Gold markets have had an exciting 2020 to date, but positive news regarding COVID-19 vaccines rolling out and the quelling of anxiety around U.S. election outcomes has dampened some of the enthusiasm for the yellow metal, market observers said during a virtual event hosted by State Street Global Advisors and the World Gold Council.

After soaring midyear, gold prices have fallen off near-term highs and trended downward since early August. Still, some at the Dec. 9 event said there are reasons to be excited about what is in store for the commodity in 2021.

"Despite this month's performance, gold investment demand has been the story of the year," said Adam Perlaky, manager of investment research at the World Gold Council. The World Gold Council expects continued support for gold into 2021 on the back of economic, geopolitical and market uncertainty combined with a low-rate environment, Perlaky said.

Following months of record inflows into gold-backed exchange-traded funds, November marked the first month of outflows in a year, the World Gold Council said Dec. 9. The outflows were the second-largest ever, decreasing by $6.8 billion against net inflows for 2020 of $50.3 billion. Still, 2020 inflows remain above the highest annual numbers.

"If we're looking at all-time record [inflows], it would be unusual for us to sustain those gains at that kind of a level," said George Milling-Stanley, chief gold strategist at State Street Global Advisors. "I think, given all the uncertainties that are still with us, I have to say, I think that we're certainly going to see continued gains in the gold price."

Perlaky noted that November has typically been a lower-performing month for the gold price over the last 10 years. However, if gold holds steady for the rest of the year, it would still mark a phenomenal year, according to Milling-Stanley, who expects greater retail investor interest in 2021.

Milling-Stanley said the COVID-19 pandemic boosted already-elevated levels of economic and political uncertainty, and "gold has done exactly what it's supposed to do."

"We're still in extraordinary circumstances, and in our lifetimes, we've never seen anything like COVID-19. I think we're still coming to terms with that," Milling-Stanley said, pointing to the potential for more uncertainty in global markets. "I think there's going to be no reduction in the safe-haven buying of gold as an investment in the industrialized world."

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Perlaky pointed to potential gains from improving consumer demand in large markets for gold in places such as China and India. Investment demand is also likely to remain a market driver despite the recent pullback, he added.

"While investors might have reduced their tactical gold hedges recently, there's still clearly risks in the market," Perlaky said.

James Steel, chief precious metals analyst at HSBC Bank, wrote in a Dec. 9 outlook that he expects the financial, economic and health uncertainties stemming from COVID-19 to continue to support gold in 2021 and even 2022, though potentially at a reduced level. Steel noted that investment demand will need to remain high to absorb market supplies as elevated prices continue to erode underlying physical demand in sectors such as jewelry.

"Monetary and fiscal policies are providing gold with the two requirements of a bull market: debt and liquidity," Steel wrote. "This is likely to continue for the foreseeable future and remain supportive — regardless of vaccine progress."

In the broader market, many investors have looked beyond the challenging environment created by 2020 and are pricing in a better economic outlook, the end of the pandemic, and easier fiscal and monetary policy, said Michael Arone, a chief investment strategist at State Street Global Advisors' U.S. SPDR business. Investors also believe that U.S. election outcomes soothed concerns about any "extreme" policy items becoming law, he said.

"Our perspective here is that investors have signaled comfort with the balance of power with a Biden administration, a reconstituted Congress and the conservative Supreme Court," Arone said.