– Research & Information from Core Bullion Traders.
Each month we will bring you the most up-to-date Macroeconomic information and Gold market news. This information should be used as an overview and summary review only. Nothing contained in this document constitutes an offer to buy or sell securities or commodities and nor does it constitute advice in relation to the buying or selling of investments. It is published only for informational purposes. Core Bullion Traders does not accept responsibility for any losses or damages arising directly or indirectly from the use of this presentation or data.
Macroeconomic Update & outlook
•The European Economic Forecast for Autumn 2020 in a nutshell reads: ‘Rebound interrupted as resurgence of pandemic deepens uncertainty’. The coronavirus pandemic continues to represent a very large shock for the global and EU economies, with very severe economic and social consequences ongoing.
•Autumn 2020 Economic Forecast projects that the euro area economy will contract by 7.8% in 2020 before growing 4.2% in 2021 and 3% in 2022.
•Job losses and the rise in unemployment have put severe strains on the livelihoods of many. Policy measures taken by some European countries have helped to cushion the impact of the pandemic on labour markets. The unprecedented scope of measures taken, particularly through short-time work schemes, have allowed the rise in the unemployment rate to remain relatively muted compared to the drop in economic activity. EU forecasts project the unemployment rate in the euro area to rise from 7.5% in 2019 to 8.3% in 2020 and 9.4% in 2021, before declining to 8.9% in 2022.
•Deficits and public debt are set to rise. The increase in government deficits is expected to be very significant across the EU this year as social spending rises and tax revenues fall.
•Inflation remains subdued – so it’s not ALL bad news….Inflation in the euro area, as measured by the Harmonised Index of Consumer Prices (HICP), is forecast to average 0.3% in 2020, before rising to 1.1% in 2021 and 1.3% in 2022.
•Effectively, over the longer-term, the outcome of the US election will have a limited impact on the outlook for US fiscal policy, while the current ultra-low interest rate environment will remain the norm for the foreseeable future. Negative real rates, ballooning US debt and, eventually, flows into emerging markets, will continue to put pressure on the US dollar and provide a supportive environment for precious metals.
*Sources: European Commission Autumn 2020 Economic Forecast – https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2021
Gold Market Update & Outlook
- Gold fell by 4% on the 9th Nov. after news of a COVID vaccine boosted risk appetite in the markets. Prices have since recovered slightly on fresh US stimulus hopes.
- Notwithstanding this, it is still predicted that gold will hit a series of new all-time highs in 2021. Primarily, once the focus shifts toward the wider macro-economic backdrop, gold is likely to attract fresh investor interest.
- An escalation of COVID outbreaks in the US and Europe must surely eventually lead to further fiscal and monetary easing. Against this backdrop, negative yields, caution about stock market valuations and continued dollar weakness should all favour gold investment.
- Risks to the forecast: COVID-19 remains the principal risk to our forecast. The inability to control the second wave will provide an additional boost to gold investment. By contrast, a faster than expected introduction of a vaccine should reduce safe-haven demand. In the near term, US election uncertainty could create market jitters, though its impact on gold is likely to be short-lived.
- Goldman Sachs remains upbeat about Gold. In a report published (last) Friday, the investment bank said that it is maintaining its 2021 gold price target of $US2,300 an ounce. Their reasoning being as the global economy returns to balance between positive news of potential vaccines for the COVID-19 virus and the still prevalent risks of further economic damage from more waves of the virus.
- With America locking down from coast to coast (as we write) due to a huge surge in COVID cases – Stocks have already begun to tumble in value, with all 11 S&P 500 sections in the red. As most precious metals followers know, these types of events and sentiment usually mean an upsurge in investors flocking to Gold and with that a rise in the precious metal price.
- The coming weeks will be telling in where the price may go in 2021…..so stay tuned!
Contact us today if you would like to know more. We look forward to dealing with you at Core Bullion Traders.
Disclaimer & Copyright 2020
Although every effort has been made to undertake this work with care and diligence, Core Bullion Traders do not guarantee the accuracy of any forecasts or assumptions. Nothing contained in this presentation constitutes an offer to buy or sell securities or commodities and nor does it constitute advice in relation to the buying or selling of investments. It is published only for informational purposes. Core Bullion Traders does not accept responsibility for any losses or damages arising directly or indirectly from the use of this presentation or data.