(Kitco News) Gold is looking to return to its all-time August highs of above $2,000 an ounce, and this driver will get it there, according to Digix co-founder and COO Shaun Djie.
Once the election is over and the winner is determined, the next catalyst that will get gold back to $2,000 an ounce is the resurgence of coronavirus cases, Djie told Kitco News on Tuesday. This will be particularly devastating in an environment that still does not have a successful vaccine.
“You will see a lot of money managers coming back to the trading space on the backs of the election being over. The next big driver for the market will be coronavirus cases and a vaccine timeline,” Djie said.
This could get gold back to $2,000 an ounce. “The resurgence of the COVID-19 cases in the U.S. could be the main trigger for gold to hit $2,000 level, especially coupled with all the unsuccessful trials of different drug companies who are trying to manufacture a vaccine,” he added.
No matter who wins the election, the second COVID-19 wave will push gold upwards, Djie pointed out.
When it comes to short-term moves, markets are not taken aback by a delay in results, Djie noted.
“The environment of this particular election definitely creates a lot more debate when it comes to results. I won’t be surprised to see a delay by more than 24 hours due to close calls in swing states,” he said.
Gold’s upside potential also lies in a rough transition of power, Djie added. “If the transition is smooth, investors will be quick to reinvest back into the U.S. again as markets will start to price in stimulus sooner rather than later, especially if Biden wins,” he said.
Gold’s 2021 projections
Next year, markets will zero in on the U.S. debt, stimulus policies, and reopening of Asian economies, which will likely happen faster than in North America or Europe.
“Gold market will be trending upwards because of the fact that most of the world will still be going through a very difficult period when it comes to the handling of the virus,” Djie said. “The key theme next year will be the distribution of the vaccine. If that doesn’t happen, economies will not reopen as soon.”
The Digix co-founder does not foresee the same kind of volatility in gold next year, projecting for the precious metal to end 2021 close to the level where it began.
“I’m cautiously optimistic with gold’s performance for next year. I do think that gold will likely be a lot more stable form of asset for next year,” he said. “The stock market is likely to be a lot more volatile.”
One major thing that remains not priced in by the markets is the timeline for a vaccine. “That is very unpredictable. When will these trials be successful and conclusive, and when will they be able to roll out a vaccine? This will make a massive impact on manufacturing, travel, and other areas,” Djie said.
A successful vaccine will likely push gold lower as economies reopen, risk subsides, and industrial metals benefit.
“When a vaccine is finally available, you will see a lot of industrial commodities trading really well,” Djie noted. “For gold, this will mean an end to uncertainty, and that will likely bring gold prices down. I don’t think gold will collapse, but we might see $1,600-$1,500 level.”
To some extent, gold has been increasing in price, along with real estate and equities on the basis of “tremendous pumping of the U.S. dollars into the economy,” he added.
Author: Anna Golubova