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Everything You Need To Know About Gold In 2021

Mar. 09, 2021 3:12 PM ETCMCL, GDX, GDXJ, GLD, GLDM, TLT35 Comments
Harrison Schwartz profile picture
Harrison Schwartz


  • Gold has declined due to the rise in real interest rates associated with the ongoing crash in Treasury bonds.
  • As inflationary forces continue to mount, gold and Treasuries will continue to decouple and may soon go in opposite directions.
  • Since CPI overweights urban consumption and does not account for key factors, "CPI inflation" will likely continue to rise regardless of Federal Reserve policy.
  • A crash in stocks and bonds may fuel a rally in gold as money flows out of financial assets into real assets and goods.
  • With gold's downside risk limited by dovish monetary policy, it may be a good time to consider accumulating gold or gold miners.


The past few weeks have seen an increase in concern among gold investors that the bull market has ended prematurely. Gold has been a top bet for many investors who are concerned about rising inflationary pressures and monetary instability. These pressures have continued to mount, so it seems the price of gold should be rising, but gold has declined by over 10% so far this year.

Indeed, we're expected to see a $1.9T stimulus package soon which should hypothetically boost aggregate demand, or at least keep it from declining. Food inflation is also very high by historical standards and oil prices are rising. These "supply-side" inflationary pressures combined with extreme fiscal deficits have historically caused large inflationary waves which have benefited gold.

While the long-term outlook for gold is very strong, short-term interest rate pressures are pushing the yellow metal lower. In my view, this may actually be one of the last strong buying opportunities for the metal. Gold declined in value quite dramatically exactly a year ago as investors exited all assets and many feared deflation. However, those that used the opportunity to accumulate were paid handsomely.

Gold and other precious metals may see more declines in the short-run as interest rates rise. However, the interest rate pressures which have pushed gold lower are shifting which means the bottom may be near. Additionally, evidence suggests a large portion of last year's monetary base expansion (i.e. Q.E.) went into stocks and bonds and not gold. As stocks and bonds decline, I believe that we'll see trillions of dollars move into the real-asset market which could spur one of the largest bullish moves in gold yet. Let's take a closer look.

The "Interest Rate Effect" of Gold

Fortunately, gold is a largely mechanical asset. Its value at any moment is almost entirely

This article was written by

Harrison Schwartz profile picture
Harrison is a financial analyst who has been writing on Seeking Alpha since 2018 and has closely followed the market for over a decade. He has professional experience in the private equity, real estate, and economic research industry. Harrison also has an academic background in financial econometrics, economic forecasting, and global monetary economics.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CMCL,GLD over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (35)

What factors determine interest rates ??? What is an interest rate composed of ???
With the fall of the US dollar one would expect gold prices to rise..but the opposite has occurred..
The main reason.. much of real gold is held by foreign individuals, as gthey use gold as a depository for US dollars, and they have been selling gold..
Paul T. Lambert profile picture
If only it were this simple... but what this article neglects to mention is that for the most part, no real gold is actually traded. Nonetheless, no-gold paper gold pricing controls what you pay at the coin store. It's a travesty of actual market price discovery. Nothing new, here, of course; it's just that it's a mistake to pretend that gold "prices" have much to do with its actual value.
It all makes sense, especially the notion of nominal rates rising faster than inflation. But it is not the only factor affecting the price action in Gold. Stocks and cryptos took a big bite from the gold pie. If not that, I think Gold would be higher, perhaps not at the top at 2050, but more like 1900. Yes, a lot of money is being infused into the system, and lots of people have no better use of it but investing in the stock market and the bitcoin. That causes a positive reinforcement loop when even more money is attracted to this wave and taken from other places, like Treasuries and Gold. Both stock market and the BTC may crush and probably will, but until this bonanza continues, Gold will have hard time to get shining. But the thesis in my opinion is right and Gold should become an attractive investment first and insurance policy (physical) second.
What about SBSW? Exposure to gold, palladium, platinum, rhodium, etc.
@Maurice M Doubled my money in a year with SBSW - Thanks to James Dines, The Dines Letter
@Notlim Shot, @ Maurice M, SBSW is at 52-week highs - are you lightening up your position?
Just added a full position in a #1 jurisdiction (Australia) for Karora Resources Inc. (KRRGF OTC; KRR TSX). Just became a solid junior with recent proven finds; strong financials and all-in production < $1000. Trading at @ U$ 2.50 and should be at U$ 6 in a year.
BlueTower5000 profile picture
The way to play this right now with equity valuations in the sky is to buy the safest miners paying fat dividends. Newmont is about a 4% yield right now with a PE near 17 last I checked. Agnico Eagle and Kirkland Lake are another 2 safe miners paying dividends in excess of 2%. Limit your buying of the juniors in case of a severe downturn and try to keep some cash for dip buying in case we go lower. Maybe pick a streamer like FNV or WPM. Buckle up though, we’re approaching another liquidity event.
@BlueTower5000, Amen. Do you have an opinion on SBSW or KL?
BlueTower5000 profile picture
@Miners to the Moon I own both. KL is supremely undervalued and my biggest single miner position. SBSW has a massive dividend and stands to profit hugely when platinum starts rallying.
@BlueTower5000, but is SBSW fully valued? Hate to chase a miner at its 52-week highs.
Dinjax profile picture
@Harrison Schwartz good article and thanks for the education explaining gold's recent drop.
Agree with your assessment on CMCL and would also add BTG as another undervalued miner with solid performance. Long both.
Agbug profile picture
Considered the argument here, and decided to dump my GDXJ and go for a ride with GUSH. Higher oil prices seem a much better bet short term.
birder 4000 profile picture
I am sort of a skeptic, well more than sort of. I am of the opinion that the dollar is going to be worth virtually nothing. Just consider the latest legislation--give everybody free money. I suppose if you are a politician who does not expect to last much longer that makes some sense. Won't be around to pay the reckoning. And long term for a politician is four years. Well, I do believe that a hedge in this situation is appropriate and gold, silver, collectibles, and mining equities do provide that. Same goes for foreign equities although it appears that most foreign governments seem to be in lock step with the US. Even Switzerland ran a deficit last year. Although assets based in Switzerland are perhaps safer than those based in the US. Think Nestle, Roche, and Novartis for instance.
Agbug profile picture
What's missing is unable to be measured or easily quantified with a FRED chart in order to get the PM market moving upwards. The fear factor. Something unexpected and typically unpleasant. Some global political turmoil or other black swan type of event that generates a fearfull response. For example, I knew Trump had won the election when gold spiked $50 an ounce on election night 2016. That's just an example mind you, not a judgement on the result.

