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Gold’s 2021 outlook mixed but will unlikely outshine Bitcoin

Gold's 2021 outlook mixed but will unlikely outshine Bitcoin

After rallying sharply between March and August, the Gold price retreated from an all-time high during the second half of the year. The market analysts blame robust stock market recovery for sluggish performance in the past couple of months.

The investor’s rotation from safe-haven assets to risker assets played a key role in halting the bull-run.     

Gold price performance. Finviz chart

The discovery of the coronavirus vaccine added to headwinds for gold price recovery in the last month. Gold is currently trading around $1,880 an ounce, down slightly from an all-time high of $2,000 level that it had hit in August.

Gold is set to steadily rebound in 2021

The market analysts are optimistic that the precious metal has little downside potential while prospects for steady upside momentum are strong. This is because of depreciation in the US dollar value as well as appreciation in the inflation rate.

Goldman Sachs believes the gold price will rise to a new all-time high of $2,300 in 2021. The firm projects that economic recovery will support inflation next year, with expectations that the inflation rate will hit the 3% level in 2021. Historically, Higher inflation always negatively impact the US dollar value. Meanwhile, the drop in the US dollar value makes gold prices cheaper for consumers.

Some other rating firms like Fitch believe Gold has a limited upside potential amid a sharp growth in supplies.

“Regardless of the heights the gold price will stabilize at, supply is expected to get back to increasing again in 2021,” the firm’s representative said.

Bitcoin is likely to outshine gold

Bitcoin price rally has outperformed gold in 2020, with expectations that the largest digital coin is likely to extend the gains in fiscal 2021.

Bitcoin price has reached the new all-time high of $23k this week and surpassed the $400 billion market capitalization, more than any global largest bank’s market cap. JP Morgan bank is the closest bank to Bitcoin by market capitalization at $362 billion.

In 2020, the Bitcoin price growth has mostly been inspired by the entry of institutional investors. In 2017, the situation was different the asset’s all-time high being inspired by the ICO frenzy.

“Bitcoin is no longer the mirage it used to be – it is truly becoming the oasis in the desert.” Gunnar Jaerv, COO of First Digital Trust said.

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