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Mark O' Donnell
Research Analyst
January 12, 2021

Gold: The less that are interested, the better

Gold: The less that are interested, the better

Like Tesla, Gold has had a legendary 2020. Gold reached all-time highs just shy of that $2,080/Oz mark before retracing in the latter part of 2020.

Gold ETF's Ballooned to over $550 Billion inflows, to the point where Gold ETF managers had nowhere to store the Gold they purchased for the ETF's.

Gold peaking around $2,080 before retracing off its all time high

With Gold at around the $1,850/Oz mark, investors and traders wonder what has happened to Gold and its future holds.

Gold did what Gold does best

I believe it is quite simple – Gold did its job, and it did it well. Last year, Gold bolstered one of its essential characteristics: to be a Safe Haven. The first half of the year saw unpreceded and widespread lockdowns amidst a recessionary period across the world. Stock markets plunge, and bond yields tightened.

Gold rose as the first half of 2020 got worse

And, of course, Gold prices rose. As the Coronavirus worsened throughout the year, with second waves and uncertainty when the vaccine was going to come, the price rose even more. However, as things started to ease up around the world, with a vaccine in sight, Gold pulled back. Uncertainty turned into some certainty. Risk-on was back, and Gold was left to be.

Gold is best when it is believed to be a safe haven, not a speculatory asset

Hindsight is 20/20, and it's easy to say now that Gold's price fluctuations were due to this. I would be first to say my prediction of Gold was incorrect. However, this gives us information about how Gold may react in the future.

While Gold was at its all-time highs, the world "valuation" started creeping into analysts' mouths when talking about Gold and its price; a word which I believe should not be associated with any safe-haven whatsoever, and a word which I think is a good indicator as to when to sell your safe haven asset. There should be no hesitation when switching from risk on to safe-haven assets due to the possibility that the safe-haven asset is "overvalued."

Inflationary periods are being discounted

With 2021 traveling full steam ahead, amidst Capitol riots, possible impeachment hearings, and increasing Coronavirus cases in America, Gold has settled around the $1,850/Oz mark. Many analysts predict an inflationary period in the US Economy will bolster Gold's price, which still may highly be a possibility.

However, Margaret Yang, a strategist in DailyFX, believes that the market discounted inflationary pressures, and "that means the selloff in Gold could be temporary, and the downside may be cushioned by fresh stimulus to be announced by Biden."

What do you think the future holds for Gold?

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