What’s Going to Happen to the Gold Price?

Gold, which has had a wild ride, should head higher for the rest of 2021, according to a new research report. But just how high depends on the worry level—which for now is climbing.

The greater the economy’s woes, the better things are for gold prices. This new assessment of the precious metal’s prospects in 2021’s second half lays out just how much it could rise under several different economic scenarios.

The best outlook for gold is, of course, the worst for the economy and the human race, according to the study by the World Gold Council, the industry’s trade group, and Greenwich Associates consulting firm, with the help of Oxford Economics. According to the report, if new coronavirus variants overwhelm the vaccines and the economy’s growth, then gold will shoot up 11.4% for all of 2021. If there’s a cautious recovery, held back a bit by the virus problems, then gold rises 7.7%.

If the recovery accelerates, presumably thanks to the ebbing of the pandemic threat, then the shiny metal advances 6.4%. Should interest rates increase and offset the recent hot inflation, then gold ascends just 4.4%. Gold historically doesn’t do great with rates headed upward. And if the consumer-led boom resumes, gold goes up a mere 1%.

Gold, which dipped 6.6% in the year’s first half amid joyous news about the pandemic’s retreat and the economy’s surge, has perked up some in the two weeks-plus of the second half, nudging up 2.4%, at $1,812 per ounce as of Friday’s close. New anxieties about the Delta variant of the coronavirus and an inflation jump—the Consumer Price Index (CPI) soared 5.4% for the 12 months through June—rattled the stock market.

In pandemic-shaken 2020, gold spiraled 28%, due to its classic role as a haven when the economy gets gut-punched.

Inflation is gold’s friend. The report said it averages 15% yearly when the CPI is above 3%. Good economic news is not always a minus for gold, it went on: Strong growth boosts demand for gold jewelry. It noted, “We anticipate that the need for effective risk hedges will continue to support investment demand, but gold’s performance will also be influenced by the direction of interest rates and the robustness of the economic recovery.”

The World Gold Council cautions that it is not forecasting the price of gold, but is merely presenting hypothetical outcomes under different circumstances.