September 09, 2020

Survey of analysts views on primary drivers of the gold price

What's influencing the price?

We all know that the gold price embarked on a run as the Covid-19 pandemic began to take hold. From trough (19 March) to peak (6 Aug), the London price moved by an unprecedented $592.90 or 40%.

Unsurprisingly a price shift of this magnitude prompted a great deal of media commentary, frankly speculation, divided loosely into three camps: enthusiastic bulls, gloomy bears, and a the third group, arguably the largest, which continues to flip-flop with every twist and turn of the news.

Faced with this uncertainty, we undertook a quick survey of the professional gold analysts who every year contribute to LBMA’s Precious Metals Forecast Survey, but rather than ask them to stick their necks out (again) and suggest an average price, the survey focused on what these analysts now perceive to be the top three drivers of gold during the final third of the year.

In the original Forecast Survey, published at the end of January, analysts predicted the gold price would be driven by geopolitical and economic tensions such as Brexit, the US election, and the simmering US/China trade war; US monetary policy; and changes in demand especially from India and China.

Today, however, the analysts’ views have focused more exclusively than before on the USA with the top three drivers seen to be: Negative US real interest rates/bond yields (28%), US dollar weakness (24%), and the US Presidential Election (20%). Clearly the first of these impacts the second, and both are directly Pandemic-related, but it’s interesting Covid was not named in the top-three finishing a game fourth with special mention of the economic impact of an effective vaccine.

As for the forthcoming election, the humourist George Carlin made an important point: “In America, anyone can become president. That’s the problem.”