As Gold Markets Struggle will Gold Retain Momentum as a Portfolio Diversifier?

By CanadianMiningReport.com Staff Writer / August 27, 2021 / Article Link

Gold markets have seen a pullback during the course of the trading session on Thursday as gold prices continue to struggle just below the $1750 level. That is an area that previously had been supportive, so naturally it is now becoming a resistant line.

Despite gold prices clinging on Friday on concerns over rising cases of the Delta variant, uncertainties over the U.S. Federal Reserve’s tapering timeline kept bullion on course for a weekly drop. The rising inflation in the United States caused some sell off across gold markets.

Spot gold rose 0.2% to $1,755.90 per ounce by 0832 GMT. However, it was down 0.4% for the week. Last week’s U.S. jobs report sent bullion prices to a four-month low on Monday.

U.S. gold futures gained 0.4% to $1,758.40.

Investors now appear to be comfortable with the idea of tapering. This makes it unlikely to be a negative. The key question for gold bugs will be over the timing of rate hikes.

Analysts expect demand for gold to remain robust amid elevated inflation rates and pandemic-related uncertainties. There is no sign that investors will pull away from safe-haven assets. Gold is seen as a hedge against inflation and a Fed rate hike will increase the opportunity cost of holding non-yielding bullion.

The protracted period of consolidation for gold is seen as temporary by most experts. Since the start of 2021, gold has demonstrated good gains. 2021 has been a record year for gold prices and we’re bound to see more gains in the medium and long-term. According to the CPM Gold Yearbook 2021 international gold markets are reacting as expected to the pandemic. The biggest drivers that will support gold as the world reopens include sovereign and private sector debts, deficits, and ultra-loose monetary policies.  It will be difficult for dovernments around the world to reverse the fiscal policies introduced as a response to the pandemic.

In the meantime, the most active mining stocks this week include Calibre Mining Corp. (OTCQX: CXBMF) (TSX: CXB), Franco-Nevada Corporation (NASDAQ: FNV), B2Gold Corp. (NYSE: BTG) (TSX: BTO), Gold Fields Limited (NYSE: GFI), Alamos Gold Inc. (NYSE: AGI) (TSX: AGI).

For the remainder of 2021, investors will likely continue to buy gold stocks and bullion. The Temporary dips in gold prices are the moment when many big buyers decide to enter. This buying pattern is expected to have a different impact on prices than what was seen in 2020. This year prices are likely to stay at elevated levels but could struggle to rise sharply as investors take a more cautious approach.