Is Gold a Good Investment for 2022?

Gold is now back above its key psychological bullish mark of $1,800 which reinforces its role as a hedge against inflation.

But the prospect of interest rates rising and continuing geopolitical tensions are looming over the future moves of the gold price.

So what exactly is the outlook for the gold price and could the precious metal create new opportunities for investors in 2022?

Let’s unpack that!

Why the gold price didn’t rally in 2021?

With some of the key drivers of the gold price in place, it almost looks like a mystery why gold didn’t rally hard in 2021.

    Do you know the four main drivers of the gold price

    1. Currencies (especially the US dollar): a weaker US dollar will most likely push the gold price higher, and vice-versa.
    2. Market uncertainty and inflation: gold often moves higher when economic conditions worsen and inflation concerns increase.
    3. Capital flows and price momentum: investors moving their capital in or out of gold can move the gold price and create momentum in the market.
    4. Internal gold market dynamics: these include central bank buying, mine production, and seasonal consumption.

      At least three of these main drivers for gold seemed to be present last year:

      • Uncomfortably hot inflation: over the past year, inflation was all over the news (and probably in the Fed’s biggest nightmares), as it hit a 40-year high in the U.S. and a 13-year high in Europe.
      • Central bank buying: central banks definitely❤️gold this year. According to the World Gold Council, central bank buying rose by an impressive 82% in 2021, with Thailand coming up as the biggest buyer (it bought as many as 90 tons of gold).
      • Massive money printing: this driver is not usually cited among the main driving forces for the gold price, but it’s in fact very important, especially with today’s economic uncertainty. Last year, central banks printed money at a record pace to prop up their economies hit by the COVID-19 pandemic. As a result, this has considerably weakened the purchasing power of paper money.

      And when paper currencies start losing their purchasing power, investors usually look for alternative stores of value to protect their wealth, turning to assets like physical gold which has maintained its value throughout centuries.