After rising earlier in the year, gold prices retreated from a record $ 2,069.50 an ounce in August, weighed by signs of an improvement in the global economy. Investors tend to buy the metal when they are nervous about owning riskier assets like stocks or corporate bonds.

This leaves some investors expecting more moderate gains in 2021 as the economic outlook improves. From November 6 to December 18, investors withdrew more than $ 10 billion from gold-backed ETFs, according to data from the World Gold Council, a notable reversal from record flows earlier in the year.

Much will depend on the strength of the US recovery. Renewed in Coronavirus pandemic Traders say a run-off election in Georgia next month to limit control of the Senate could lead to market volatility in early 2021, providing support for gold prices.

But many investors are expecting a strong recovery in 2021. Coronavirus vaccines are expected to be launched To accelerate employment and GDP growth starting in the second quarterAccording to economists surveyed by The Wall Street Journal

Critical to investor expectations for gold: a trend known as real returns, or bond yields, when adjusting to inflation. With the true yield of 10-year benchmark Treasury bonds at minus 1%, the cost of holding gold – which pays no yield – rather than government bonds is relatively low, said James O’Rourke, an economist at Capital Economics. Real revenues are expected to decline further and gold prices are expected to end 2021 at $ 1900 an ounce.

He said, “Real returns are not always the driver of the gold price, but with lower interest rates and higher inflation expectations, they are the primary driver.”

Meanwhile, a strong recovery could raise real yields and damage gold’s value. Significant moves in real US Treasury yields have been associated with reversal movements in gold prices since the 2008 financial crisis, according to data from

C. B. Morgan Chase

& Co. , Which found for every 0.25 percent increase in real 10-year treasury yields, gold moved $ 80 an ounce in the opposite direction.

After recommending customers to buy gold for two and a half years until last July, Natasha Caneva, head of commodity research at JPMorgan, now expects real returns and a drop in gold prices to $ 1,650 an ounce by the end of 2021.

“If real returns are rising, why would you buy gold?” She said.

Some still expect a weak dollar to limit gold’s decline. Many forecasters on Wall Street predict that increased government spending and a shift towards riskier assets will affect the US currency, which touched its lowest level in several years in 2020. Because gold is bought and sold in dollars, the weak dollar makes gold cheaper for foreign investors.

The Wall Street Journal’s dollar index, which measures the dollar against 16 foreign currencies, lost more than 5% during 2020, its biggest annual decline since 2017.

Silver prices also hit a record year. The most-traded silver futures contract closed on Thursday at $ 26,412. This represents a gain of 47% for the year – Silver’s best performance since 2010.

As silver is used to make products as diverse as electronics and solar panels, some analysts said that demand may remain high even as the global economy recovers.

“The story of silver is very similar to the story of gold. What differs is that the recovery in industrial demand will help push the price of silver slightly higher compared to gold next year,” said Mr. O’Rourke.

Write to Sebastian Pellejero at sebastian.pellejero@wsj.com