Gold price 2022

Outlook Gold 2022

The second Covid year is now behind us, with all the uncertainties and fears that have affected people and the markets. We all now hope that 2022 will be the third and final year of the pandemic. Gold prices have surged to new highs since the start of Covid. But what happens when the pandemic is over, will the price go back to pre-crisis levels? 

We do not assume this, even if corrections are possible! In addition to the pandemic, there is currently support from the highest inflation rates for several decades. The US Federal Reserve recently admitted that inflation could not just remain a temporary phenomenon. Even if the choice of words was not quite as clear, the preparation for a rate hike in March can be seen as a clear admission that the situation was somewhat underestimated. We are now eagerly awaiting the first statements from the European Central Bank in January. As in the United States, the inflation rate in the euro area has risen to a multi-year high. Unlike the ally on the other side of the Atlantic, however, announcements of interest rate hikes were held back here. The main reason can certainly be found in the fact that many southern European countries have not overcome the debt crisis in the long term. Even minimal increases in interest rates could bring countries like Greece, Spain and Italy to the brink of economic collapse. We therefore assume that the ECB is still hoping that the inflation rate will return to a tolerable level without drastic monetary policy measures. 

However, if the rates remain at the current level in the next few months, then the euro country will also be forced to turn the interest rate screw. Recently, especially in Europe, there has been the fear of a war between Russia and Ukraine. Especially in Eastern Europe, the demand for gold bars increased enormously. Here, gold lived up to its reputation as a "safe haven" in uncertain times. We assume that there will be further very stable demand for investment gold in 2022, not only in Eastern Europe. In addition, demand for jewelery has also recovered significantly in 2021, especially from China and the Middle East. Market observers are also expecting a further increase for this year. 

In order to draw a conclusion for the gold price from the facts mentioned, we expect a more sideways trend in the range of $1,750/oz to $2,200/oz for 2022. Should, which we all hope not, a new worse variant of the virus escape or Russia actually invades Ukraine, new all-time highs could be reached very quickly.

Author: Torsten Schlindwein, Head of Sales Recycling, Investment & Jewelers/Goldsmiths, C.Hafner

Published 1 February, 2022