Why hasn’t gold rallied closer to $2,000 per ounce even after so much money printing ?

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What moves gold prices and prices of gold miners?

I was expecting a greater upward move in gold prices after new round of stimulus. However gold prices are still stuck below $1,900 per ounce.
Why is there so much resistance to gold prices moving higher ?
Would you recommend going overweight on gold miners for 2021 ?
Do you expect an increase in gold price soon ? Can you provide some insight on what moves the price and also provide some idea on the timeline for upward gold price movement ?

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Asked on December 29, 2020 4:56 pm
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Private answer

HI there,

There is no question that the macro events that support a high gold price are in place. The feds printing money, threat of hyper inflation, low interest rates and continued economic uncertainty are all factors that support a strong price of gold. Keep in mind however, that gold bull run's usually last for 5-years or more (we are in year 1). It won't go up in a straight line, but the fundamentals are certainly there to support high gold prices.

Even if it hovers around $1,800-$1,900/oz, miners are generating considerable cash flows. Over the past decade, they've been making decisions based on $1,100-$1,200/oz gold. So today, they will be highly profitable and are likely to reward shareholders with increasing dividends (as we've seen in 2020). So gold miners today are doing quite well even if their share prices over the past few months do not reflect this.

We don't like to go overweight any particular asset. Gold in particular, we view as a hedge against uncertainty and not the primary growth driver of our portfolios. We like gold, and given all the macro fundamentals support a strong price, we think the price of gold will remain quite attractive through 2021. As for what is holding it back - there is concern that Bitcoin has replaced gold as a hedge but we are not convinced of that. At least not yet. We also like Bitcoin and recently wrote a piece on it in the Premium Content section. Bottom line, we believe there is room for both gold and Bitcoin within a portfolio.

Mat

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Posted by Mathieu Litalien
Answered on December 29, 2020 5:38 pm