What will the new year bring us? It’s a natural question to ask, but not an easy one to answer.
2021 is starting off in the shadow of 2020. One of the most dramatic and unexpected years in history just ended. For some, it could be tempting to not want to look back on 2020. Yet to see what could be in store for us in 2021, we must reflect on 2020 for a moment because…
The major events of 2020 have set the stage for 2021.
Not long after the year began, the emergence of COVID-19 began to affect all aspects of life. The unprecedented turn of events caused a major market crash in March, and stocks then spent months clawing their way up from the lows. Unemployment skyrocketed. Small businesses closed temporarily and then forever. In response, the government passed trillions in stimulus and entered new levels of debt trying to handle the situation. The dollar shrank in the face of debt and low interest rates set by the Fed.
Out of this chaos, gold and other precious metals rose to prominence. The safe-haven assets shone amid uncertainty. Gold had its best annual performance since 2010, breaking record prices one after another and rising to a brand-new all-time high price.
With all these events in the rearview mirror, our eyes must look at the road ahead. It seems foggy, but some areas can be brought in focus.
Experts are concerned about several specific risks in the upcoming year.
For one, many are worried about the profound effects of federal debt. The annual U.S. budget deficit hit a record $3.132 trillion during fiscal 2020. According to Reuters, this was more than triple the 2019 deficit. The overall federal debt increased to exceed $27 trillion.
In an op-ed piece for CNN, Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, advocated for the need to fight the growing debt problem. On December 3, 2020, she wrote, “This needs to be addressed, or else future generations of Americans will still be paying the price in decades to come.”
The effect debt has on the dollar may already be in place. The dollar is losing favor internationally. In an interview in mid-December 2020, billionaire Sam Zell said, “The single greatest risk that we are dealing with today is the loss of the U.S. dollar as the reserve currency.”
Aside from the dollar and debt, many are concerned that the stock market is in bubble territory and could be ready to pop. Comparisons of the current market to the dot.com bubble have been published by Business Insider, MarketWatch, The Wall Street Journal, and more. The question of whether history will repeat itself in 2021 hangs over the beginning of the year.
However, there is not only doom and gloom ahead in 2021—there is also good news.
There are opportunities to take advantage of now.
One opportunity could be in precious metals. After a banner year, a repeat performance for gold and other metals seems likely.
Kevin Smith, Crescat Capital’s CIO, and other businesspeople see reason for gold to rise further. Smith explained, “To be frank, buying gold or silver is not a contrarian [portfolio] position today. There are enough people in agreement with the idea that all government-backed fiat currencies are doomed to some level of devaluation through inflation due to the level of fiscal and monetary imprudence and unsustainable debt imbalances in the financial system.”
Additionally, palladium is set to grow on a manufacturing rebound. Analysts at Citi have forecasted that this precious metal could see $3,500/oz. later this year.
In the face of the fallout of 2020, precious metals could be an essential element in a portfolio in 2021.