ASX gold stocks could rebound as experts tip high highs for gold in 2021

ASX gold stocks slumped with gold since news of a promising COVID‐19 vaccine, but some experts believe it can still hit new highs in 2021.

| More on:
ASX gold inflation gold bull figurine standing on stock price charts representing rising asx share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX gold stocks have slumped with the precious metal since news of a promising COVID‐19 vaccine hit, but some experts believe it can still rebound to a record in 2021.

The price of the precious metal tumbled around 4% in the past week to US$1,877 an ounce. This triggered a 4% slide in the Newcrest Mining Limited (ASX: NCM) share price, 6% decline in the Evolution Mining Ltd (ASX: EVN) share price and 11.5% drop in the Northern Star Resources Ltd (ASX: NST) share price.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) climbed around 3% over the same period.

ASX gold stocks losing their glitter

Gold's lost some of its lustre on growing confidence that the world would soon emerge from the pandemic.

It's also been on a backfoot since media organisations declared Joe Biden the new US president while the Senate remains in Republican hands.

This means Biden will find it hard to unleash the trillions in stimulus he's proposing – a move which will weaken the US dollar.

These factors explain why ASX gold stocks have been underperforming.

Why gold could hit new record highs in 2021

Gold may be down, but it's not out. That's the view of some experts who're predicting that the safe haven asset will hit new highs in the new year, reported CNN.

The fact is, gold may have retreated but it's still well within striking distance of this year's peak at just over US$2,000 an ounce.

Biden's difficulty in getting his massive stimulus passed into law may very well force the US Federal Reserve to up their quantitative easing (QE) ante too.

If the Feds pump even more money into the financial system via QE, that will weaken the US dollar and shake confidence in the world's reserve currency.

Gold is still relevant post COVID

All this is good news for ASX gold shares and the commodity, which investors regard as both an alternative to the US dollar and an inflation hedge.

"All of the reasons for gold strength over the past few months are still in place," CNN quoted Bryan Slusarchuk, chief executive of Victoria-based Fosterville South Exploration.

"The horse has left the barn. People are looking at gold as an alternative currency."

Gold a good alternative to bonds

There's another reason why gold could find renewed favour. Some believe it makes a good substitute for government bonds.

This isn't normally the case as gold doesn't have a yield like bonds do. But the rates on Australian and US government bonds are so low, some investors might think having some gold is a good diversification strategy to their government bond portfolio.

What's more, it's clear that record low interest rates will be around for years, as will fiscal and monetary stimuli.

Gold price forecast for 2021

"The safe haven trade for gold is not completely gone. We are just a crossroads where volatility is high," Everett Millman, precious metals specialist with Gainesville Coins told CNN.

"We expect moves on both sides and a lot of headline risk."

However, Millman is tipping gold to hit a fresh record high of around US$2,100 next year, while Slusarchuk is a lot more bullish with his prediction of US$2,500.

If this comes to pass, ASX gold stocks could outperform in 2021.

Motley Fool contributor Brendon Lau owns shares of Evolution Mining Limited and Newcrest Mining Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Gold

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Gold

Down 30% since April, should I buy the dip on Northern Star shares today?

A leading expert delivers his verdict on Northern Star shares.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Gold

Guess which $107 billion ASX 200 gold stock is storming higher today on record results

The $107 billion ASX 200 gold miner is storming higher today. Here's why.

Read more »

Happy man working on his laptop.
Energy Shares

Opportunity knocks: 2 ASX stocks ready to surge

Analysts expect big things from these shares.

Read more »

Miner looking at a tablet.
Gold

Up 58% this year, ASX 300 gold stock reveals 600,000 ounce African MRE

The ASX 300 gold stock is growing its mining footprint in Senegal.

Read more »

A woman in a business suit sits at her desk with gold bars in each hand while she kisses one bar with her eyes closed. Her desk has another three gold bars stacked in front of her. symbolising the rising Northern Star share price
Gold

Macquarie tips 28% upside for this ASX gold mining stock

Let's see what the broker is saying about this miner.

Read more »

An older female ASX investor holds a gangster-style fist pump pose showing off gold rings with dollar signs on them.
Gold

Macquarie says these 3 ASX 200 gold shares will 'outperform' in FY26

Gold shares have been on a long tear and Macquarie reckons these 3 ASX stocks have more room to run.

Read more »

Red arrow on gold bars going down.
Gold

Northern Star share price slides despite $1.2 billion net gold mine cash flow

Investors are bidding down the Northern Star share price today. But why?

Read more »

Miner looking at a tablet.
Gold

The end of the gold rush: Can these ASX Gold shares keep rising?

Has the gold rush run its course?

Read more »