Gold Meekly On The Up, With A Positive End To 2021?

It was a rather bland August for gold, with prices jumping 2.0% to $1,818 per ounce and physical gold ETFs recording a fourth consecutive week of modest outflows of 326,000 ounces. Also, although inflation has grown significantly this year, it has not been enough to boost prices.

However, some experts see a glowing raise in price by the end of the year, one that hinges on the Federal Reserve’s tapering of asset purchase. 

Heading into September and with job data becoming available, investors’ eyes are on how it will unfold for the precious metal.

Gold Sees Out August

The possible tapering by the Fed kept gold prices in neutral territory at the beginning of August.

Towards the end of said month, according to an RBC Capital Markets report, CFTC’s net long gold positions increased by 21,000 to 221,000 contracts, while gold equities rose by 6.8%. 

Further, gold equity ETFs recorded a third consecutive week of humble outflows of $160 million. 

“Larger equity price changes for names under coverage include Equinox Gold Corp EQX (+12%), Sibanye Stillwater Ltd SSW (+12%), and Centerra Gold Inc CG (+11%).” 

With September’s kick-off and a flailing dollar, CNBC reported: “Spot gold was up 0.2% at $1,814.42 per ounce by 2:01 pm EDT (1801 GMT), after hitting its highest since Aug. 4 on Monday at $1,822.92.” 

Also, U.S. gold futures hit $1,818.1 accounting for a 0.3% jump, while the dollar’s more-than-a-three-week low “made gold cheaper for buyers holding other currencies.”

What Experts Say

Chris Lewis from FX Empire asserts that the $1,825-$1830 area continues to be important. “We have pulled back just a bit from there and it certainly looks as if we are hesitant to take off for a bigger move.” 

In relation to Friday’s release of non-farm payrolls data, Lewis asserted, “We’re going to be very tight between now and the jobs number.” 

So, predictions for gold remain opaque but still imbued with a comforting sentiment, amid comments from U.S. Federal Reserve Chair Jerome Powell that boosted interest in the precious metal. 

At the Jackson Hole conference, he did not give away much on a specific timeline for asset purchase tapering by the central bank.

In the same way, Loreta Mester, the president of the Cleveland Central Bank, mentioned that recent inflation readings did not convince her enough about starting to reduce asset purchase. 

Future of Gold Price

In this outlook, Commerzbank analyst Daniel Briesemann says: “Having previously turned their backs on gold for a number of weeks, thereby contributing significantly to the price slump in early August, speculative financial investors have now returned.”

Bart Melek, head of commodity strategies at TD Securities asserts that the Fed is going to “pull the trigger” albeit without a vigorous drop in monetary accommodation in the next months, “so gold should ultimately do okay.”

As the Fed waits for “the right data” to confirm whether the U.S. economy is strong and ready to walk on its own again, the impact of the latest closures in the Chinese economy due to COVID-19 are still being felt and will continue to weigh on. 

Investors’ decision to buy the precious metal will be affected by how the demand is compromised by the economic situation.

For now, the long-term trend is still bullish as inflation expectations are still up. This could turn prices around in the remainder of 2021, and such expectations could prevail, not only because of the improvement in the economy, but also because the Fed might keep playing its stimuli card amid the recovery of the economy.

Disclosure: No positions in any companies mentioned.