Gold outlook

Gold prices moved off record highs in 2020 and are down noticeably year-to-date. The  vaccine rollout, economic recovery and rising yields are putting gold on the defensive,  detracting from the need to own bullion as a perceived “safe-haven”. Nascent economic  recovery and expectations of further strengthening as COVID-19 concerns recede,

combined with inflation expectations have pushed yields to pre-pandemic levels and weakened gold prices in the process. Investor liquidation in the gold-ETFs and a reduction in net long positions on the CME are evidence of investor sentiment shifting away from gold. We believe the scope for further declines may be modest, however. A decline in yields – notably the US 10-yr Treasury – offers gold a chance to rally. The likelihood of modest USD weakness is also potentially supportive of gold, as is any uptick in trade or geopolitical risks. Possible financial market instability due to asset price appreciation could also spark renewed quality asset demand for gold.