Summing up Q1 2021 in the Gold Market

digitalgoldcoin (51)in #gold • 3 years ago

The first quarter of 2021 brought a fair amount of disappointment for the gold market. In spite of various emerging crises on different scales that should have boosted the demand, the price still decreased by 10%. The last time such a significant negative result was observed was in Q4 2016, with a 13% reduction.

The Q1 price slump was largely caused by the fact that the 10-year US Treasury yields have been growing since late December 2020. The yield surged from 0.92% to 1.72% to reach the rate of US inflation in February 2021. Of course, this means that the holders of Treasurys didn’t earn anything once inflation is taken into account. German state bond holders are doing even worse: they are earning just 0.33%, while the inflation rate is 1.3%. Thus, these investors are actually losing money. In the long term such investments gradually erode one’s wealth.

And yet, many in the financial markets still believe in the Central Banks’ magical healing power. Because of this, as the US dollar grows stronger and Treasury yields get higher, gold finds itself under pressure.

Many analysts believe that the downward trend in the precious metal market will continue for a while longer. Investors are now looking towards the stock market, where prices keep reaching new all-time-highs. Precious metals simply can’t compete with stocks for investors’ attention right now.

As for gold-mining stocks, in March their price dynamics was similar to that of gold and silver. The price correction continues for now, but these stocks still hold a lot of long-term growth potential. It should be noted that the prices of silver-mining stocks fell more in March than the prices of gold-mining shares, due to silver’s weak price action last month.

The price of platinum remained largely unchanged in March, reaching $1,191 an ounce. Meanwhile, palladium appreciated by 13% to reach $2,625 per oz. It seems like speculative investors are now paying more attention to palladium, causing it to outperform other precious metals.

According to a forecast by Citibank, gold will trade between $1,700 and $1,900 until the end of 2021, with an average price of $1,800.

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