Commodities, Finance, Gold, News

Why gold will bounce back in 2022


Gold endured a tumultuous 2021, with momentary highs offset by stagnant stretches where the price trended below $US1800 ($2508) per ounce for weeks at a time.

According to The Perth Mint, in 2021 gold experienced its first calendar year decline since 2018, falling 4 per cent to end the year at $US1820 per ounce.

Gold’s price decline could be attributed to various factors such as a rising US dollar, which finished 2021 up 6 per cent, improving economic growth forecasts, the global vaccine rollout reducing investor fears, or the continued rise of digital markets such as cryptocurrencies, which experienced a 205 per cent overall market value increase in 2021.

Despite this, it must be noted that gold’s difficulties largely occurred in the first quarter of 2021. Gold ended March 2021 at below $US1700 per ounce but trended northward from then onwards.

“From the end of March through to (the) end (of) December, gold trended higher, supported by rising inflation rates and a renewed decline in real bond yields,” Perth Mint manager for listed products and investment research Jordan Eliseo said.

The final two months of 2021 were especially positive, as gold prices rose from about $1750 to begin November, up to $1850, before settling at $1820 to close the year.

Eliseo believes that while there are potential drawbacks for gold in 2022, such as decelerating US inflation rates and a continued rising US dollar, the market has the potential to attract safe haven interest as investors protect themselves from market volatility.

“Indeed, with markets beginning to show signs of fragility in the face of the withdrawal of policy support, it would not take much to boost gold, with complications caused by the emergence of the far more transmissible Omicron variant (and the lockdown response we are starting to see in parts of Europe), another potential tailwind,” Eliseo said.

“It’s worth noting that gold has now worked through a roughly 15-month time period that at its worst saw prices correct by almost 20 per cent from peak to trough.

“Corrective cycles like this are part and parcel of every market, and indeed are often a healthy development as they allow the market to rid itself of excess froth and speculation.”

Previous ArticleNext Article
Send this to a friend