Gold Price Update: Q2 2021 in Review | Market Update
What occurred to gold in Q2 2021? Our gold worth replace outlines key market developments and explores what may occur transferring ahead.
Click here to learn the earlier gold worth replace.
2021 is now half over, and prospects look constructive for gold. Elements comparable to world COVID-19 reduction efforts, low rates of interest and inflation considerations are all thought of tailwinds.
Despite these elements, the yellow metallic loved solely a small rise throughout Q2, leaving many market watchers feeling upset and questioning why final summer season’s all-time excessive now appears so far-off.
Read on for a take a look at gold’s efficiency in the course of the second quarter of 2021, with commentary from consultants on its worth drivers and future outlook.
Gold worth replace: Price finally ends up for the quarter
The gold worth breached the US$1,900 per ounce mark briefly in the course of the second quarter, however in the end ended the three month interval not removed from the place it began.
Kicking off April on the US$1,730 degree, the yellow metallic climbed pretty steadily till the tip of May earlier than experiencing its quarterly peak of US$1,908.20 on June 2. It then fell steeply halfway by the month earlier than closing June simply above US$1,760, putting its quarterly achieve at about 1.9 p.c.
Gold’s Q2 2021 worth efficiency. Chart through Kitco.
Although gold’s Q2 worth motion has been underwhelming for some market individuals, it compares favorably to Q1, when gold tumbled from round US$1,900 to beneath US$1,700.
Even so, the yellow metallic stays greater than US$200 away from the excessive level it hit round a 12 months in the past, and its failure to take off has shocked gold buyers and commentators.
Marc Lichtenfeld, chief revenue strategist on the Oxford Club, summed up what many have been thinking, telling the Investing News Network (INN) in an interview, “It’s so hard to tell what is going on with gold.”
Watch the complete interview with Lichtenfeld above.
As talked about, COVID-19 reduction efforts, low rates of interest and inflation considerations have all been pointed to as constructive gold worth drivers. Although many components of the world are starting to get better from COVID-19, the pandemic created an unprecedented quantity of worldwide cash printing, particularly in the US.
Meanwhile, rates of interest in the US stay close to zero, with no indication that the Federal Reserve plans to extend them in the close to future. At the identical time, the central financial institution has dismissed inflation as “transitory” — though just lately Chair Jerome Powell did concede that it’s “well above target.”
A robust US greenback, which hampered the precious metal‘s efficiency in Q1, fell off in the course of the second quarter, though it started to achieve floor once more halfway by June. Higher US 10 12 months Treasury yields additionally negatively impacted gold in the primary quarter of the 12 months, however they remained at pretty elevated ranges all through Q2 as effectively, maybe offering some pushback on gold.
Lichtenfeld continued, “If you look back, let’s say 10 years ago, and told a gold investor that over the next 10 years the US government and governments around the world are going to be running their printing presses non-stop, and that oh, by the way, 10 years from now there’s going to be a global pandemic that’s going to kill millions and completely shut down the global economy, and the US government will be literally handing out trillions of dollars for free — you’d probably back up the truck and buy as much gold as possible, because gold should be at record highs and yet it’s not.”
Gold worth replace: Stocks nonetheless comparatively low cost
With the gold worth under expectations, how are gold-focused corporations doing?
The VanEck Vectors Gold Miners ETF (ARCA:GDX) goals to trace the efficiency of gold-mining corporations, and though it was on the rise in Q2 it in the end dropped towards the tip of the quarter.
Performance of the VanEck Vectors Gold Miners ETF, January 1, 2021 to July 19, 2021. Chart through Google Finance.
The consensus amongst market watchers appears to be that gold shares are nonetheless cheap when in comparison with the yellow metallic’s worth. Speaking to INN in early June, Resource Maven’s Gwen Preston described gold companies as “historically cheap relative to the price of gold,” and mentioned that in consequence she sees vital future upside in this class.
“There’s multiples ahead for gold miners just to catch up to historic ratios for their valuations vs. the price of gold, let alone should the price of gold continue to rise,” she defined in an interview. “So there’s a lot of upside ahead for gold miners, I really believe that.”
Watch the complete interview with Preston above.
Lobo Tiggre, founder and CEO of IndependentSpeculator.com, is generally targeted on smaller-cap alternatives in the gold house, however mentioned on the finish of June that he was feeling open to corporations on the larger facet too. Like Preston, he described gold shares as low cost when stacked up towards the gold worth.
