There are many opposing predictions for the price of gold in 2022. But what is the fundamental difference between gold rising above $2,000 and falling below $1,600? RBC Capital Markets has identified two outlooks for gold, high and low scenarios. The higher one predicts the gold price to average above $2,024 in 2022, while the lower one forecasts gold to trade at $1,576. We have compiled the forecasts of RBC Capital Markets for the readers of Cryptokoin.com .
The basic scenario of the bank is that the gold price will decrease step by step
Covid-19 developments and stock market performance create the difference between these two views. Chris Louney, Vice President of Global Commodities Strategy at RBC Capital Markets, said in a statement:
The high scenario would be one where inflation is reined in and the . And so it seems like a much riskier scenario.
RBC’s own base case outlook is much closer to the low scenario due to its US outlook and aggressive Fed rate hike expectations. The bank’s baseline scenario predicts gold to average $1,695 for the year, top quarterly price to $1,749 in the first quarter, and lowest quarterly price $1,633 in the fourth quarter. Chris Louney explains the reason for his predictions as follows:
The relationship between our low scenario and our baseline situation is much closer because, given the last two years we’ve lived, we think that the environment can only be at risk much more. has grown quite well and unemployment is rising.
What are the scenarios based on?
According to Chris Louney, for gold to change its downward trajectory, two major game-changers must emerge. “If Covid gets worse again or stock markets perform below expectations, you may see a surge in investors’ interest in assets like gold,” the strategist said.
We assume stronger stock markets throughout 2022. If this does not happen, we may see entries under it. That’s when our high scenario can come into play. But this is not our base case.
Gold is trading under pressure, down 1.6% since the start of the year, as the Fed started interest rate hikes in March and forecasts at least three rate hikes this year. Forecasting three rate hikes in 2022, Chris Louney states that inflation will be high and makes the following comment:
The door is open for March. There is definitely inflation to justify this. Jerome Powell described the US as now much stronger and closer to full employment. This fits the three rate hike visions for 2022.
One of the biggest obstacles to the gold price in 2021 was the lack of investor interest. Chris Louney adds that this needs to change before gold rises significantly:
If this investor moves due to the interest rate pin, worsening climate, Covid or worsening stock market performance, it would shift the risk skew upwards for gold. In 2021, the main issue was the lack of investor interest. And it happened despite being in one of the most inflationary environments in recent memory. If we told someone three years ago that we would have 5% inflation and that gold would not be affected, they wouldn’t have believed you.
“Gold consumers and individual investors are more sensitive to prices”
Gold, its worst performance since 2015 3% It closed the year with a decrease of 0.6. The activity in gold-backed exchange-traded products was the best and most relevant example. “They have dropped quite significantly. And again, we’re talking about an environment where everybody talks about inflation.” According to the strategist, the lack of interest in gold-backed ETFs is a sign of lack of interest among investors. Chris Louney explains it this way:
People spend their money working elsewhere and gold is not seen as ‘cheap’. Gold consumers and individual investors are more sensitive to prices when it comes to purchasing. And gold has by no means gotten incredibly cheap throughout 2021.
Chris Louney points out that gold is most likely to see price action in 2022 very similar to what it did in 2021:
None of the forces active during the year It’s not going anywhere in the near term. So 2022 will be similar to 2021 in many ways. I don’t think inflation will be low enough to really turn the tide. As far as gold is concerned, I’ve worked on the inflation front to see what will change materially in 2022. I’m not sure how this reaction function will change significantly in a few months unless there is a really big change in the macro view.