If you were in any doubt as to whether you should add gold to your portfolio this year, yet another industry expert has come out strongly in favour of high gold prices throughout 2021. Financial services firm StoneX says that its expectation is for gold to be strong all year, making it a very attractive investment prospect against a challenging economic backdrop which makes portfolio diversification and wealth preservation all the more important.
A vortex of economic risks make gold a very attractive prospect the firm’s analysts say, with gold a trusted “hedge against multiple forms of risk”.
Writing in StoneX’s 2021 outlook, the analysts point to a handful of factors which are bullish for gold and likely to remain that way for some time to come. These include low interest rates, the expectation of higher inflation, the need for large amounts of economic and fiscal stimulus, continuing social and political tensions in the USA and geopolitical uncertainty.
The analysts said, “This year, with both geopolitical and economical certainty skewed to the downside, we expect that gold will maintain high prices, especially given negative real interest rates and excess liquidity seeking a home.
“The United States, the European Central Bank, and the Bank of Japan have all been active with combined asset growth of over £ 5.04 trillion ($7 trillion) last year. With Congress’ approval of a £648.78 billion ($900 billion) virus relief package in the United States tied to the £0.94 trillion($1.3 trillion) government funding programme, there is more liquidity coming; Europe may follow suit, while Japan is looking to extend support for the corporate sector.”
When it comes to inflation, there is more good news for gold, according to SpaceX which says that any increase will be increasingly favourable to the precious metal and further cement its appeal to risk-averse investors. They explain, “It is not inflation per se that would have a tangible impact on gold; it is the effect of rising inflation on real interest rates … Professional funds will continue to favour gold investment as a risk-hedge, especially as equities remain over-valued and vulnerable to a correction — particularly if corporate tax rates are raised.
Although President Biden was sworn in earlier this week, his presence in the White House could continue to drive a wedge between some sectors of the US population, which places economic recovery in peril; something which is again good news for gold, adds StoneX’s analysts.
“The largest risk to derail the economic recovery remains linked to politics, and the bifurcation within the United States became increasingly clear in the latter part of 2020 and especially in the first week of 2021. According to a YouGov poll, only 62% of voters believe that Joe Biden is the legitimate President, which could undermine the Biden presidency throughout his term. If domestic conflicts gain momentum, investor caution will certainly take hold… On balance, with the outlook for the first half-year uncertain at best, we expect gold to rise.”
Now is the time to act. Move quickly, buy now.