The Gold Market In 2020 And Beyond

Was the past year good for the yellow metal? What happened in 2020 and what will 2021 be like for the gold market?

Nobody expected the Spanish Inquisition! And nobody expected a pandemic in 2020! Oh boy, what a year… How good that 2020 has already passed! It was an extraordinary year, unlike any other in many decades. Unfortunately, 2020 was a disastrous time for many people all over the world who suffered from COVID-19 or whose relatives and friends died because of the coronavirus or the collapse of the healthcare system… Our thoughts are with them. Many others lost their jobs or income, and all of us suffered from loneliness and limited freedom during the Great Lockdown. Indeed, it’s good that 2020 is over – and we hope that 2021 will be much better!

And what did 2020 mean for gold? Well, it turned out that last year was gracious to the yellow metal. As the chart below shows, gold entered 2020 with a price of $1,515 per ounce and finished the year at $1,888 (London P.M. Fix as of December 30). It means that the shiny metal rose over 24 percent – that’s not bad considering other assets were hit really hard during the economic crisis!

Actually, 2020 was definitely better for gold prices than 2019, when the yellow metal gained “only” over 18 percent. As I didn’t predict the global pandemic (who did?), I didn’t forecast such strong gains in my base scenario. However, given the inversion of the yield curve in 2019, I expected a kind of economic downturn that would positively impact gold prices. One year ago, in a January 2020 edition of the Gold Market Overview, I wrote:

unless anything ugly happens, the macroeconomic environment could be less supportive for gold than in 2019. However, bad things do happen, and, according to Murphy’s law, anything that can go wrong will go wrong. Hence, the gold fundamentals may turn out to be more positive for gold over the year. After all, the yield curve has inverted last year and we are already observing some recessionary trends, especially in the manufacturing sector and among the small-sized companies (…) given the amount of black swans flying just above the market surface, gold might provide us with some bullish surprises as well.

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