Holding $GDX, $GDXJ and $NEM right now. $GOLD would be next on my list if I find the cash.
SuperAwesomeDude profile picture
@Agbug The most powerful man in the world holding his first press conference. THAT will be a black swan event!
Agbug profile picture
@SuperAwesomeDude I don't want to be anti-elderly, so I'll leave the world to be the judge of your observation. I had an extreme pivot investment wise and dumped my GDX and GDXJ and went all in on GUSH. Another pro-gold article convinced me that gold and silver weren't my best bet right now. I'm a little late to the crude party, but the music is just getting cranked up.
Steve in TN profile picture
@SuperAwesomeDude That hilarious statement should be given by late night comedians but will never happen due to their leftist bent.
adriano321 profile picture
Silver will outperform in the near- mid term. New physical buying pressure is stretching an already thin market.
Most people don't need gold and they don't need plastic garbage from China anymore. They do need oil, gas and food. Some silver coins would come in handy.
It seems clear Gold will selloff in an equities selloff, as investors sell gold for cash to cover margin calls. There will be nowhere to hide. However, Gold and other PMs will recover first. No way do PMs just take off righy if stocks crash.
@NimbleTrader Most people getting margin called in an equities selloff are unlikely to have gold in their portfolio.
Zero Set profile picture
I am very exited about the future of Caledonia Mining. I am also very exited about getting the opportunity to buy shares in the mid 13's. And more excitement found in these two recent articles.

Zim has perfect business operating environment – Caledonia Mining Corporation

Expansion Prospects Excite Caledonia
RandyFloyd profile picture
i'm adding slowly. maybe i'm getting greedy "hoping" for a deeper correction, but regardless this has got to be a good place to get in. but could it get better...?
I think mining in the U.S. makes a big comeback in general. The last 20 years have washed out the old prospectors and ushered in a new group of tech savvy, sustainability minded newbies, while the in ground mineral resources have remained largely untouched. I just bought a little PPTA for fun and, hopefully, profit. Run by a woman mining engineer from the Sierra Club with Native Americans on the BOD! . Gold and rare earth( antimony) miner. Silver will run even faster than gold, as the renewable electrification of everything will increase demand for the next couple of decades. Most of the legacy deposits in N.A.are in Mexico, Endeavor Silver, a great name in the space. Also coming, sustainable development of Idaho cobalt. Jervois will be the dominant player. Thanks Harrison, good analysis
Aureus Denarii profile picture
@Doug Scher
The Stibnite project for PPTA, formerly Midas Gold is still years away if it even moves forward. With massive upfront capex as it is a previously impacted site with considerable contamination. Which likely means dilution and debt to get to production.
Even if Laurel Sayer were "from the Sierra Club" I'm not sure she would have any influence on the many other conservation entities against the proposed mine. If your comment, "Native Americans on the BOD!" is a reference to the native Idahoans on the Board, that's quite different than an Indigenous person.
In fact, the corporation is being sued by the local Indigenous tribe to stop the project.
All that being said, it is a huge high-grade resource in mining friendly Idaho. With what could be a boon to one industry (mining), it would be disastrous for another (tourism) as this is located in a particularly pristine area of central Idaho. An open pit mine here just doesn't fit. But they have packed the board with miners, Idahoans and lobbyists so who knows.
Good Luck
Agbug profile picture
@DRE Retired , That seems like a tough one to gain permits for, but stranger things have happened. Funny coincidence, I worked on a survey crew in 1980 that was for a mine in that valley of old Stibnite. A true ghost town then. It's the East Fork of the South Fork of the Salmon River, right up against the Frank Church River of No Return Wilderness. Seems a tall order for a mine in that locale.
Very interesting! Once the monetary dam breaks... the flood will shock many
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