Gold ended 2020 at $1,891, partially thanks to monetary policy easing. In 2021, the Fed may not trigger a comparable rally in gold, but it should offer gold prices some support. Welcome to 2021! I hope that it will be a wonderful year for all of you; a much healthier, calmer and normal year than 2020 was. And even more profitable of course! Indeed, at least gold bulls could be satisfied with the last year, in which the price of gold jumped from $1,523 to $1,891 ( London A.M. Fix )! It means that the yellow metal gained more than 24 percent, as the chart below shows. I know that 24 percent does not look impressive compared to Bitcoin , which gained more than 260 percent in 2020, but it’s still a great achievement relative to other assets or gold in the past. Not to mention the fact that gold’s price level looks more sustainable, while the recent parabolic rises in cryptocurrencies suggest a price bubble .
President-elect Joe Biden is expected to increase further government spending. For this and also other reasons, there is a risk that inflation under Biden’s presidency could be higher than under Trump’s. That would be great news for gold. Let’s face it, Biden won’t have an easy presidency. And I’m not referring to the fact that he will be sworn in as the oldest president in U.S. history or that he will have to deal with the coronavirus pandemic and the process of vaccine distribution across the country. I’m referring to Biden inheriting an economy with slow growth and too much public debt . Given the debt burden, it should be clear that under Biden’s presidency, real interest rates will remain at ultra-low levels. This is how a debt trap works – the more the debt grows, the less the economy (Treasury) can afford higher interest rates .
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A Looming Decision From The Fed Could Send Gold Soaring By Arkadiusz Sieron - Dec 19, 2020, 10:00 AM CST
The Governing Council of the ECB met last week, announcing significant, dovish changes to its monetary policy . First of all, the ECB decided to increase the envelope of the pandemic emergency purchase program (PEPP) by €500 billion to a total of €1,850 billion. It also extended the horizon for net purchases under the PEPP to at least the end of March 2022.
Second, the ECB decided to extend the reinvestment of principal payments from maturing securities purchased under the PEPP until at least the end of 2023. Third, the ECB eased the conditions of the third series of targeted longer-term refinancing operations (e.g., through extension of the period over which considerably more favorable terms will apply by twelve months, to June 2022, and through granting more subsidized loans to banks to stimulate lending). Fourth, the ECB extended the duration
Brace yourselves, winter is coming! It may be a harsh period for the United States, but much better for gold. Some of you may have seen snow this year already, but the astronomical winter is still ahead of us. Unfortunately, it could be a really dark winter. Instead of joyful snowball battles and making snowmen, we will have to contend with the coronavirus . The vaccines will definitely help (the first doses of Pfizer’s vaccine were administered this week), but their widespread distribution will begin only next year. So, we still have to deal with the pandemic taking its toll here and now – as the chart below shows, the number of daily COVID-19 cases is still above 200,000 in the U.S.
The vaccines are coming – we’re saved! Although the arriving vaccines are great for humanity, they are bad for the price of gold. In November, Pfizer and BioNTech announced that their mRNA-based vaccine candidate, BNT162b2, had demonstrated evidence of an efficacy rate above 90% against COVID-19, in the first interim efficacy analysis. As Dr. Albert Bourla, Pfizer Chairman and CEO, said: Today is a great day for science and humanity. The first set of results from our Phase 3 COVID-19 vaccine trial provides the initial evidence of our vaccine’s ability to prevent COVID-19. Indeed, the announcement is great news! After all, the vaccine is the ultimate weapon against the virus. There’s no doubt that we will get the vaccine one day. Thank God for scientists – they are really clever people who work hard to develop a safe vaccine! Why can’t we have more of them instead of so many economists? As well, the pandemic triggered unprecedented global cooperation to develop