Why invest in GOLD 2021 Brochure - www.thegoldsafe.co.uk - The Gold Safe
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Why
invest in
GOLD
2021 Brochure
An analysis of gold
See us online and investing in the
www.thegoldsafe.co.uk current financial climate
Introduction The last 12 months have brought a period of extraordinary events, with the global COVId-19 pandemic wreaking havoc on economies and countries around the world. Since its emergence in Europe and the United States in January and February, an unprecedented series of national lockdowns, shut downs, redundancies and closures followed. States of emergency were declared, millions of people across the world were told to stay at home and businesses were forced to shutter, some for good, as entire industries ground to a halt and employment disappeared. The economic impact was swift and deep. Monday 09 March 2020 will forever be known as Black Monday. The Dow Jones Industrial Average (DJIA) plunged 7.79% or 2,013.76 points, the largest decline in history as realisation of the magnitude of a global pandemic spread. Two other crashes, both record-breaking in their falls, followed. On Monday 16 March, an even worse 12.93% plunge hit. Between 12 February and 09 March, the Dow Jones saw 19.3% wiped off its value. That figure is just 0.7% shy of a bear market being declared. Two days later, the Dow closed 20.3% down, taking it into bear territory for the first time since 2009 [ Source: https://www.thebalance.com/fundamentals-of-the-2020-marke t-crash-4799950 ]. Across the economy, other markets and metrics would also post their worst ever figures, racking up record losses and unprecedented falls. Welcome to the new gold rush. The events of 2020 have sent gold soaring to record highs; it peaked at over £1,516 ($2,067) on 07 August, 2020 and analysts and financial institutions alike agree; more is to come. The global pandemic has created a perfect storm for gold, with a wide range of supporting factors coming together to strengthen the precious metal exponentially. These factors led to gold appreciating in value by as much as 30% in little over six months and see it in prime position to eclipse those gains by an even greater amount in 2021. Don’t miss out on the best opportunity of this generation. Buy now. See us online www.thegoldsafe.co.uk 1
Negative Interest Rates
Source:
1
https://www.thebalance.com/fundamentals-of-the-2020-market-crash-4799950
Economies around the world are grappling with the looming spectre of negative
interest rates; something which feels inevitable as COVID-19 cases continue to
hit grim new records and global economies struggle to recover from months of
brutal trading conditions.
The Bank of England is said to be considering introducing negative interest
rates as early as the beginning of 2021 and has already written to all UK banks
requesting that they test their readiness for negative rates to be implemented.
This comes after it slashed interest rates to a record low of just 0.1 per cent in
order to provide more favourable conditions for lending through the pandemic.
The Bank of England said in May that negative interest rates were ‘under active
review’ but shifted its position closer to enacting them in September by
declaring them ‘part of the toolkit’.
The Bank of England policymaker Michael Saunders has signalled the move to
negative rates might be inevitable, noting, “My judgment at present is that the
ELB (effective lower bound) for the UK is probably a little below zero, provided
appropriate mitigations (e.g. reserve tiering, bank funding scheme) are in
place.”
The USA technically dipped into negative territory in March, and other
countries around Europe and Asia are in a similar position.
Why are negative interest rates good for gold?
Negative interest rates point to a struggling economy and drive a risk averse
sentiment, making the precious metal increasingly attractive as a safe store of
wealth. Senior Forbes contributor and Michigan Ross finance professor,
Amiyatosh Purnanandam says, “The negative rate essentially means that
borrowers get paid to borrow money from the lender. When the Treasury bill
rates turn negative, investors such as banks and mutual funds pay to the U.S.
government, the borrower in this case, for taking their money. Why does this
happen in the first place? At a time of crisis, such as wars and pandemics,
risk-aversion skyrockets, and investors run for ultra-safe assets.”
