Gold and assets like the Sprott Gold Miners ETF (NYSEArca: SGDM) are enduring some first-quarter difficulties, but some analysts remain bullish on bullion for the duration of 2021.

SGDM tracks the Solactive Gold Miners Custom Factors Index and “emphasizes gold companies with the highest revenue growth and free cash flow yield, and the lowest long-term debt to equity ratio,” according to the issuer.

“Investors could still see some of the strongest price action in gold this year, according to Wells Fargo, which sees signs of a developing rally,” reports Anna Golubova for Kitco News. “The driver behind this new spark in prices is diminishing supply growth. And it could get gold up to $2,200 an ounce this year, said Wells Fargo’s head of real asset strategy John LaForge.”

Sparks Remain for ‘SGDM’

Stock fundamentals like cost deflation across the mining industry, share valuations below long-term averages, and rising M&A are all supportive of the miners space as well, but those fundamentals could be glossed over if the dollar strengthens. Yet many currency traders expect the dollar to remain lethargic this year.

Supporting the case for SGDM, we may also continue to see multiple factors come into play to support the gold market in the coming months. For starters, economic expansion has historically been supportive of jewelry, technology, and long-term savings. Risk and uncertainty could further support safe-haven gold demand. The price of competing assets like bonds, currencies, and other assets may also influence investor attitudes toward gold. Lastly, capital flows, positioning, and price trends may ignite or dampen gold’s performance.

“Such times in the past have sparked some of gold’s strongest price rallies … We believe gold could be on the eve of a new commodity bull super-cycle, which would be only the seventh since the year 1800,” LaForge said. “Gold prices have climbed over 40% since 2018, and we believe that more gains lie ahead.”

SGDM 1 Year Total Return

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.