The outlook for gold prices early in 2021 will hinge on the progress of a proposed U.S. $1.9 trillion stimulus package, and the impact of a strengthening dollar.
Gold was down 1.04 percent at $1,828.61 on January 15, and was on course for a second straight weekly drop, impacted by the firming greenback, which can potentially cap bullion in coming sessions.
Gold was supported by tightened lockdowns in countries such as Germany and France, and new restrictions against Covid-29 in China, as well as by comments from the U.S. Federal Reserve indicating no changes in interest rates.
The tighter lockdown news augured for a slower recovery of the global economy.
Gold prices risked downside due to possible delays in implementation of the stimulus package proposed by U.S. President-elect Joe Biden, who takes office on January 20.
“The short-term economic perspective still looks troubling. People are getting scared, and they are raising cash. The market remains vulnerable,” said Kitco Metals global trading director Peter Hug.
“Biden’s proposal of $1.9 trillion is going to help, but again it is a little down the road. He first will need to come into the office and get the stimulus passed through the House and the Senate. At the same time, he is potentially going to try to impeach President Donald Trump. It will get messy.”
Economic data pointed to a significant slowdown early in 2021 due to the introduction of more lockdowns, dragging on economic recovery.
Key to the outlook for gold prices this year will be the United States, wrote Lawrie Williams, precious metals commentator for bullion dealer Sharps Pixley.
“The outgoing President will be leaving in a degree of ignominy, fighting a unique second impeachment call. This could well only further incite the political divisions, whether or not it is successful,” Williams added.
“The outgoing President will also be leaving the country in the throes of a rapidly escalating virus pandemic about which many of his supporters are in denial. This difficult combination will certainly mean there are huge threats which will need to be overcome by the incoming Biden Administration.”
Disclaimer: Any opinions expressed in this column are solely those of the author and should not be considered as investment advice.