During the first half of 2022, the gold price has been driven by the central banks raising interest rates in response to high inflation and resurfacing geopolitical risks. With the US dollar hitting a 20-year high, gold fell to a one-and-a-half-year low at the beginning of H2.
What is the gold price forecast for the rest of the year, given the current macroeconomic and geopolitical environment? Should you invest in gold now?
In this article, we look at the recent drivers and gold price predictions from market analysts.
Gold rallies on ‘less negative’ macroeconomics
The gold price dipped below the $1,700 mark for the first time in a one-and-a-half-year on July 21, amid growing recession fears that caused losses across risk assets.
However, gold has managed to find a strong floor at the level of $1680 per ounce mark and garnered strong buying interest.
Gold continued to rally for 3 straight weeks on the mild hawkish stance of the US Fed on interest rate hikes and a fall in the US gross domestic product (GDP) data in the second successive quarter. The changes in stance have pulled down the dollar index from its 20-year high, as well as bond yields. So, once again investors have started looking at gold as a ‘safe haven.’
Going ahead, the outlook remains negative for the near-term the gold price chart above shows. The current trend is bearish as indicated by a descending channel characterized by a series of lower highs and lower lows.
Traders will go short during a descending channel, usually after completed short-term counter trends to key resistance levels.
However, once the channel is completed, traders will seek for long opportunities to profit from any increases in price.
If Gold price breaks above $1.800, the asset’s price could be about to experience an overall upward trend. If the $1800 resistance holds, the gold price could fall as far as $1,450/oz, the low in March 2020.
What will drive gold prices for the rest of the year?
According to the World Gold Council, the precious metal will face two key headwinds during the second half of 2022:
- higher nominal interest rates
- a potentially stronger dollar.
However, the negative effect from these two drivers may be offset by other, more supportive factors, including:
- high, persistent inflation with gold playing catch-up to other commodities
- market volatility linked to shifts in monetary policy and geopolitics
- the need for effective hedges that overcome potentially higher correlations between equities and bonds.
In this context, gold’s both strategic and tactical role will likely remain relevant to investors, particularly while uncertainty stays elevated.
Gold Price Forecast for 2022 and beyond
US-based Citibank was also bullish in its short-term outlook for the gold price in 2022. The bank’s latest gold market outlook on 4 July:
“Citi maintains a 3Q 2022 gold price forecast of ~$1,845/oz, bottoming to an average of ~$1,750/oz in 1Q 2023, and then rallying to $2,000/oz into 2024. The US falling into recession (sooner than later) might see gold prices rally a bit sooner.”
Algorithm-based forecast site WalletInvestor was bullish in its projections, indicating that the gold price could move up to $1,746.51 by the end of 2022.
However, Long Forecast is very bearish. The Economy Forecast Agency projections saw the 2022 Gold closing price at $1,446.
Gov.capital’s algorithm-based projections saw the commodity close out 2022 at a price of $1,803.085.
The Importance of a Gold price forecast
You can use gold forecasts to allocate funds in your portfolio. For instance, if you believe that there is a bull market in gold, then you can add a little more to your gold holdings.
However, Gold price forecasts should not be definitive since events in the future can change.
When considering any gold price forecast for 2022, it’s important to keep in mind that high market volatility as well as the current macroeconomic and geopolitical environment makes it difficult to give long-term estimates. As such, analysts and algorithm-based forecasters can and do get their predictions wrong.
