Demand for gold from jewellers and central banks will recover in 2021 but remain below pre-pandemic levels, while buying of bullion by exchange traded funds (ETFs) will fall sharply, consultants Metals Focus said on Tuesday.
Supply of gold from mines, meanwhile, will rise to its highest on record this year, Metals Focus said in its annual Gold Focus report.
It predicted that gold would cost on average $1,820 an ounce in 2021, up from $1,770 last year. On Tuesday, it was trading around $1,860 an ounce.
The novel coronavirus transformed the gold market.
Investors last year stockpiled huge amounts of the metal, traditionally seen as a safe place to store wealth, briefly pushing gold prices to record highs above $2,000 an ounce.
But jewellery sales collapsed and some central banks, facing economic difficulty, held off buying gold or even sold it.
Many larger investors pivoted back to riskier assets as vaccines were deployed and the global economy moved towards recovery, and ETFs, which store gold for shareholders, have shrunk.
However, smaller investors buying gold bars and coins have continued to stockpile, with Metals Focus saying it expected their purchases to rise to an eight-year high in 2021.
Supporting prices this year will be the threat of inflation eroding the value of assets and currencies, Metals Focus said. Gold and other commodities are often used as a hedge against inflation.
(By Peter Hobson; Editing by Barbara Lewis)