariffs on hundreds of billions of dollars’ worth of Chinese exports which President Trump imposed back in 2018. Things could get ugly again before too long.
How I’d Get Exposure To Gold Right Now
Having exposure to gold in 2021 remains a good idea despite the recent gold price correction, then. I’d do this by buying shares in gold producers like Barrick Gold Corporation and Newmont Corporation
in the US, or Polymetal International and Fresnillo in the UK. This allows investors to receive dividends in addition to riding any increases in the gold price.
Or I’d invest in an exchange-traded fund (ETF) comprising of a collection of gold producer such as the iShares Gold Producers UCITS ETF. This particular fund allow you and I to receive dividend income which is automatically reinvested. It also provides strength and security to investors by investing in a cluster of gold companies.
Clarice Moore is a veteran of the digital marketing industry. She’s helped grow and manage some of the world’s most successful companies, all while learning from and collaborating with some of the brightest minds in his field. His background includes project management, business development, sales management and product strategy.
Clarice Moore has also been an integral part of various high-level partnerships for multiple global brands such as Kuka USA, Hootsuite Media Inc., HP Inc., Intel Corporation, Dell Technologies Capital LLC among others.