2
Negative Interest Rates... TD Securities has revised its 2021 forecast up on the back of negative interest rates Canadian investment bank, TD Securities expects negative interest rates to heavily favour gold in 2021, creating perfect conditions for the precious metal to accrue value and remain a solid, stable asset which is highly attractive to investors. Bart Melek, TD Securities’ head of global strategy, is very bullish on the prospect of negative interest rates for gold, said, “Normalizing liquidity conditions, negative real rates, low cost of carry and concerns surrounding fiat currency debasement, not unlike those present during the post-GFC period, likely mean … a move toward $2,000 is also a distinct possibility into 2021, as the global economy normalizes, monetary contentions remain loose while fiscal deficits surge. “Once the funding stresses that drove prices lower are alleviated further, as the Fed and other key central banks monetize COVID-19 related market disfunctions and major governments spend trillions of borrowed money to fortify stressed households and corporates … investors are likely to continue to pivot their focus towards gold. “Once the COVID-19 economic crisis is well defined and health issues are mitigated, the economy should have a good base to perform well. Negative interest rates will likely be the order of the day for a long time, which make gold relatively cheap to hold. And, since it is nobody's liability, which is quite opposite to government paper which will be issued to support all the spending needed by the trillions to fund the various stability programs throughout the G7, gold has a clear path towards $2,000/oz.” See us online www.thegoldsafe.co.uk 3
Unemployment
A record number of workers have found themselves
unemployed around the world in the wake of the pandemic.
Despite the prospect of a vaccine being rolled out in 2021,
the deployment is likely to be slow and this means that some
social distancing measures will still remain in place for much
of the year, severely hampering economic recovery.
Furthermore, with economic recovery expected to take years
and some industries such as travel facing as much as a 85%
drop in demand, the creation of new jobs is not expected to
return unemployment levels back to normal for some time to
come.
Figures from the UK government’s economic watchdog says
that levels of unemployment in the country will likely reach
2.6 million people by June 2021, the equivalent of 7.5% of
the working population. The Bank of England seconds this
forecast, with its expectation that unemployment levels will
reach 7.7% in April.
In the wider Euro area, record high levels of unemployment
are also being felt. The seasonally-adjusted rate of
unemployment was 8.4% in October, versus 7.4% in 2019.
The body responsible for compiling the figures, Eurostat says
this increase is notable both socially and economically,
because “Rising unemployment results in a loss of income for
individuals, increased pressure with respect to government
spending on social benefits and a reduction in tax revenue.”
The average figures hide other worrying trends, with Spain’s
youth unemployment rate running at 41.7% and Italy 31.7%.
In the USA, the unemployment rate peaked at a record 14.7%
in April according to the US Department of Labor with millions
of additional people making unemployment claims each
week. Around 10 million jobs have disappeared since the
start of the pandemic and have not been replaced with new
opportunities. Long term unemployment is also on the rise,
suggesting the unemployment rate will remain high for many
months to come.
4
Unemployment... Why is unemployment supportive of higher gold prices? A high unemployment rate is an indicator of a sluggish or contracting economy, with large volumes of job losses often taken as a sign that a recession is to follow. We saw this during the worst months of the pandemic – with investors panicked and markets struggling amid deteriorating economic conditions, gold is bullish. Specialist fund says high unemployment supports a strong gold rally The portfolio manager of a specialist fund focused on precious metals says that this data is positive for gold and is likely to support a new bull run. Midas Fund’s portfolio manager Thomas Winmill says high unemployment means gold prices will rise – suggesting that we are in for even higher prices next year during a protracted global recovery. He said, “When you have high jobless rates, it means the government is likely to continue an accommodative monetary policy, keeping interest rates low and trying to stimulate business activity and get people back to work. Low interest rates tend to result in a negative real-interest-rate environment….That is normally very good for commodities such as gold. It’s hard times for people but can be very good for investing in commodities, relative to financial investment to say fixed income.” See us online www.thegoldsafe.co.uk 5
Commerzbank issues very upbeat
2021 forecast for gold
The German bank, Commerzbank has been bullish on gold throughout 2020 and doesn’t foresee its position changing next year
according to the bank’s analysts, who have issued a very upbeat price forecast for the precious metal which will see it
continuing to make substantial gains over the next 12 months.
