Will Gold Continue to Shine Until 2021?

Gold rose to $1,902 an ounce at the close of trading, which is about 30% higher than its March low and only 1% above a record high in 2011.

The 2020 pandemic was the driving force behind one of the strongest rallies the gold market has ever witnessed.

The decision of central bankers to print money faster than ever to finance their spending, besides the decline in bond yields adjusted for inflation in the United States, and the sudden drop of the dollar against the euro and the yen, as well as tensions between the United States and China were the main reasons behind the major leap in the price of gold.

Investors are seeking safe havens that will not lose value, and the US bond markets, which acts as an attractive hedge to strip inflationary effects through treasury yields, dropped below zero, leading to a gold rush.

When interest rates are zero or close, gold is an attractive commodity as investors do not have to worry about not getting interest on gold, which is rather a safe haven.

In April, Bank of America raised the 18-month price target to $3,000 an ounce, and analysts have been forecasting a significant gold rally for several months that might rally into 2021 on strong fundamentals.

"The crisis a decade ago was all about banks. Now, I see gold pointing towards $2,000. I don't see the end of the tunnel at least until the US elections in November," said Afshin Nabavi, head of trading at Swiss refiner and dealer MKS PAMP Group.

Gold Price History

In 1980, the price of gold hit an all time high at $2,246 an ounce after the Iran hostage crisis, while in the fall of 2011, the price of the yellow metal hit another high at $2,076.

In 1982, gold dropped severely loosing more than 90% of its value to $836.

In 2011, a combination of paranoid investors and others with a fear-based political agenda were happily predicting gold prices going to $2,000, $3,000, and even to $5,000 in a matter of years, yet, prices have moved mostly downward since then to record $1,153 an ounce in 2015.

In Sept. 2018, and after trade tensions rose between the two biggest world economies, the price of the precious metal started rising from $1,208 to touch $1,534 by mid-Aug. 2019 to start its rally, during the pandemic, heading for the biggest rise in the history of the shiny metal.

It is noteworthy that gold also witnessed three major leaps during the energy crises of the seventies caused by the October War, and after the Sept. 11 hijacking, as well as during the global financial crises in 2008-2009.