The metal will follow the same path next year, Goldman's analysts said. The Federal Reserve has indicated it will allow for a temporary overshoot of its 2% inflaon target aer a prolonged bout of weak price growth. Goldman's economics team sees inflaon rising to 3% before weakening through year-end.

"This may well lead to market parcipant concerns over the longterm inflaon rate and more inflows to gold in order to hedge it," the bank's analysts said. Expectaons for a weaker dollar also support a disconnect between gold prices and long-term rates, the team added.

Goldman also expects demand for gold to strengthen across emerging markets. Chinese and Indian gold demand "already displays signs of normalizaon," and the likelihood of a Biden administraon taking a soer stance on trade policy should further support the rally.

Gold traded at $1,888.87 per ounce as of 11 a.m. ET Tuesday, up roughly 25% year-to-date. Gold prices are expected to break out of the current narrow trading range and soar through 2021 as the coronavirus recession gives way to higher inflaon, analysts at Goldman Sachs say.

Bullion has hovered around $1,900/oz over the past few weeks aer its summer rally to record highs fizzled out. While uncertainty surrounding the U.S. elecon fueled a brief rally, posive news of covid-19 vaccine trials has pushed investors out of safe havens and into riskier assets.

Spot gold declined 0.3% to $1,873.08/oz by 1:50 p.m. ET Wednesday. U.S. gold futures were down 0.6% to $1,872.60/oz in New York. In the near term, gold doesn’t have a clear catalyst to li or drag on prices, analysts Mikhail Sprogis and Jeffrey Currie say. Yet, the precious metal is poised to break out in 2021 as inflaon concerns take center stage, they add.

Goldman has set a $2,300/oz price target for gold, which equates to a 22% rally from current levels over the next 12 months and another all-me high

Long-term inflaon

This may well lead to market parcipant concerns over the longterm inflaon rate and more inflows to gold in order to hedge it,” the bank’s analysts say.

Expectaons for a weaker dollar also support a disconnect between gold prices and long-term rates, the team adds.

Analysts at HSBC echoed the same senment, stang that the longterm outlook for gold remains posive, despite further downward pressure in the immediate term due to the vaccine breakthroughs.

“The broader economic climate (such as high debt, likely defaults, and vulnerable asset price declines) is sll gold-friendly. The risk now is whether the pandemic worsens and how quickly a vaccine can be made available – assuming it does provide protecon from covid-19,” HSBC analysts say.

“The fiscal and monetary response to the pandemic globally will remain highly accommodave. A Democrac administraon with the commensurate likelihood of bigger fiscal smulus packages to come will likely buoy gold.”

“All this should connue to provide Gold with a reason to go higher in the medium to longer-term"