Price of Gold Fundamental Daily Forecast – May Be Up 24% for the Year, but Its Been a Lousy Investment Since Early August

Gold futures are inching higher in a lackluster trade on Thursday as investors prepare for another long holiday weekend. Nonetheless, the market is headed for its best annual performance in ten years. Gold is also inching higher for the week despite nearly two weeks of rangebound trading, garnering support from a slightly weaker U.S. Dollar and modestly lower U.S. real rates.

At 11:19 GMT, February Comex gold is trading $1898.30, up $4.90 or +0.26%. Gold is up more than 24% for the year, its best performance since 2010.

Despite those strong gains, everyone who watches gold prices every day, the route to those gains wasnt easy. Gold along with nearly every other major asset group plunged at the start of the pandemic as investors flocked into the safe-haven U.S. Dollar.

It wasnt until the global central banks and governments flooded the markets with monetary and fiscal stimulus that gold began its huge price surge.

After reaching its top for the year in early August, gold lost more than half of its earlier gains as economies began to improve, governments cutback on fiscal stimulus and the central banks held policy steady. Meanwhile, the announcement of a vaccine to fight coronavirus in early November fueled a one-day loss of over $100, golds largest single-day decline in years.

Later in the year, investors returned to higher-risk assets including equities and currencies. This drove the U.S. Dollar to its lowest level in 2-1/2 years. Yet, gold did not move higher than its August top. Go figure.

The latter half of 2020 proved to be very detrimental to gold buyers especially those who deemed it a safe-haven asset. This year proved to me and I hope others that gold is not a safe-haven asset. It‘s a place to park money when you don’t know what to do with it. Where do you think some of the money came from for the late surge in equity prices？ Look at the charts. Then look at the dates. Don‘t you think early gold buyers were selling gold to book profits then move it into higher-yielding equities？ I mean it’s pretty obvious.

If gold were truly a safe-haven like the brokers and headline writers want you to believe then it should be moving higher, lock-step with the surge in coronavirus cases and deaths. And of course the extremely weak U.S. Dollar.

I think you‘d be better off in 2021 if you look at gold as an investment rather than a safe-haven asset. What 2020 proved is that when the central banks and governments flood the financial markets with money, gold becomes a valuable asset, but once conditions improve, it becomes an asset that doesn’t pay interest or a dividend, dampening its appeal.

Gold could shine in 2021 if it becomes relatively cheaper. At some point in the future, stocks will get too expensive and gold will be cheap. That is likely to trigger the next major rally. Until then, Im looking for a drawn out rangebound trade as we start the new year.