March 2021 Roundup

March 2021 Market Roundup

 

Following an eight-month low towards the end of February, March began with a gold price recovery to nearly $1,750 per ounce. By the end of the first week of March, however, it fell again to a nine-month low of $1,687 although it wouldn’t stay there for long.

On the 11th March, the US House of Representatives passed a $1.9 trillion coronavirus relief package; Joe Biden’s top priority as president. This stimulus package meant that the $300 per week unemployment insurance boost would be extended and most American citizens would receive a direct payment of $1,400.  News of the relief programme drove demand for gold as a hedge against inflation, and the price quickly increased above the $1,700 barrier again; a position which it held throughout much of the month.

Despite the price of gold falling significantly below its peak of $2, 072 per ounce back in August 2020, The Royal Mint continued to experience elevated demand for gold, silver and platinum during March, particularly compared to pre-Covid times.  As a result of the pandemic, there is greater general awareness around investing in precious metals, particularly amongst younger people, and The Royal Mint has observed a 428% growth in the number of millennial investors purchasing with The Royal Mint (between 01/03/20-28/02/21) compared to the year prior. 

Andrew Dickey, Divisional Director for Precious Metals at The Royal Mint said “We are finding that new and existing investors are choosing to hold for the long-term, regardless of short-term peaks and troughs in the price.  Our new digital gold accumulation product- Little Treasures- is proving particularly popular, as well as the more traditional bullion bars and coins.  In fact, the lower price has provided many investors with an opportunity to buy at a favourable price.” 

The Royal Mint also allows customers to hold gold inside their private pensions and they’ve seen a 149% growth in pension customers in March 2021, compared to the same period in 2020.

In other news, cryptocurrencies, and in particular- Bitcoin, continued to make the headlines in March with certain investors questioning whether Bitcoin would become the ‘new gold’.  The World Gold Council offered some clarity to this rhetoric by explaining; “Gold and cryptocurrencies are fundamentally different assets that play distinct roles in an investor’s portfolio. Gold is a well-established, highly liquid asset with a proven track record for serving as a diversifier and a risk hedge while delivering long-term returns. Investors have been recently attracted to cryptocurrencies like Bitcoin due to their significant price increase, but they are also performing as highly speculative and volatile assets that involve assuming significant risk for the potential of high gains.  And while investors may choose to embrace high-reward, tactical assets such as Bitcoin, they still need the appropriate tools to manage the additional risk. As such, in our view, a higher exposure to cryptocurrencies warrants a higher allocation to gold.”

In relation to the months ahead, many analysts predict continued support for gold, particularly in the second half of the year.  James Steel, Precious Metals Analyst for HSBC cites low interest rates and a potential ease in inflationary pressure, and consequently a fall in yields, to be potential drivers of a recovering gold price in 2021.

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