Gold Price Forecast 2022

With the final quarter of 2021 approaching, investors are now turning their attention to 2022 and thinking about what to expect from the gold price in the year to come. 2021 has proved a volatile year for the precious metal and a difficult one to predict. Perhaps unsurprisingly then the gold price forecasts for 2022 are similarly varied.

Having reached a new all-time high in 2020, analysts had forecast the potential for a new record to be reached in 2021. The success of the vaccination program in the US and UK has seen many restrictions lifted, and economies bounce back. This optimism over the global economic recovery has seen gold pull back from the highs of 2020, but still remains high in relative terms, and at present is holding above pre-pandemic prices.

Below we will look at some of the key factors driving any movement in the gold price that investors will be watching closely. As always, we will also take a look at some of the gold price forecasts for 2022 by market analysts. Updates will be provided as and when available towards the start of 2022.

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Gold Price 2022

The gold price in 2022 has a number of key drivers to look out for, from monetary policy, the pandemic, and geopolitical issues. The direction the gold price could move is dependant on the outcomes of many of these issues and the combined effect they have.

Monetary Policy – One of the biggest drivers for the gold price this year has been monetary policy, and primarily the impact it has on the US dollar, so this will undoubtedly be a key issue for the gold price in 2022 as well. The economic response to the pandemic has been unprecedented levels of money printing, and interest rates kept near zero.

These low interest rates are negative in real terms, low bond yields are negative in real terms, and fears over inflation/stagflation have risen. While central banks have firmly stated that they believe inflation to be a transitory response to last year’s deflationary pressures, the ongoing rise in prices casts doubt on this assertion eight months into the year. Supply lines may not recover throughout 2022, wage pressures are being driven by a shortage in skilled staff that will take time to fill, and quantitative easing (QE) continues each month, potentially keeping prices elevated well into next year and above national targets of around 2%.

How monetary policy moves in 2022 is expected to have large implications for the gold price, and many forecasts are based on this issue. If the economic recovery continues at its current rate, and inflation also continues to rise, then policy will likely turn hawkish. QE could begin tapering in late 2021, and into 2022. Interest rates would also begin to increase, and although this would be a slow process would likely see the gold price fall in 2022, even if rate rises only start late in the year.

The current ultra-accommodative monetary policy and high inflation are seen as positive for gold, so the longer that continues the more support it will offer to the gold price in 2022.

Pandemic – Continuing on from, and potentially affecting, monetary policy is the ongoing global pandemic. Despite a relatively successful vaccination program in the UK, US, and Europe, there is still a significant gap in less economically developed countries, and a large gap in vaccine rates worldwide.

The rise of the delta variant has already weakened the efficacy of current vaccines, and with many still unvaccinated, other variants that could develop pose further potential risks in 2022. As the past two years have already shown, Covid can surprise and do so quickly. How the pandemic progresses during winter and into 2022, and whether any further restrictions are required, will have an impact on the pace of the global economic recovery and therefore the monetary policy decisions made above.

Geopolitical issues – A key issue in 2018 and 2019, geopolitical tensions can often worry markets. Trade wars and sanctions stifle economic growth, while the potential for conflict can also see gold prices rise quickly. Relations between the US with countries like China and Russia are still poor, with rhetoric often negative and outright aggressive in many cases.

Events in the Middle East are also being closely watched once again. Attacks on oil tankers have seen Iran blamed in a similar situation to events at the start of 2020. The Taliban’s takeover in Afghanistan will also raise fears of increased terrorism in the region, and markets will undoubtedly be waiting to see how other countries respond, and whether the new regime is formally recognised on the world stage.

Central bank demand – Having paused in 2020 to respond to the pandemic, many central banks have once again started buying more gold reserves to protect their national wealth. Serbia, India, Turkey, Brazil and many others have all added gold to their reserves, and if this continues next year, it will keep demand high and maintain support for the gold price in 2022.

Update June 2022: As discussed above, geopolitical issues have become a major driver for the global economy and gold in 2022. Russia's invasion of Ukraine seemed unthinkable to many, and saw the gold price shoot back towards it's all-time high, hitting $2,070.57 per ounce in March.

This ongoing conflict and the sanctions placed on Russian products - gas and oil chiefly among them - has put recession back on the cards for many countries. Combined with the extreme inflation rife across the US and Europe, any slowdown in economic growth will result in further strife for the finances of many countries, just a year after emerging from the pandemic.

Gold is currently stuck between two opposing forces. The conflict in Ukraine and soaring inflation are helping to keep gold up near it's all-time high price. The response to high inflation is to raise interest rates however, something which many central banks have now begun to do. Higher interest rates can reduce the appeal of gold as a non-yielding asset, and that has stopped gold from rising to what would likely be new record highs.

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Gold Price Prediction 2022

Gold price predictions for 2022 are quite varied, but many analysts believe gold will maintain a level around current prices based on the performance so far this year. They believe the economic recovery will continue, muting any potential gains from other factors.

On the lowest end of the scale is Australia and New Zealand’s ANZ Bank alongside Singapore’s OCBC Bank, who believe that the strength of the recovery will see gold fall to $1,500 - $1,600 per ounce as tapering begins and interest rates rise.

BMO Capital Markets, UBS Global Wealth Management, and Reuters, all predict the gold price in 2022 will average between $1,700 - $1,800 per ounce maintaining the levels seen at the time of writing.

Other analysts, such as Trading Economics, see gold averaging $1,963 per ounce, while Goldman Sachs still feel $2,000 per ounce will be reached by the end of 2021 alone. There are signs the global economic recovery is already running out of steam, while others also argue that inflationary pressures will not be transitory, and could be far more difficult to bring down than the Fed and others realise.

Golds status as a safe haven and inflation hedge still has plenty of factors therefore offering support next year. Gold price predictions for 2022 are likely to fluctuate significantly, reflecting the upheaval caused over the past 18 months by the Covid pandemic. As always, caution needs to be taken with any price predictions, as the price will be in flux and could rise or fall quickly as events unfold, and that an average price forecast may not represent the peaks and troughs that the gold price could see in 2022.