Noting that gold has gained 23% since March alone, the bank expects fallout from the pandemic to continue well into next year,
putting gold firmly in the driving seat for investors. The bank said that a price around £1,681 ($2,300) is expected by quarter
four thanks to continuing favourable monetary policy and economic stimulus.
In the bullish briefing note, Commerzbank’s analysts explained, “We do not expect a change in the ultra-expansionary monetary
and fiscal policy despite the upcoming vaccinations. Instead, governments and central banks will continue to be required to
cushion the negative effects of anti-corona measures on the economy and society. If the necessary fiscal stimulus measures
are not adopted in time due to resistance in the legislative process, pressure on central banks to step into the breach with
further easing measures would increase.
“Even if, as we expect, the corona pandemic can be brought largely under control in the second half of 2021 through sufficient
immunization of the population, the enormously increased public debt levels caused by the corona policy and the inflated
balance sheets of central banks will remain in place for a long time to come. The arguments in favour of gold have not changed
for the central banks at all. The US dollar-denominated bonds held in the foreign exchange reserves hardly generate any
positive nominal yields; in fact, the real interest rate on these bonds is almost entirely negative. The euro-denominated bonds
even have a negative nominal yield. The price development of gold in this challenging year has also shown that gold offers great
advantages as an integral part of foreign exchange reserves.”
With the bank confident that it is just a matter of time before we hit new highs, act quickly and buy now to be in a position to
benefit.
6Loose Fiscal Policy
If there is one thing that we can expect to see in 2021, it’s a
continuation of the loose economic policy that has defined 2020 to
fuel the economic recovery. With more fiscal stimulus needed to
prop up global economies, low to negative interest rates here for the
long haul, soaring government debt and the potential for rising
inflation all underline gold’s attractiveness as a source of long term
returns.
The Harvard University professor of capital expansion and growth,
Jeffry Frankel describes the rate of policy easing as ‘aggressive’ –
something which bodes well for gold. He says, “The US Federal
Reserve has eased monetary policy aggressively since the onset of
the coronavirus recession in March. True, there currently is little sign
of inflation – for centuries a major motive for holding gold. But rising
goods prices are not the only sign of easy money. Today’s low real
interest rates, depreciated dollar and high stock prices – not to
mention the size of the Fed’s balance sheet – all reflect the Fed’s
accommodative monetary-policy stance.”
Bank of America Merrill Lynch and National
Australia Bank see bullish gold as a result of
loose policies unprecedented falls.
Bank of America Merrill Lynch cites looser monetary policy as being
behind its bullish expectation that gold will reach a record-breaking
£2,194 ($3,000) within the next 18 months as a direct result of
looser monetary policy.
BofA analyst Michael Widmer said, ‘The current macro-economic
backdrop of loose monetary and loose fiscal policy reinforces that
dynamic, so we believe the recent rallies can be justified. We expect
gold to hit £2,194 ($3,000/oz) in the coming 18 months.
National Australia Bank’s head of commodity research, Lachlan
Shaw backs this forecast, with central banks not expected to reverse
loose policy in the medium term. He said, “If inflation expectations
pick up as a result of increased economic activity from the vaccine,
that should keep a lid on long U.S. real yields and be a supporting
driver for gold.”
7Quantitative Easing
Back in March, the Bank of England governor, Andrew Bailey
announced that rates would be cut to a rate not seen since that
organisation’s founding in the 1960s, with and quantitative easing
to take place. An additional £200bn currency was ordered to be
printed in order to fund bond purchases to support economic
activity and avoid mass bankruptcies.
At the same time, the European Central Bank committed to £708bn
in new bond purchases. Concurrently, the US Federal Reserve has
also stepped in, created nine swap lines with the same number of
countries for reserve currency.
