Investors are leaving "SAFE HAVEN": what will happen with gold prices?

Gold is a safe haven for investors. During political or economic uncertainty, demand for it grows, and when the situation normalizes, accordingly, it falls. We are now seeing a similar situation. Supported by the coronavirus crisis, the price of gold rose and exceeded $ 2,000 in August. Subsequently, against the backdrop of news of successful vaccine trials, gold prices began to fall. As of 11:50 am (Baku time) on November 26, 2020, gold was worth $ 1,814.8 per troy ounce (+ 0.5% per day). In general, compared to the August peak, gold has fallen by 15%.

A further drop is entirely possible. If you look at the charts, you can see clear bearish candles in the last few months.

Also, the news that Donald Trump's administration has decided to begin transferring power to Joe Biden has pushed the price down. As a result, a 4-month low in gold prices was recorded.

According to the World Gold Council, in the third quarter of 2020, central banks became net sellers of gold for the first time since 2010 (gold sales exceeded purchases). That is because some countries wanted to minimize the coronavirus's negative impact on the economy, offsetting losses through gold sales at record high prices. A drop in the gold value to $ 1,700 could again make it attractive to investors, increasing demand and prices accordingly.

The cost of gold may drop to $1,750-1,780, but it is unlikely to fall more than these indicators. After reaching this mark, gold can very quickly return to the growth trajectory.

There are several reasons for this. First, vaccine development will take some time, and current prices do not include the risks associated with vaccine delays. Such a scenario cannot be ruled out either.

Secondly, this year's gold growth has also been spurred on by the risks of increasingly restrictive measures associated with the coronavirus pandemic and enormous spending to stimulate the economy (mainly in the United States). The coronavirus package in the United States was about $ 3 trillion.

Forecasts of international financial institutions are mixed. For example, Morgan Stanley downgraded its forecast for 2021 from $ 1,950 to $ 1,825. Experts at BofA Global Research (part of Bank of America) did not include gold in the list of commodities that could bring moderate returns in 2021. They stake on oil, gas, copper, nickel, and aluminum. However, even according to their forecasts, gold will be worth around $ 2,063 next year.

BCS Global Markets expects $ 2,090 per troy ounce of gold in 2021, Fitch Solutions - $ 1,700.

Based on the preceding, it can be assumed that a serious reduction in the price of gold should not be expected in the medium term, and in the first half of next year, a moderate rise in prices is possible.