Gold In Q1: Price Softens, But New Catalysts Emerge

Gold in Q1: Price Softens, But New Catalysts Emerge

The big story in Q1 was the sharp rise in bond yields, putting pressure on gold and silver prices. But as the world begins to transition from pandemic to recovery, new potential catalysts emerge for precious metals.

Our ITV report looks at the performance of precious metals and other major asset classes during the first quarter of 2021, along with a review of the conditions that are likely to impact them as the year progresses.

Gold and Silver in Q1: Spiking Yields Pressured Prices

The U.S. 10-year yield rose from 0.916% on December 30 to 1.744% by March 31. This near doubling of the benchmark bond within three months is outsized by historical standards and impacted most assets including gold and silver.

Here’s how precious metals and other major asset classes performed in Q1.

Gold declined 10.6%, ending Q1 at $1,691.05. It was gold’s worst quarterly performance since Q4-2016 and worst Q1 since 1982. Silver fell 9.4% to $24.

The US dollar rose 3.7%, while Treasuries logged their worst quarter since 1980, pushing yields sharply higher. Both of these factors put a damper on gold and silver.

Platinum and palladium were leaders last quarter, boosted by the prospects of economic recovery.

Crude oil prices saw a hefty rebound, and the commodity complex continues to show signs of strength. Broad stock markets also continued to rise, largely in response to optimism surrounding an improving economy.

Bitcoin (not shown) continued its volatile surge, rising 103.2% in the quarter.

The View for the Rest of 2021

As we start Q2, recovery efforts are picking up speed worldwide, despite some countries seeing an uptick in Covid-19 cases. President Biden announced that 90% of adult Americans will be eligible for vaccination by April 19, a goal that if met would surely impact economies and markets.

Reflation is arguably the dominant driver of current global price action. A $1.9 trillion coronavirus relief plan was approved, and a $2.25 trillion infrastructure bill is on deck. Similar measures have taken place in many advanced economies.

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