“The opportunities are so broad based that I find myself uncharacteristically looking at the majors as well as the smaller companies … anything that I can see as having a compelling value proposition is of interest to me, and when the stocks are so relatively undervalued compared to the commodity they produce — even the majors can be doubles (or) triples,” he commented.
Watch the complete interview with Tiggre above.
Looking extra particularly at outcomes this 12 months from treasured metals producers, analysts at Raymond James mentioned in a mid-July replace for buyers that they anticipate margin compression from the businesses they’re watching in the second quarter in comparison with Q1.
As the crew explains in its observe, “(A)lthough gold and silver price averages were up slightly q/q (gold 0.9% and silver 1.7%), we expect a trend of higher unit costs in 2Q on lower q/q production levels related to scheduled maintenance, lower grade sequencing in the quarter, and some mine re-starts.”
The agency is looking for the second quarter to be the 12 months’s weakest working interval for various producers — together with Agnico Eagle Mines (TSX:AEM,NYSE:AEM), B2Gold (TSX:BTO,NYSEAMERICAN:BTG), Calibre Mining (TSX:CXB,OTCQX:CXBMF) and Barrick Gold (TSX:ABX,NYSE:GOLD) — however sees the businesses it covers sustaining their annual output steering.
Gold worth replace: Will gold hit US$2,000 in 2021?
Looking ahead into the second half of 2021, the query of when the gold price will rise higher is on many buyers’ minds. The thought is particularly related given gold’s breakout final summer season.
Byron King, who writes Whiskey & Gunpowder at St. Paul Research, which is a part of Agora Financial, advised INN he thinks gold may repeat last summer’s price jump. “Last summer we saw gold over US$2,000 an ounce. I expect we’re going to see the same thing again this summer,” he mentioned, noting that his view on the gold worth is tied to his outlook for the US greenback, which isn’t favorable.
“When we look ahead, is the US government going to get its spending under control? I don’t think so. Is it going to get its fiscal act together? I don’t think so,” King commented. “Or is the Federal Reserve going to somehow say, ‘No more … Congress, stop spending so much money, we’re not going to print up the wherewithal for you to do it.’ Are you kidding me? No way.”
Watch the complete interview with King above.
These concepts have been expressed by many others in the gold house, together with business veterans Ross Beaty and Rob McEwen. Beaty, who’s chairman of Equinox Gold (TSX:EQX,NYSEAMERICAN:EQX) and just lately stepped down from his longtime place as chairman of Pan American Silver (TSX:PAAS,NASDAQ:PAAS), has mentioned it’s difficult for him to think of a negative scenario for the metallic.
“The forces that are driving gold are stronger than I’ve ever seen in my career, and I just don’t see those ending any time soon. We cannot increase interest rates to stem inflation because that’ll crater major markets. Even if we do though, that should be good for gold — even if major markets crater, gold should be a beneficiary,” he defined in a dialog with INN.
“If the US dollar weakens, gold should be a beneficiary. But even if the US dollar strengthens, I think gold will remain strong — I just think in this particular environment gold has a really, really good outlook.”
Watch the complete interview with Beaty above.
For his half, McEwen, who’s chairman and chief proprietor of McEwen Mining (TSX:MUX,NYSE:MUX), identified several factors that he thinks are holding gold again: the assumption that inflation is beneath management, the concept gold is an “old-school investment” and broad market power. However, he has a transparent concept of how the state of affairs may change — he believes that when inflation is extra widely known, that can be gold’s cue to maneuver.
“During the last 12 months, the prices of many essential commodities have experienced large price jumps, and it won’t take very long for these increases to be reflected in the prices of finished goods, services, foods — and followed by demand for higher compensation by labor,” he mentioned. “And that’s when that inflation will become evident — clearly evident — and gold will start performing,” mentioned McEwen.
Watch the complete interview with McEwen above.
Whether or not gold can have one other sizzling summer season stays to be seen, though as of late July the dear metallic was breaking out of its late Q2 stoop, sitting pretty securely across the US$1,800 degree.
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Securities Disclosure: I, Charlotte McLeod, maintain no direct funding curiosity in any firm talked about in this text.
Editorial Disclosure: The Investing News Network doesn’t assure the accuracy or thoroughness of the data reported in the interviews it conducts. The opinions expressed in these interviews don’t mirror the opinions of the Investing News Network and don’t represent funding recommendation. All readers are inspired to carry out their very own due diligence.