Gold price January 2021: A Month of Volatility.

In February 2021, the price of gold experienced a volatile month, with prices fluctuating in response to various factors affecting the global economy. I think positive vaccine news is actually bullish for gold long term (Even though that would mean a much better economy). People locked down and spending less = lower velocity of money = lower inflation.

At the start of the month, the price of gold was around $1,850 per ounce. The first week of February saw the price rise to around $1,875 per ounce, as investors sought refuge in the precious metal amid concerns over the rising number of COVID-19 cases worldwide and uncertainty over the economic recovery.

The price of gold continued to rise over the following week, reaching a high of $1,959 per ounce on February 10th. However, the gains were short-lived, and the price started to fall as the US dollar strengthened and US Treasury yields rose, reducing the appeal of gold as an alternative investment.

By the end of the third week of February, the price of gold had fallen back to around $1,770 per ounce, a decline of more than 9% from its peak earlier in the month. This drop was attributed to a combination of factors, including a stronger US dollar, rising Treasury yields, and the expectation of higher interest rates.

In the final week of February, the price of gold recovered slightly, trading at around $1,738 per ounce by the end of the month. However, this still represented a decline of around 6% for the month overall.

So, what were the factors driving the volatility in the gold price during February 2021?

One key factor was the rising US Treasury yields. As yields on 10-year Treasuries rose to their highest levels since February 2020, investors turned to US dollar-denominated assets, pushing up the value of the currency and reducing the appeal of gold. Bonds are falling and yields are increasing. This all suggests dollar strength and rising interest rates. I believe there is another move lower I the next two weeks, that would be a good short term buy. Not convinced on the intermediate to long term.

Another factor was the prospect of higher interest rates. In February 2021, the Federal Reserve signaled that it would keep interest rates near zero for the time being but hinted that it could raise them in the future if inflation expectations continue to rise. This expectation of higher rates put pressure on the price of gold, as the precious metal does not generate income like bonds or equities and becomes less attractive as interest rates rise.

Historical gold prices in January 2021 for USD, Canadian dollar, Australian dollar, Indian rupees, and British pound.

daily historical gold prices in January 2021 for USD, Canadian dollar, Australian dollar, Indian rupees, and British pound,

Gold has long been a favorite investment option for investors seeking to hedge against uncertainty and volatility in financial markets. In recent times, the precious metal has been in the spotlight, as it has undergone significant price movements over the past year. After reaching all-time highs of $2,075 in the summer of 2020, gold prices drifted lower and have recently rebounded from a low of $1,760 in November. This has left many investors wondering whether the correction in the price of gold is finally over.

According to Ravindra Rao, VP-Head Commodity Research at Kotak Securities, gold continues to trade in a broad range as support from higher US stimulus, rising virus cases, and impeachment proceedings against President Trump are countered by vaccine progress and weaker investor interest. This has resulted in choppy trading for the precious metal, with the price fluctuating within a certain range. While the general expectation of higher US stimulus may continue to support prices, gold may remain choppy unless there are fresh triggers.

Michael Jones, a seasoned investor, discusses here what may be driving the price of gold and highlights potential vulnerabilities in the short term. Jones notes that the recent weakness in gold prices can be attributed to several factors, including the vaccine progress and the weaker investor interest as evident from ETF outflows. However, Jones also points out that the positive factors that have been supporting gold prices, such as higher US stimulus, rising virus cases, and impeachment proceedings against President Trump, are still in play.

Jones goes on to mention an existing trade on gold and suggests a new trade to take advantage of potential upward movement in the price. According to Jones, the existing trade on gold involves buying a call option on the metal, which gives the investor the right, but not the obligation, to buy gold at a certain price. This trade can be used to take advantage of potential upward movement in the price of gold.

In addition to the existing trade, Jones suggests a new trade that involves buying physical gold and holding it for the long term. According to Jones, this trade is suitable for investors who believe that the correction in gold prices is coming to an end and that the metal is set to rebound in the long term.

Overall, Jones suggests that the correction in gold may be coming to an end, and investors who are bullish on the metal may want to consider taking advantage of potential upward movement in the price. While gold may remain choppy in the short term, the positive factors that have been supporting the metal’s price are still in play, and this could provide a boost to the metal’s price in the long term. As always, investors should conduct their research and consider their risk tolerance before making any investment decisions.