Gold could hit a new high in 2021, says Australian bank ANZ

Published Thu, Dec 10 20208:43 PM ESTUpdated Thu, Dec 10 202011:34 PM EST

(This story is for CNBC PRO subscribers only.) Gold has soared this year as economic uncertainty has pushed investors into safer assets — and one Australian bank this week identified a new possible high for the metal in 2021. With the rollout of Covid vaccines expected to lift prospects for the global economy, some strategists have predicted an end to the run-up in gold prices . However, analysts at Australian bank ANZ think otherwise. "The likelihood of a strong global recovery and a rally in risk assets continues to improve. This could take some shine off gold's haven appeal," ANZ analysts said in a Thursday report. "However, we don't think this will scuttle gold's current rise higher." ANZ predicted that gold prices could push above $2,000 per ounce in 2021 — repeating a feat achieved in August this year when the precious metal hit an all-time high. Spot gold was trading at around $1,837 on Friday morning in Asia. The chart below shows how ANZ bank sees the trajectory of gold prices over the next two years. The bank's analysts said gold prices will continue to climb in the coming months even though investors have an increasing appetite for riskier assets such as stocks — which typically indicate waning interest in gold. "Gold will remain well supported" into the coming year and potentially hit a high of $2,100 per ounce in the middle of 2021, projected ANZ, outlining several reasons including an expected depreciation of the U.S. dollar and falling real interest rates. "Conventional wisdom suggests gold would suffer amid a risk-on tone across markets. However, history shows that gold and risk appetite don't always go in opposite directions," they said. Weak U.S. dollar, falling interest rates Improving global growth is typically a "poor environment" for the U.S. dollar, according to the Australian bank. "Strong growth drives flows into riskier assets and pushes an allocation away from the USD. This time should be no different," the analysts wrote. A large — and likely growing — U.S. current account deficit also suggests that the greenback could weaken further, they said. Current account measures a country's total transactions with the rest of the world, including imports and exports of goods, cross-border investments, as well as transfers such as foreign aid. In addition, forecasts by the U.S. Federal Reserve for interest rates and inflation showed real rates "should continue to push into negative territory," said ANZ. Negative real rates erode purchasing power, which means people may turn to gold for its ability to maintain its value. "That said, we also acknowledge headwinds in the short term. The continued strength in equity markets is likely to see further investor rotation out of gold-backed ETFs and into equities (predominately traditional growth sectors)," said the bank. Beyond 2021, gold prices could decline as the global economy moves closer to its pre-pandemic growth trajectory, according to ANZ.

Gold bars at Solar Capital Gold Zrt. in Budapest, Hungary on March 10, 2016.

Akos Stiller | Bloomberg | Getty Images

(This story is for CNBC PRO subscribers only.)

Gold has soared this year as economic uncertainty has pushed investors into safer assets — and one Australian bank this week identified a new possible high for the metal in 2021.

With the rollout of Covid vaccines expected to lift prospects for the global economy, some strategists have predicted an end to the run-up in gold prices. However, analysts at Australian bank ANZ think otherwise.

"The likelihood of a strong global recovery and a rally in risk assets continues to improve. This could take some shine off gold's haven appeal," ANZ analysts said in a Thursday report. "However, we don't think this will scuttle gold's current rise higher."