Gold's Price Movements for 2021 and Beyond

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If you're a student of gold price fluctuations, 2021 might turn out to be one of the most interesting years ever. Why? The COVID pandemic tested the global economy in several unique ways. One of the results was that the way people view gold, as both a short-term hedge asset and long-term investment vehicle, changed. For anyone making near-term and longer guesses about the price of gold, it's also vital to recognize that no one is really sure where we are with the pandemic.

In other words, is it on its way out, getting ready for a second wave, or in mid-course? That conundrum and many other pieces of key economic data need to be factored into pricing predictions for the beloved metal's per-ounce selling price. So, what are the most important facts to keep in mind, whether you want to how to trade gold online or stockpile bullion in a safe deposit box? Here are several that will help you decide for yourself whether the world's most popular precious metal is about to rise, fall, or trade sideways for the rest of 2021 and beyond.

Watch Mortgage Rates

How do mortgage interest rates, and the real estate market in general relate to the price of the yellow metal? The real estate market has long been an indicator for the price of all sorts of commodities, precious metallic ones among them. For example, when the economy starts to rev up amid rising interest, like the prime and mortgage rates, investors and consumers tend to lose interest in non-interest-bearing gold, which is often looked at as a safe haven when there's no other place to park money. Well, with mortgage interest rates expected to hover at or near historic lows, between 2.5 and 3 percent, for most of 2021, that's a good indicator that the price tag for all the precious metals will rise. It's not a case of the real estate market being directly affected by precious metal prices, but more a situation where you can use one to make educated predictions about the other.


Another valuable resource for making guesses about all sorts of commodities, precious metals included, are the major banks. Most are pegging gold's range for the rest of 2021 between $2,000 and $2,400, with a few allowing even higher upper limits depending on what happens with COVID vaccines, infection rates, and the new U.S. political administration. There's something very curious about the big financial institutions, as a group, and their estimations in this case.

If we accept even the low end of their range, $2,000 per troy ounce, that still means the popular metallic asset would set a record average annual price since records have been kept, and adjusting for inflation. What makes that so curious? Because the world's huge banks and other institutions are typically bearish about precious metals, and prices often outpace their stodgy estimates even in the worst years. That's why the last quarters of 2021 will be so revealing. We'll see whether the market's major players actually have a clue about gold's expected values.

The Fed and Interest Rates

Historically, one of the best indicators of gold's future value have been activities of the U.S. Federal Reserve Board, which has the power to set rates that member banks pay to borrow from the government. In January, the Fed announced that they would continue on their path of keeping rates low. That means easy money as the bankers like to call it, and generally low rates across the board.

How does that affect what you and I pay for one or more ounces of bullion? It directly stokes the cost of precious metals, including gold and silver, which are favored by retail investors. And with talk of inflation, the result could be even more potent. Even a modest rate of inflation works to drive those already low interest rates even lower by watering down investment yields, and making the acquisition of metals all the more attractive.

Long-Term Trends

Making long-term prognostications about the value of any asset is risky business at best. However, we can reasonably say that as the U.S. dollar continues, through continued deficit spending and monetary dilution, to become weaker, the prices of most hard assets, precious metals included, could rise to record highs over the next five years. The COVID virus is, in a way, a permanent factor.

That's because it showed the world that black swans really do exist, no matter how safe and secure we think the global economy is. What will be the next black swan? A second round of COVID, another virus altogether, a grand version of the 2008 financial meltdown, or something else? Whatever it is, it could propel gold's value to multiples of the current level.

Comments (1)

Adam Feinberg
Elegran - Manhattan, NY
NYC Condo, Co-op, and Townhouse specialist

Nice post.

I have a soft spot in my heart for Precious Metals. My first job out of college was with AIG Trading Group. I got promoted quickly and wound up managing the Precious Metals Structured Derivatives and Special Business desk for a couple of years. I worked on all the crazy and exotic deals that just didn't fit in anywhere else- i.e. spot, futures, options, or forwards trading were all pretty vanilla and fit nicely into easy categories. I worked on the leases, consignments, physicals, swaps, swaptions, etc.  It was an intense job, easy to burn out from. A few years later I had left though my divison merged with the now infamous AIG Financial Products (they were the ones that created the Credit Default swaps that added fuel to the fire of the 2008 meltdown).  Years after that, I later joined CME Group- in the former NYMEX division- so once again I was surrounded by metals trading..and it was pretty cool to be able to go downstairs to the trading pits. I thought about becoming a real estate agent for years and finally made the change in 2016, and while I will always love financial markets- but after so many years of working on The Street, I was ready for a change. I can at least leverage my unique background working with NYC real estate in a way that I probably couldn't in other markets. 

Sep 27, 2021 09:09 PM