ANZ Bank senior strategy analyst Daniel Hynes said that the perfect conditions for gold to increase prices mostly lie in loose monetary policy, low exchange rates, high inflation and large financial support.
He predicted that gold prices will return to fall to $1,600/ounce when the Federal Reserve began raising interest rates to control inflation in the middle of this year.
Regarding interest rates, experts predict there will be 2 increases in 2022 because inflation is still hot in the first half of the year.
"It will take time for the Fed to curb inflation or return it to a comfortable level around 2 - 3%. Currently, raising interest rates is still the end of 2022 story for the market," said Mr. Hynes.
Report from J.P. Morgan Global Research said that gold prices will be hurt as the Fed tightens monetary policy, with the first interest rate hike likely in September.
Analysts said: The lenient central bank policy will cause gold and silver prices to fall the most during 2022. From an average of $1,765/ounce in the first quarter, gold prices are likely to fall throughout 2022 to an average of $1,520/ounce in the fourth quarter."
Sharing the same view, RBC Capital Markets expert Chris Louney predicted that with the prospect of 3 interest rate increases in 2022, the risk for gold will tend to decrease.
"We have not seen any new interest from investors. The average price for the whole year that the bank forecasts for gold is 1,695 USD/ounce" - Mr. Louney said.
However, gold proponents believe that the precious metal has historically performed well in interest rate- rising cycles.
According to Suki Cooper - precious metals analyst at Standard Chartered Bank, after the uncertainty surrounding the Fed's monetary policy tightening plan became clear, this was the time for the precious metal to shine.
Hist historically, gold prices have tended to stabilize after the first rate hike in the upward or downward cycle, Cooper said. As for now, how gold prices fluctuates around the $1,800/ounce mark will be very important because this is a strong resistance level. In the first quarter, the precious metal is likely to surge to $1,875/ounce."
Jordan Eliseo - director of investment and listed products research at gold processing company Perth mint - shared the same view.
The director said it would not be surprising if gold hit bottom and rebounded after the Fed completed the "taper" faster than expected and even increased interest rates. For him, this could really be a catalyst for gold.
One thing to note is how inflation expectations will change in 2022. "It is clear that the current inflationary pressures are much hotter than what the Fed predicted just a few months ago," he pointed out. If the market begins to see that inflation will last longer, many challenges will fall on both policymakers and investors.
Currently, the rate of inflation in 5 years is still near 2.5% - 2.7%. This means the market is pricing inflation around 2.5% instead of 6.5% for the five years. However, whether inflation can return to near the 2% target as the Fed wants is still on the table."
