Precious Metals 2021 Price Forecasts from the master

The CEO of Metals Daily, Ross Norman has an unparalleled track record of winning or near winning the annual LBMA price forecasting survey, including winning it for both gold and silver last year.  So what does he see for 2021?  Remember he is talking USD so multiply everything by 1.3 or increase by about a third for AUD prices.

“GOLD

Average: $2025

High : $2285

Low : $1810

We expect gold to perform well in 2021, although at a slightly more subdued rate compared to 2020.

Specifically we see ongoing US dollar weakness, deeper negative real rates in the treasury markets and a significant rise in unproductive debt as the Democrats open the spigots with fiscal stimulus as supporting factors. With the economy still contracting in Q1, we expect a bounce in H2 as the vaccine frees up the economy. With the recovery comes demand-pull as well as cost-push inflation further fuelled by the higher velocity of money, leading to expectations of much higher inflation, notwithstanding the weak labour markets. 

As in 2008, central banks are doing whatever it takes to save the economy, but the second order consequences of the measures put in place will weigh on markets ; as such, we see concerns shift from herd immunity to herd insolvency. 

Financial markets remain vulnerable and we think investors will continue to see gold as the near perfect antidote. In short, the bull run that dates from mid 2018 still looks very much in place and we see good gains ahead, albeit at a slightly slower pace. 

SILVER

Average: $30.26

High : $36.00

Low : $24.10

As one of the best performing metals in 2020, we see silver maintaining that outperformance. 

Investment demand for both physical silver coins / bars as well as the ETF (now at over 1 billion ounces) are likely to continue showing impressive gains and reflects strong demand for safe haven assets in these troubled times. As the silver bull run continues we expect the gold/silver ratio to continue to decline as silver outpaces gold. Silver bar demand is likely to be led again by the U.S. and Germany which may be partly offset by weaker demand in price-sensitive India on record prices in rupee terms.

Improving investor demand is however being offset by weaker demand in some key industrial applications including thrifting in the photovoltaic and in the automotive sector. 

PLATINUM

Average: $1316

High : $1520

Low : $1000

We foresee good gains for the broad commodity complex in 2021 but platinum in particular. 

In a post covid world we forecast a solid recovery in global auto sales with the implementation of Euro 6d and China 6b emissions regulations for light-duty vehicles seeing higher loadings, with Chinese auto sales looking at a 23% gain to 27 million vehicles and US sales up 14% to 16.3m units. Perhaps more importantly there is good momentum being built with investors through ETFs as well as coin and bar demand (Japan in particular), especially with a wider awareness of platinum’s key strategic role in the growth of the hydrogen economy. 

2021 is likely to see platinum in a supply deficit for the third consecutive year with demand outpacing supply by about 240k ounces. Although a smaller deficit than we saw in 2020, there is nevertheless a cumulative effect. A rising tide lifts all boats and platinum, like its sister metal rhodium has shown, looks fully prepared to benefit.”

As a footnote, the above clearly anticipates no major crash in financial markets as such.  Should that play out as many predict, whilst again metals possibly get sold off initially in a liquidity squeeze, 2020 illustrated how hard and quickly they rebound to gains far in excess of what he is predicting.  As we shared recently, we repeat the warning from Wall Street legend and founder of GMO, 82 year old Jeremy Grantham CBE:

“The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behaviour, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.

These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part. Every career incentive in the industry and every fault of individual human psychology will work toward sucking investors in.

But this bubble will burst in due time, no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios. Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives. Speaking as an old student and historian of markets, it is intellectually exciting and terrifying at the same time. It is a privilege to ride through a market like this one more time.”

Norman’s price forecasts do not include such an outcome but even if not exceeded, those gains against the losses anticipated by Grantham become even more meaningful.