All eyes in the capital markets are on the Federal Reserve and whether it continues to maintain hawkishness, a push for higher rates that translate to a stronger dollar and could put downward pressure on gold.
The Fed looks primed and ready to start taking its foot off the stimulus gas pedal. While now acknowledging that inflation is no longer transitory, the notion is that interest rates will eventually have to go higher in 2022.
“Should the Fed step up the gear on tapering, this is likely to punish gold prices as the dollar appreciates, yields rise and rate hike expectations jump,” said Lukman Otunuga, manager, market analysis at FXTM.
“Of the three banks besides the Fed, the Bank of England seems to be the furthest along on the ‘hawkish track’, said Edward Meir, analyst at ED&F Man Capital Markets. “It passed on raising rates last month but could do so this time around.”
In the meantime, gold is down about 6% for the year. Prices did spike higher when the Omicron variant made a post-Thanksgiving appearance, but the precious metal has faltered since then.
It appears to be trading back in the range it was stuck in for most of the summer. As prices decide what they want to do, this can still be an opportunity for investors to pick up gold at a value-oriented price.
“The target for the end of the year is $1,600 for gold and $22 for silver,” said ANZ senior commodity strategist Daniel Hynes.
“We’re not expecting much upside from current levels. The $1,800 level is essentially our Q1 target, which is barely above current levels,” Hynes added. “And then, during the second half of the year, gold is likely to ease back and hit $1,600 by the year-end.”
Market Uncertainty Can Still Benefit Gold
With the fog of market uncertainty still lingering in the air for 2022, investors who want gold exposure can pick up the Sprott Physical Gold Trust PHYS. PHYS investors get easy access to gold exposure with the option to convert their ownership shares to physical gold, should they choose to do so.
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