Coronavirus vaccines began rolling out this week, boosting optimism that the economy will soon rebound. But as Peter Schiff said in a podcast last month, there is no vaccine for what ails the economy. Even if the vaccine proves effective and governments ease off the draconian policies they have implemented in response to the pandemic, governments and central banks will have to continue stimulus programs and loose monetary policies. That’s good for gold.
Commerzbank sees things the same way, projecting gold’s bull run will continue through 2021 with the yellow metal rising to $2,300 by Q4.
Peter said the problem really isn’t COVID-19. The problem is we’re addicted to the cure — cheap money and debt.
The disease doesn’t even matter anymore. Because even if we get rid of the disease, we’re still addicted to the cure. And the Fed can’t take away the cure without causing an even bigger problem than the initial disease that the cure was meant to cure. … All that debt and all the money printing doesn’t go away even if COVID goes away.”
Commerzbank analysts agree that the extraordinary monetary policy isn’t going to end any time soon. Either governments, central banks, or both, will continue to pump liquidity into the financial system.
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.”
With QE and stimulus continuing, Commerzbank expects gold to push above August’s all-time highs in the coming year. It projects an average price of around $2,000 an ounce in 2021 with a peak above $2,300 in Q4.
Gold has struggled over the last several months despite significant dollar weakness. Vaccine progress has sparked risk-on sentiment leading some to declare the gold bull run over. But even considering the drop from August’s record over $2,000 an ounce, gold has had a strong year. At $1,850 an ounce, gold is up 21% on the year and about 23% from the March lows.