Gold: opportunities and risks in 2022

As it settled into the New Year, gold performance has been underwhelming, not least due to higher interest rates for government bonds and the growing determination of the US Federal Reserve (Fed) to introduce up to three key interest rate hikes over the course of the year while simultaneously tapering off bond purchases. This scenario is unfavourable for the gold price; however, stock markets in the US and other countries have reacted with losses to the latest announcements, which is in many cases the flip side of the coin when key interest rates are raised.

High potential for crisis and conflict might support gold in 2022

Besides inflation rates of 7 per cent in the US and 5 per cent in the EU, unresolved or emerging problems are most likely to weigh on the global economy, thus fuelling the gold price. For example, the coronavirus omicron variant seems to be less severe but highly infectious and could thus paralyse parts of the economy. In addition, two current geopolitical crises are growing particularly worrisome: the threat of an imminent annexation of Ukraine by Russia and China’s increasingly insistent claim of Taiwan. Both conflicts would result in significant sanctions on the part of the US and EU, which could in turn seriously impact global trade. In November 2022, the US midterm elections are on the agenda. Weak results for Democrats would significantly increase the chance of Donald Trump becoming the next US President.

Quantitative forecasts by analysts range from 1,500 to 2,000 US$ per ounce

At the end of 2021, analysts from major banks made vastly differing gold price forecasts. The Bank of America sees gold at an average of 1,900 US$ per ounce in 2022, while Goldman Sachs forecasts an increase to 2,000 already in the first quarter. Société Générale expects gold at 1,945 in the first quarter, while Scotiabank and Credit Suisse expect a gold price of 1,850 on average in 2022. Citibank and ABN Amro forecast the weakest gold performance; Citibank at an annual average of 1,645 and ABN Amro at 1,500 US$ per ounce by the end of 2022.