Singapore Bullion Market Association

Website Sponsor

Article List

Article List

Will Gold’s Rally Extend into 2021?

By Eily Ong, Global Analyst, Bloomberg Intelligence

Published on September 8, 2020

Improving gold market fundamentals could support rising prices into 2021, in our view, with our scenario analysis pointing to 13-50% higher levels than consensus. Drivers include shifting consumer behaviour along with stronger haven status amid risks to global economic growth, geopolitics and pandemic concerns.

CONSUMERS, UNCERTAINTY EMPOWER TRUST IN GOLD

Gold consumers’ adjustment to a higher price for the metal, along with greater investment demand, is a recipe for the precious metal’s potential price acceleration in 2021. Market sentiment for gold is likely to strengthen on dollar wobbles amid rising geopolitical risks in a lower-for-longer interest rate environment.

Central banks and investors may absorb the market surplus as they seek gold for portfolio diversification and possibly as a hedge if inflationary pressures return on the substantial stimulus measures injected amid the global health crisis.

We may also see a return to consumer hoarding (jewellery, industrial), especially in India and China. These factors combined bring a sunnier outlook for gold – an asset that offers no coupon or dividends – as an alternative safe-haven, wealth-preservation asset.

TIMELINE OF KEY CATALYSTS

  • 2020-21: Covid-19 crisis enhances gold’s safe-haven quality; pandemic impact likely beyond 2020
  • 1Q21: Gold’s seasonality tends to be favorable over a three, five and 10-year period
  • February: 4Q20 conference call for gold producers, supply growth and cost risks may arise in 2021
  • 3Q20-4Q21: Real interest rate may further decline
  • 3Q20-2021: Acceleration in inflationary pressure expectation from rising Covid-19 stimulus measures, helps consumers adjust to higher gold prices
  • 2Q21-4Q21: Gold consumer purchases may recover especially for India (wedding and festivals amid potential normal monsoon season) and China (sustained metal price rise)
Source: Bloomberg Intelligence, Metals Focus, WGC, GFMS, IMF

NEW PEAK

The gold price could peak in 2021, in our view, as we believe the metal may meet all the key factors in our Gold Price Matrix. The metal’s price momentum is driven by eight elements, including the use of gold exchange-traded funds as a refuge in times of global financial, health or geopolitical crisis; dollar weakness; inflation; and low or negative interest rates.

Also on the list are increasing demand from China and India, weak confidence in financial markets and net central bank gold purchases. Gold peaked at $1,921/oz. in September 2011, when it met all eight criteria in our study.

Gold’s attribute as a flight-to-quality, safe-haven asset is strengthening amid the Covid-19 pandemic, which we believe may result in rising investor appetite for diversifying portfolios with gold in 2021.

GOLD COULD CLIMB AS HIGH AS $2,583 IN 2021

Gold is a versatile, multipurpose and multi-focus asset for buyers, which makes price forecasting hard. Our scenario analysis of the asset’s annual average price expectation for 2021 indicates a potential metal-price range between $1,306-$2,583/oz. This implies an upside of 13-50% when compared with consensus’ price estimate of $1,721.88/oz. for 2021, and a 24% downside risk on lower price expectations. We also calculated an upside of as much as 56% vs. the 2020 year-to-date average price of $1,653.80 as of July 17.

Our demand scenario for gold’s general use has identified three categories: a commodity (metal produced for use in industrial applications); a currency (hedging risks to preserve an investor’s portfolio); and a cure-all to enhance prospects for the purchaser (during a crisis, superstition or culture).

Source: Bloomberg Intelligence
Source: Bloomberg Intelligence, Metals Focus

GOLD MARKET DYNAMICS TO IMPROVE

Annual global gold demand could improve year-over-year in 2021 to 4,130 metric tonnes, based on our base-case scenario analysis. This may help reduce the metal’s excess supply over world consumption, especially since the coronavirus outbreak in December. The market could remain in surplus, albeit at a slightly lower volume of about 688 tonnes at the end of 2021 vs. 2020’s 690 tonnes, according to Metals Focus data. We see strong sentiment from safe haven investment purchases, especially in the case of a new Covid-19 outbreak, and as jewellery consumption recovers as consumers adjust to higher prices.

This could bolster gold prices and potentially bring higher earnings in 2021 for the world’s leading miners, including Newmont, Barrick Gold, AngloGold Ashanti, Polyus Gold, Kinross, Gold Fields, Agnico Eagle Mines and Freeport-McMoRan.

EILY ONG is an equity and industry analyst for Bloomberg Intelligence. She specialises in the global metals, mining and steel sectors. Before joining Bloomberg, Ong gained nearly 20 years of experience in the financial services industry. Her roles at Credit Suisse and Deloitte largely focused on the metals and mining sector. Ong is a Chartered Accountant and was also the investment research manager at the World Gold Council.

PREV ARTICLE
NEXT ARTICLE
BACK TO INDEX

SECRETARIAT SBMA-Emily-Oh

Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

SECRETARIAT SBMA Clara-Chang

Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

SBMA Committee-Photo-john-levin

Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

SBMA Secretariat-Fabian-Lew

Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

SBMA-margare-secretariat

Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

SBMA-Albert-secretariat

Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

SBMA-Shaokai-Fan

Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

SBMA-Committee-Alan-Liew

Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

SBMA-Committee-Nikos

Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

SBMA-Committee-khun nuttapong

Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

SBMA Committee-Photo-Raman-Walia

Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

SBMA Committee-Photo-Andrew-Clarke

Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

SBMA Committee-Photo-Kazuya-Naoki

Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

SBMA Committee-Photo-Vinh-Nguyen

Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

SBMA Committee-KL-Yap

Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.