EDITOR'S NOTE: Market sentiment and fundamentals are the only two factors that count when it comes to gold prices. The problem is that they’re often not in sync. Neils Christensen is wagering his bullishness on sentiment, based mostly on his publication’s survey. On one hand, he could be right. As gold’s often a “fear trade,” the motivations driving its price are more aligned with general opinion (read: sentiment) than long-term calculation. But on the other hand, sentiment can change multiple times over the course of months and years. Scarcity is another major issue that falls on the fundamental side. But demand for scarce supply can also change over the course of months (note, we’re talking “demand” and not “scarcity” itself). Our long-term view is always bullish because GOLD IS MONEY. It’s a basic and straighforward principle. Don’t let the headlines or volatility distract you if acquiring “sound money” is your long-term goal.
Welcome to Kitco News' 2022 outlook series. The new year will be filled with uncertainty as the Federal Reserve looks to pivot and tighten its monetary policies. At the same time, the inflation threat continues to grow, which means real rates will remain in low to negative territory. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2022.
Retail investors remain significantly bullish on gold prices next year as the precious metal looks to end 2021 with nearly a 4% loss.
Gold prices have seen a solid push higher, moving above $1,800 an ounce on the last trading day of 2021. Spot gold prices last traded at $1,827.95 an ounce; however, the market started the year at $1,898 an ounce.
It has been a relatively disappointing year for the gold market, which saw some pretty volatile moves. Including a flash crash in August that saw the price drop below $1,700 an ounce. Gold prices have struggled to attract bullish attention even as real interest rates fell to historic negative territory, driven by extraordinary inflation pressure.
Analysts note that the rise in consumer prices this past year has been met with expectations that the Federal Reserve will tighten interest rates soon than expected. At its December monetary policy meeting, the U.S. central bank signaled that it would end its monthly bond purchase by March and could raise interest rate three times in 2022.
However, U.S. monetary policy is not scaring many retail investors who appear to be significantly bullish on gold heading into the new year. According to Kitco News' annual outlook survey, a clear majority of Main Street investors expect gold prices to push new record highs in 2022.
This year, nearly 3,000 people participated in Kitco's annual online survey. Of those 1,605, 54% said they see gold prices above $2,000. Meanwhile, 592 voters, or 20%, said that gold would trade between $1,900 and $2,000.
In last year's outlook price survey, 84% of retail investors expected gold prices to rise above $2,000.
The results show that only 352 retail investors or 12% see gold prices holding relatively steady in the current range between $1,800 and $1,900 an ounce.
Meanwhile, 158 or 5% of participants see gold prices trading between $1,700 and $1,800 an ounce.
On the outright bearish side, 109 voters or less than 4% see gold prices trading between $1,600 and $1,700 an ounce, and 130 people slightly more than 4% see gold prices dropping below $1,600 an ounce.
There have been a few bearish calls that have stood out in recent weeks. Analysts at J.P.Morgan Research said that gold prices could average around $1,520 by the fourth quarter of 2022.
Wall Street analysts have no clear consensus regarding where gold prices will go next year. Many analysts have said that while the specter of rate hikes next year could weigh on gold prices, much of the bad news has been priced in.Meanwhile, Georgette Boele, senior FX & precious metals strategist for the Dutch bank, said that she sees gold prices falling to $1,500 an ounce by the end of next year.
Many banks see gold prices trading in a reasonably wide range between $1,800 and $2,000. The most significant factor to drive gold price in 2022 remains real interest rates. Although the Federal Reserve is looking to raise interest rates three times next year, many economists expect inflation to stay above 4%, which means real rates will remain deep in negative territory. Almost all economists predict that the Federal Reserve will remain well behind the inflation curve in 2022.
Among the bullish banks, Goldman Sachs is one of the most optimistic. In November, analysts said they see prices pushing above $2,000 an ounce by the end of the year.
Wells Fargo is also bullish on gold next year, looking for $2,000 an ounce as the precious metal plays catch up to the rest of the commodity complex. John LaForge, head of real asset strategy for Wells Fargo gold, will be sensitive to U.S. monetary policy in 2022; however, he added that it is unlikely the Federal Reserve will adopt overly aggressive monetary policies.