CEO and Founder of Regal Assets, an international alternative assets firm with offices in Beverly Hills, Toronto, London and Dubai.
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In today's uncertain investment climate, customers, friends and family are asking me more than ever before what I think about the precious metals market. After months of discussions, I've decided to put together an article on expectations for the year ahead for gold, silver and platinum group metals.
In the interest of transparency, I'm the founder of an alternative investment company involved in gold, silver and cryptocurrency and also hold investments in gold, silver, platinum and palladium. But that doesn't mean I'm permanently bullish on these assets. There's a time and a place for each of them, but there are periods when you might be better off opting for other assets.
The analysis offered here is merely the aggregate of expert opinions in the industry. None of this constitutes financial or investment advice, and I encourage you to do your own supplementary research before making any decisions with your money.
Gold Investing In 2021 And Beyond
The yellow metal had a strong run last year with an annual price increase of 24%. On January 2, gold opened at $1,521, and it closed on December 31 at $1,895. This constitutes the best year-over-year growth for gold since 2010.
All signs point to gold cooling down and consolidating in the short run before rallying again toward the end of the year and into 2022. Citigroup predicts a price target of $2,500 by year-end. Although I think this might be too bullish, it won't be far off if we see rising inflation and falling bond yields through midyear.
If the Fed is forced to raise the federal funds rate to combat rising inflation, that's when gold prices would most likely take off. Investors interested in gold will likely want to buy now if they believe the conditions that drove 2020's bull run — equity market volatility, a weaker dollar and a low interest rate environment — will continue through 2021. It's important to note, though, that gold prices have fallen in the first couple of months of this year.
Silver In The Year Ahead
It's likely we'll see an increase in industrial demand for silver. With the Biden administration taking office in the U.S., green energy demand is set to soar following Biden's $2 trillion climate plan.
Silver alloys are used extensively in the production of solar panels and photovoltaic (PV) cells. In fact, in 2019, 100 million ounces of silver was used to construct PV cells worldwide, though business intelligence company CRU Group predicted that to be the peak for silver demand in PV panels.
Some analysts call for a $50 per troy ounce price target for silver in 2021. Although I'm not sure if I'm quite as bullish, I agree with the sentiment that positive price signals abound for silver. It seems likely we'll see consistent price growth over the next three to four years as the policy environment favors silver.
Platinum-Group Metals In 2021
Precious metals within the platinum group are chemically diverse and traditionally represent more volatility than their white and yellow counterparts. They include the following:
• Rhodium.
• Ruthenium.
• Osmium.
• Iridium.
• Palladium.
• Platinum.
Investors generally concentrate on the last two mentioned, palladium and platinum, for their liquidity advantage. Demand for these metals is driven by the auto sector, which utilizes platinum for light-duty diesel vehicle production. Since these metals are considerably more niche than gold and silver, it's difficult to forecast their supply and demand.
However, industry analysts believe that industrial demand for platinum groups is high and showing no signs of slowing down. Experts suspect an oversupply of platinum — to the tune of up to 670,000 ounces — is expected to keep the price of palladium significantly higher than platinum in 2021.
Inflation On The Horizon?
Many of the forecasts mentioned in this article hinge on whether inflation rises or falls in the year ahead. Expert opinion varies in this regard, with some analysts forecasting muted inflation while others foresee a CPI jump beyond 2% after the Covid-19 vaccine precipitates a surge in consumer demand.
The U.S. M2 money supply skyrocketed by roughly $370 billion during a one-week period in mid-January. Money is entering public circulation at a +26.5% year-over-year pace. These are conditions that, historically, have signaled future inflation events. If this happens, I expect gold growth to outpace all other precious metals over the next few years.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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