2020 was a stand-out year for gold and then early 2021 has seen prices fall. Jim Copland, Executive Director, Small Caps at IFM Investors explains how he predicts gold prices will continue to trade lower in 2021 – forecasting a range between US$ 1700 – 2000. He notes that it’s all about real rates and as these are going up, they are putting pressure on the gold price. He does, however, see that 2021 will continue to be a relatively good environment for gold, with the market generally supportive of further gold investment. Wayne Gordon, Executive Director & CIO at UBS has a year-end target of US$1650 and notes that the stimulus that has been passed in the U.S. was higher than expected which will impact price.
Sunil Kashyap, Director of FinMet Pte notes the impact of the pandemic on physical demand, especially across Asia. With the increase in physical demand now kicking in, especially in China and India, we’re seeing this create some additional support now for the gold price. Copland notes that we’ve seen that as the gold price falls, the physical side of the market tends to step it up and so the money coming out of ETFs now can be soaked up by the physical markets.
We’ve seen that as the gold price falls, the physical side of the market tends to step it up.
On the investment side, Gordon notes a structural shift he’s seen from the asset managers who traditionally haven’t included gold in their strategic allocations – having seen this grow a lot in the past year. He notes that when we see inflation pick up, gold can be seen as an inflation hedge and that he expects the asset managers who have come into this space over the past year to continue to hold their positions in gold. Kashyap also notes an interesting new dynamic where HNW individuals and family offices in Asia have gained much more awareness of gold as an asset class – apart from the traditional physical holdings.
ESG continues to grow in importance in this space as well as miners work to eliminate some of the negative connotations around gold and gold refining. Kashyap cites the LBMA as leader in looking to create global standards around responsible sourcing, manufacturing, etc. Copland notes that he sees an uptick in gold miners looking to use more renewables on-site and also a long-standing focus on the “social” aspects where they have a good track record of helping the communities in which they operate, most importantly in emerging economies. Gordon is increasingly impressed at how companies are trying to do better across the board and are working on communicating that with the broader investment community and notes a pickup in the demand for “green gold”.
Sunil Kashyap, Managing Director, Director, FinMet Pte Ltd.
Wayne Gordon, Executive Director & CIO, UBS AG
Jim Copland, Executive Director, Small Caps, IFM Investors