What does this mean for gold?
Quantitative easing is hugely bullish for gold – and the good news
is that the scope of QE in 2021 looks vast, giving the gold bulls a
straight run towards all-time highs.
BNP Paribas is one of a number of respected financial institutions
which fully expects quantitative easing to support strong gold prices
across the next 12 months.
Michael Sneyd, head of macro quantitative
and derivatives strategy and Harry
Tchilinguirian, commodities economist said
Bloomberg Intelligence bullish for gold on
in a briefing to investors, “The recessionary
fallout of the COVID-19 outbreak on the back of quantitative easing
global economy suggests investors are likely
to continue to seek refuge in gold. Bloomberg Intelligence has also cited quantitative easing in its
“With the Federal Reserve moving its policy extremely bullish outlook for gold, adding yet more strength to the
rate to the lower bound and turning to need to invest. In the December outlook for BI, Senior commodity
unlimited quantitative easing, and other strategist Mike McGlone said, “Gold is quite straightforward:
banks taking similar action, we expect real probabilities tilt toward more of the same for its price at about
rates to remain in negative territory as $1,790 an ounce on Nov. 27 than advance in 2021 above this
nominal yields are suppressed. This raises year’s peak of around $2,075. A key question regarding gold and
the incentive to hold gold, particularly in such risk: what it might take to reverse rising debt and QE?
an uncertain economic environment. “The metal may be less supported by rising stock-market volatility
“In addition, gold’s role as a hedge in as in 2018-20, but seemingly unstoppable trends in negatively
investor portfolios will be put to use in the yielding debt, quantitative easing (QE) and rising debt-to-GDP
case of losses in other asset classes, such as provide firm foundations for the store of value.
a strong correction in equity markets.” “Gold is poised to extend its uptrend in 2021. Backing up into its
upward sloping 50-week moving average toward the end of 2020
should provide the gold bull market a relative advantage in 2021.
The metal's upward trajectory, which resumed with the first Federal
Reserve rate hike in 2015, shows few signs of other than staying
the course.”
8Weak US Dollar
The US dollar has taken quite a hit during the pandemic, with US
Dollar Index figures confirming a 6.15% dip in the period February
– October
[Source: https://www.asianinvestor.net/article/market-views-
will-the-us-dollar-continue-to-weaken/464117 ].
This trend looks very unlikely to be reversed because its pillars of
strength, such as low unemployment figures and a thriving
economy have been ravaged by the pandemic. This is further
compounded by soaring levels of government debt as a result of its
necessary fiscal stimulus measures and other compounding factors
such as political uncertainties surrounding the contested election,
transfer of power and global trade woes.
Why is a weaker dollar good for gold?
Sun Chao, a researcher at the International Monetary Institute, Renmin University of China,
says a weak dollar is worrying for investors and leads to a migration to gold instead,
pushing up precious metal prices. “The recent spike in gold prices suggests the market
expects some key factors to affect the global economic trend. To begin with, one
apprehension is a weakening dollar. Since the beginning of this year, there has been
remarkable increase either in the total asset of the Federal Reserve or M2 (broad money),
making the dollar less attractive.”
In 2020, a weaker dollar coincided with soaring gold prices, with the greenback slump
propelling gold to a 34% increase and a record £1,538 ($2,047) price thanks to investor
panic.
The better news? The greenback is likely to struggle to regain its strength in 2021, setting
the stage for a protracted bull run according to industry experts.
Vincent Mortier, CIO of Amundi is just one expert who believes the dollar will struggle to
resurge in 2021, paving the way for a very bullish New Year. He said, “Since the
pandemic-induced recession, we have seen the removal of the twin pillars that used to
support the dollar – interest rate differentials and US growth exceptionalism – replaced by
the re-emergence of the twin deficits, especially the fiscal deficit. Therefore, we expect the
dollar to stay weak in the medium term.”
