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This year has been a roller coaster for gold, starting the year at the $1550/oz, dipping to a low of $1450/oz in late March on initial pandemic deleveraging and peaking in August at $2050/oz. Yet, undeniable, the overall trend is still up, 15% from the beginning of the year and strategists at CIBC are forecasting an even stronger performance in 2021 to $2300/oz.

Key quotes

“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. The markets have been buoyed by the recent news of a vaccine, with some market participant expecting a return to more conservative fiscal spending by governments and Central Banks in 2021. This may be premature, as economic risk and uncertainty is far from over, given that globally we are in the midst of second wave, and what will be a 15-18 month global slowdown of the world economy will have longer-term effects.”

“We forecast real rates, the primary driver for gold prices, 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.”

“Our gold price forecast now stands at $2,300/$2,200/$2,100/$2,000 per oz for 2021/2022/2023/2024, spot prices of $1875/oz.”

 

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