Anyone involved in investing in precious metals, more specifically gold, will know that gold prices reached record highs in 2020, surpassing $2,000 per ounce.
This was due to all that the health crisis implied by the spread of COVID-19 around the world. It should also be borne in mind that gold has been an excellent safe haven asset throughout its history and especially during times of crisis, the more instability in the economy the greater the tendency to buy precious metals.
Today, we are in a different scene, in the midst of an economic recovery. The gold market is in a period of consolidation, which has led to a price that has moved in narrow margins.
In 2021 and after the commodity’s great year in 2020, gold is down 6%, despite the rise in inflation, also by 6%. However, leading experts predict that there are good prospects for 2022.
Inflation will push up gold prices
According to forecasts made by Goldman Sachs analyst Damien Couvali, inflation is one of the determining factors that will boost gold in the coming months of 2022. In October it rose by 6.2% and reached levels that surpassed those reached in 30 years.
Inflation and gold buying always go hand in hand, the higher the inflation the less money is worth and the more investors are interested in buying gold.
This makes gold an excellent asset to include in investment portfolios for greater diversification and protection against rising inflation. The analyst believes that gold could rise above $2,000 an ounce by early next year. Will this be the case?
Factors that will benefit the gold market in the coming years
A report from analysts at Haywood Securities is very positive about gold and they have interesting forecasts for 2022 and 2023:
- They expect an average price of $1,850 an ounce in 2022 and $1,900 in 2023.
- They mention the factors working against gold in the short term: the strengthening of the US dollar, the increase in Treasury bond yields due to the further rise in interest rates expected in 2022.
- Some favourable factors: the slowdown in economic recovery and growth and rising inflation, also mentioned above.
They argue that gold has a positive long-term trend, and for this they rely on the positive macroeconomic factors for the precious metal. Gold is a tangible, fungible asset and an excellent store of value for long-term thinking.
Other aspects to consider
- The equity market is showing increased volatility. This may favour the gold price, as some investors will turn to the precious metal to diversify and protect their portfolios.
- Due to the low yields of some cryptocurrencies at the end of 2021, many investors will move their money into more stable assets.
What can we take away from all this data? The forecasts are positive for the price of gold in 2022, although it must be borne in mind that there are many aspects that can affect it.
The rise or fall in the price of the precious metal depends on many factors.
It is important to think in the long term and remember the behaviour of gold throughout its history.