Invesco’s global market strategist David Chao also believes that the dollar will continue to
struggle, even after the president-elect Joe Biden is inaugurated and a line is drawn under
the political uncertainty. He said, “I expect the US dollar to weaken after the US president
is inaugurated early next year and for the dollar to remain weak over 2021.”
2
Source: https://www.asianinvestor.net/article/market-views-will-the-us-dollar-continue-to-weaken/464117
910 Price Predictions... What to expect in 2021
1 Bank of America
Bank of America predicts gold will be priced at £2,245 ($3000) in
2021. Its analysts say, “As economic output contracts sharply, fiscal
outlays surge, and central bank balance sheets double, fiat
currencies could come under pressure. Investors will aim for gold.”
2 InvestingHaven
InvestingHaven forecasts a bullish 2021 for gold, with its price
projection for gold ranging from £1,646 ($2,200) to £1,796 ($2,400)
through the year thanks to a soft dollar and rising inflation.
3 RBC Capital Markets, Royal Bank of Canada
RBC Capital Markets, which is part of the Royal Bank of Canada calls
for gold to reach £2,291 ($3,060) as early as the first quarter of the
year due to the economic impact of COVID-19 and looser monetary
policy.
4 Goldman Sachs
Goldman Sachs is extremely bullish on prospects for gold, revising its
previous forecasts up by 15% to £1,496 ($2,000). Its analysts cited
“a record level of debt accumulation by the US government” coupled
with “real concerns around the longevity of the US dollar as a reserve
currency” as the basis for its forecast.
5 Edison Group
Edison Group’s outlook for gold in 2021 has the precious metal
forecasted to achieve £2,244 ($3000) over the next 12 months
thanks to zero interest rates, market uncertainty and continuing fiscal
stimulus packages from the Federal Reserve.
And beyond:
1010 Price Predictions... What to expect in 2021
6 Frank Holmes, U.S. Global Investors
The CEO of U.S. Global Investors expects gold to reach £2,992
($4,000) within the next two or three years due to the measures being
taken now by the Federal Reserve and other nations to pump money
into stricken economies.
7 Nicoya Research
Nicoya Research projects a multi-year bull run, with gold forecast to
reach £2,430 ($3,250) in 2021, rising to £4,493 ($6,000).
8 AG Thorson
AG Thorson says things have never looked better for gold. The
investor cites low interest rates and fiscal stimulus, followed by
soaring government debt, to take gold up. He forecasts a price
between £5,619 ($7,500) and £7,492 ($10,000) by 2024.
9 Dan Oliver, Myrmikan Capital
The founder of Myrmikan Capital, Dan Oliver has revised his forecast
for gold up to £7,491 ($10,000) in the wake of the COVID-19
pandemic. He says, “The Fed, as you know, has been on a massive
purchasing spree because of the virus situation, and so therefore the
equilibrium price of gold is going up commensurately, and so the
numbers now to balance that balance sheet are enormously high.”
10 James Rickards, Strategic Intelligence
Like Dan Oliver, Rickards expects to see gold reaching in excess of
£7,491 ($10,000) thanks to growing demand from institutional
investors and the appeal of gold to investors stung by poorly
performing stocks.
11Conclusion
There is no better time to buy gold. While we may have witnessed
record prices and record gains in 2020, the stage is set for 2021 to
be the year of the bull run.
A wealth of supportive factors have gathered to propel gold, with
most if not all expected to remain in play for the duration of 2021.
The pandemic has created an environment which overwhelmingly
supports gold and has reinforced gold’s status as a stable, safe
haven in a world which has undergone one of the sharpest, deepest
and most painful economic shocks on record.
Ruth Crowell, chief executive of the London Bullion Market
Association (LBMA) says it perfectly, explaining “I can think of no
clearer demonstration of gold’s role as a store of value than the
enthusiasm with which investors across the world have turned to
the metal during the unique social and economic turmoil of the past
few months. Gold has once again proved to be the safe haven of
choice in periods of uncertainty and high volatility.”
Buy now.
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