Gold should remain strong in 2021, according to the World Gold Council

Marked by uncertainty due to the Covid-19 pandemic, the year 2021 should confirm the yellow metal’s status as a safe haven, according to the World Gold Council (WGC), the world’s gold industry market development body.

Published on January 28, the latest WGC report estimates that investment in gold should remain sustained over the coming year, due to a likely return of inflationary pressures, generated in the wake of the various stimulus plans implemented to counter the economic shock resulting from the coronavirus pandemic. This development would mechanically weigh on interest rates and would be likely to push up the price of the yellow metal, which is already up 25% in 2020. After reaching an all-time high of $2048 per ounce on August 5, 2010, gold continues to trade at record levels – close to $1,900 – driven by investment demand, which is up 40% year-on-year, with 1,773.2 metric tons purchased in 2020 according to WGC data. The study also states that most of this growth has been in the form of exchange traded funds (ETFs) backed by gold. The WGC also points out that OTC activity on the yellow metal – not included in its calculations – has also been robust throughout the past year.

Exchange Traded Funds (ETFs) purchased a record 877 tonnes of gold in 2020. Source: WGC

The institution’s teams point out, however, that investment demand for gold, which is the most likely to influence prices, represents only part of the overall demand for the metal. Taken as a whole, it has declined by 14% in 2020, to 3759.6 tons, the Covid-19 pandemic, with its wide-ranging effects, having been the determining factor in the low demand throughout 2020, explains the report. As for the overall gold supply, it decreased by 4% to 4,633 t, the lowest level since 2013.