Precious metals continue lower contrary to investor concerns. BoA says gold will stabilize and go higher despite ‘ongoing challenge’

(USAGOLD – 2/17/2021) – Gold dropped again this morning in a continuation of the downtrend that has been in place since early January and runs contrary to investor concerns registered daily in financial media – an ultraloose central bank monetary policy, the massive upcoming U.S. government stimulus program, and an overblown, manic stock market. It is down $16 in early trading at $1781. Silver is down 23¢ at $27.12. Bank of America updated its views on gold in a report released yesterday. Despite the metal’s current weakness, BoA still sees it pushing back over the $2000 mark in 2021, according to a review of the report posted at KitcoNews. “The gold market has struggled to price in reflation,” says the bank. “Rising breakevens have been mirrored by higher nominal rates. As a result, real rates, usually the key driver of the yellow metal, have been in a tight range since autumn,” However, it says, “many of the underlying issues, including excess liquidity in the system and debt sustainability, have not gone away…Hence, we believe gold prices will ultimately stabilize despite the ongoing challenge.” BoA expects gold prices to average $2063 in 2021 with a peak around $2100 coming in the second quarter.

Chart of the Day

Line chart showing the price of gold for one year through 2-3-2021

Chart courtesy of • • • Click to enlarge

Chart note:  “In a world of increasing uncertainty vs. the endurance of rising debt-to-GDP levels, quantitative easing and low interest rates,” writes Bloomberg’s Mike McGlone in his outlook on precious metals for 2021, “we believe gold is poised to maintain its 2020 upper-hand performance in 2021 vs. most commodities and assets.” He likes the fact that gold corrected in the second half of 2020 and sees that correction as the launchpad for further upside. Put another way, McGlone sees current pricing as a buying opportunity.

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